CLEAN UP ESKOM TO SAVE SA

Having generated R45bn in cash from its operations, Eskom paid out interest and other funding costs of R38bn in the year ended March, on its debt of more than R360bn. And that was before the downgrades that increased the cost of Eskom’s debts.

The paltry R7bn left over will be swallowed by ever-increasing funding costs, together with the rampant corruption that is eating Eskom alive.

The problem is, the utility must find more cash to finish the investment programme it started a decade ago. Almost half the Medupi power station is now generating electricity, but the rest needs funding to be finished. Two out of six generating units are generating power at the Kusile power station, with four to go. The total investment in these projects is over R310bn.

This means Eskom will still have to approach the market to find the money. That’s no small task, given that the face of this fundraising drive is also the face of the grand corruption eating away at the utility.

Only in a place where corruption seems to be rife could Eskom CFO Anoj Singh carry on with such apparent impunity. Last week, Singh failed (again) to tell us what he was doing in Dubai in December 2015 — other than receiving a R10,000 massage on the Guptas’ account, when they took him there on holiday.

Singh also failed to dispute claims from investigative journalists Amabhungane that the Guptas gave him R400,000 and opened a shelf company for him.

These gifts would seem to be a “thank you” after Singh and his colleagues — Matshela Koko, Brian Molefe and others — moved mountains to ensure the Guptas got their hands on Optimum Coal. Singh personally drafted and signed a shady R1.6bn guarantee, standing surety should the Guptas fail to pay Absa.

But the point is, Eskom still needs billions to keep going. Someone has whispered this to finance minister Malusi Gigaba, who recently spoke about providing “soft support” for Eskom. Forget “soft support”; what it needs is hard cash to strengthen its balance sheet.

So, South Africans will again be told, in a few months’ time, that more of their hard-earned money will be channelled to rescue Eskom. That was the case in 2015, when Eskom had only R20bn in the bank. Its going-concern status was threatened until we gave it R60bn in a debt write-off and another R23bn in cash.

It turned out that a lot of that money went to wellconnected people, paying for (among other things) expensive massages. What did we, the owners of that capital, get in return? More insults, more thieving.

Eskom has already said it plans to rely more on state-owned development financiers like the China Development Bank and the Development Bank of Southern Africa (in the absence of other options). But at this stage, even that funding won’t be cheap.

Equity injection

Instead of injecting more borrowed money (at higher interest rates), what is needed is an equity injection from strategic investors — who will demand a clean-up.

The money needed (at least R80bn if the previous bailout is a yardstick) means this would have to be a foreign investor along the lines of the world’s largest industrial and power companies. The easiest way to inject a strategic equity partner into Eskom would be to sell a big stake in Medupi and Kusile. After all, they both have 50 years of operating life ahead of them.

But for General Electric, for example, to buy into Eskom, there would first have to be a clean-up. People like Singh and Koko would have to leave, and their protectors in government (public enterprises minister Lynne Brown and President Jacob Zuma) would have to limit their involvement to formulating policy.

That could save Eskom, and SA. But it could only work with a proper, investor-driven clean-up.

The way to inject a strategic equity partner into Eskom would be to sell a stake in Medupi and/or Kusile