Shocking state of affairs at Eskom of deep concern
This week’s revelations about Eskom’s financial woes underline just how tough a challenge the state-owned power utility’s new leadership, chairman Jabu Mabuza and chief executive Phakamani Hadebe, is facing. On Monday they presented Eskom’s results for 2018, a bleak task given that the utility posted a R2.3-billion loss and has recorded R19.6-billion irregular expenditure as opposed to R3-billion in the previous financial year.
To no small extent this is the end result of years of mismanagement and looting. Eskom has had 10 CEOs and six boards in a decade and its new chiefs blame the morass on corrupt senior officials who have since left the utility’s employ.
Indeed allegations of serious maladministration and corruption played a major role in the collapse in confidence of lenders, creating a credit crunch for the utility. Happily there are signs that major lenders are warming to the new Eskom leadership.
But the hard reality is that in terms of its core business, electricity, Eskom lost R4.6billion. Demand for electricity is flat and likely to decline further should the price tag be unreasonably hiked. In fact worldwide big utilities have experienced a decline in consumer demand, partly as a result of alternative energy production.
Eskom is owed billions of rands by municipalities and it is unlikely to see much of this debt repaid anytime soon.
On the other hand, it is hard to see how Eskom can reduce its major costs – coal, ballooning salaries and servicing debt.
All of this comes at a bad time for South Africa. Eskom’s financial woes are exactly what consumers and business do not need.
Although the regulator, Nersa, has in recent years confined Eskom’s pricing ambitions, some experts are predicting that over the next three years electricity prices could go up by 110%.
This, on top of escalating fuel hikes, would have dire consequences for the cost of living and impact severely on South Africa’s economy. Critically this includes the employment rate. Our country cannot afford such a scenario. Mabuza has promised that by spring Eskom will make public its plans to totally revise its business model.
This is now not an option but a necessity.
Some experts are predicting that over the next three years electricity prices could go up by 110%