Broke Eskom to splash on bonuses
Disgraced Molefe first in line for fat payout even as utility fields woeful balance sheet
Scandal-plagued Eskom has only enough cash to last it for the next three months — but it still wants bonuses to be paid to axed CEO Brian Molefe, suspended acting chief executive Matshela Koko and others.
According to its annual financial statements, the power utility is sitting on its last R20-billion. This means that, unless something is done urgently, the parastatal could find itself unable to pay November salaries.
The financial statements, which the Sunday Times has seen, were presented to Public Enterprises Minister Lynne Brown late last month. Her office yesterday refused to comment, saying it was premature.
The power utility postponed the announcement of its results the night before they were scheduled to be made public, leaving industry analysts speculating about the reasons for the delay.
A crash by the utility could have dire consequences for South Africa’s ailing economy as the country depends entirely on Eskom for electricity, without which there can be no economic activity.
Despite its precarious financial position, the state-owned company has asked Brown to approve short-term bonuses totalling R5.5-million for three of its most controversial former and current executives. This is part of a R13-million payment proposed for Eskom’s top executives.
Under a cloud
It proposes that Molefe — who left the utility under a cloud after being singled out in the public protector’s report on state capture for unduly favouring the Gupta family — be paid a R2.1-million bonus for the eight months he served as CEO in the 2016-17 financial year.
Earlier this year, Eskom attempted to secure a R30-million pension payout for Molefe — who was CEO for only 18 months.
That move was blocked by the government following a huge public outcry.
Koko — who is suspended and is scheduled to face a disciplinary procedure this week for alleged conflict of interest for failing to disclose his stepdaughter’s shareholding in a supplier, Impulse International — stands to gain a R1.5-million bonus.
Chief financial officer Anoj Singh, who has links to the Guptas, is scheduled to receive a R1.9-million windfall.
The proposed bonuses stand in sharp contrast to Eskom’s fortunes as the company profits shrank from R5.3-billion at the end of the 2016 financial year to R900-million in June this year. Added to its woes are the facts that:
The interest the utility has to pay on its debt has increased from R31-billion to R38billion;
Financial chief Singh is facing multiple allegations of corruption;
Molefe has taken the parastatal to court, fighting to be reinstated to the job he vacated in December, only to return briefly in May before being chucked out by the minister; and
Electricity sales are dwindling in volume in a depressed economy.
Public enterprises spokesman Richard Mantu said the board would soon “brief Minister Brown on the financial status of the company. It is therefore premature to comment on the issues raised.”
Debt triggers
The company’s poor balance sheet places its status as a going concern in jeopardy, and could see some of its multibillion-rand loans recalled prematurely.
South Africa’s monopoly power producer, with more than 49 000 workers, could find itself out of cash and in need of another government bail-out less than three years after it received a R23-billion cash injection and another R60-billion debt write-off from the government.
The last time Eskom’s balance sheet was so weak, in 2015, former finance minister Nhlanhla Nene provided a R23-billion cash bail-out from the government’s sale of its shares in telecoms giant Vodacom.
He further had to convert a R60-billion
loan into shares, effectively a write-off.
Eskom’s own internal reports warn that reaching the liquidity buffer of R20-billion places its going-concern status in jeopardy.
Exacerbating its woes is a staggering R3billion irregular expenditure bill, which means auditors will saddle it with a qualified audit opinion on its financials.
The Sunday Times understands that the postponement of the results announcement, from last Tuesday to Wednesday this week, was to avert a crisis that would have required Eskom to pay back R15-billion owed to the Development Bank of Southern Africa. The DBSA facility represents 20% of the state bank’s loan book.
The recall of the facility, which was granted in 2010 and has been exhausted by Eskom, would be triggered by Eskom’s failure to achieve a clean audit outcome — a condition of the loan.
A source close to Eskom, who asked not to be named, said: “Because of the emphasis of matters, there is a breach of condition in the DBSA contract, which specifically says ‘You will have a clean audit’, and because of that they have a right to call the loan.
“Once that is done, it will have a disastrous impact and that is why they postponed.
“They need to be aligned with the investor.”
Another Eskom employee with knowledge of the matter said the DBSA felt it should have been alerted to the qualified audit opinion much earlier, but Eskom just went ahead and scheduled the publication of the results.
The DBSA, whose risk committee met with Eskom on Tuesday, refused to divulge details of the contract, citing confidentiality.
But the existence of the clean-audit clause was confirmed by several sources with direct knowledge of the arrangement.
“The issue is that if DBSA persists [in recalling its loan], it may precipitate an early repayment of our debt book,” said someone who cannot be named because of the sensi- tivity of the matter.
“This will in turn trigger our government guarantees.”
Eskom spokesman Khulu Phasiwe said yesterday that Eskom would address issues around its financials in a “comprehensive manner” on Wednesday when annual results are released.
“As part of their year-end audit, Eskom’s external auditors did raise two reportable irregularities . . . these related to Impulse International and the reinstatement of former CEO Mr Brian Molefe,” he said.
“The board of Eskom had 30 days to take appropriate steps to mitigate the risks identified, after which the external auditor are then required to . . . confirm if the irregularities are continuing or not.
“Eskom’s board has taken adequate steps to the satisfaction of the auditors that the irregularities were no longer continuing, except that in Mr Molefe’s matter it was noted that the irregularity could only be closed out when the court proceeding had been concluded.”