Tito’s Eskom SOS to Ramos
Finance whizz tipped for tough Eskom job as state kicks in with emergency funding
Former Absa CEO Maria Ramos is being brought in to head the explosive process of unbundling Eskom into three components, as the energy utility came close to imploding financially in the past few days.
The National Treasury scrambled to Eskom’s aid after a promised R7bn loan from the China Development Bank failed to come through by the end of March, leaving the utility in dire straits and unable to meet its credit obligations.
Finance minister Tito Mboweni invoked section 16 of the Public Finance Management Act (PFMA) to authorise an emergency transfer of R5bn to Eskom to repay expiring debt and interest on loans.
A total of R17.6bn will be made available to Eskom, with the next tranche to be paid to the power utility before the end of April.
The government also stood guarantee for R3bn of contingency funding from Absa Capital from March 29 to April 2. This was repaid from the R5bn disbursed by the Treasury from the National Revenue Fund, which is normally used after emergencies such as natural disasters and terrorist attacks.
While the government continues to plug Eskom’s financial holes and attempts to stabilise the power supply, the appointment of a chief reorganisation officer (CRO) to head the process of unbundling the utility into three independent units has become urgent.
The CRO will represent the government in overseeing Eskom’s finances, contracts and maintenance of facilities, and will report directly to the board and the ministers of finance and public enterprises.
The Sunday Times understands that Ramos, the former Treasury director-general who stepped down from Absa in January, is one of the people being considered to take up the powerful position. She is the favoured candidate.
In his February budget speech, Mboweni announced that further fiscal support for Eskom would be conditional on the appointment of a CRO by the ministers of finance and public enterprises.
The process was sped up after the escalation of the Eskom funding crisis when the Chinese loan failed to come through by March 25.
In a report informing parliament this week of the provision of emergency support
to Eskom, Mboweni said the R23bn of rescue funding he announced in the budget would have been disbursed between August and October, following the normal appropriation process.
“However, by the end of March 2019, it became evident that Eskom was experiencing difficulties in raising the required funding as well as drawing down on existing facilities,” Mboweni said.
The China Development Bank was “unfortunately unable to timeously execute [the R7bn] draw-down due to its central bank exchange control requirements”. The Chinese have now committed to providing the funds this month, said Mboweni.
Senior government officials told the Sunday Times the Chinese appeared to get cold feet over the push-back from some quarters about the restructuring process at Eskom. A high-level team of officials from Eskom and the government flew to Beijing to assuage their fears.
Though there is no immediate threat of more power blackouts as a result of the new crisis, Mboweni painted a grim picture of Eskom’s financial position. The utility is R419bn in debt, with the government’s exposure in terms of guarantees at R281bn. A total of R69bn over three years was pledged in the budget towards the restructuring.
“Eskom does not anticipate being able to generate sufficient internal cash for all of its maturing obligations at any point in time over the next five years and will therefore rely significantly on financing and refinancing activities. Even after accounting for funds raised, cash flow is not adequate to fund its capital expenditure programme,” Mboweni told parliament in his report.
Treasury director-general Dondo Mogajane said the emergency funding facility was last used two years ago when South African Airways needed an urgent bail-out. A total of R10bn was disbursed from the National Revenue Fund then, paid in two tranches.
“We didn’t want Eskom to default on payment after it ran short of cash. Because of the elections, the approval of the appropriations bill was delayed and it became necessary to make use of the facility in the PFMA to pay creditors,” said Mogajane.
“There is a need for a national call to action for all of us to pull together — government, civil society, labour and the private sector — to keep Eskom alive.”
Public enterprises minister Pravin Gordhan said yesterday there was a vision in place to stabilise Eskom.
“We are keeping the lights on, and the Eskom team has raised its game. After the election, the consultation process on the way ahead must intensify. The engineering technical report will be ready in the course of the coming week. We are revamping completely the way power stations work and are managed,” said Gordhan.
He and Mboweni had not completed consultations about the appointment of the Eskom CRO and he was unaware of any approach to Ramos.
“A knowledgeable finance person who is able to cut through the fog will be extremely helpful,” said Gordhan.
The person would look at the cost structure of Eskom, the coal, fuel and maintenance contracts, and the procurement of parts. The CRO would also examine staff and operational costs.
Gordhan said an assessment of the Medupi and Kusile power plants will also be necessary, including reasons for construction delays and the excessive costs involved.