OPINION | No light yet on Eskom turnaround strategy

Eskom’s warning that it couldn’t rule out another round of load-shedding in the next few months turned out to be an understatement.
Less than a day after it released its grim financial results, the lights were going off already.
It was perhaps symbolic that on the day of the release of the results, entering the company’s head office in Sunninghill was a challenge due to a traffic gridlock caused by blank traffic lights.
That set the tone for what was to come. Needless to say, none of it made happy reading.
Interest costs doubled in just one year to R45bn, nearly twice as much as the cash generated by operations, while debt soared above R400bn.
Sales volumes were down 0.8% in the year to date.
While unreliable supply is causing more and more previously paying customers to leave the grid, Eskom is burdened by having to provide electricity to those who won’t pay.
Arrears from municipalities have jumped to R17bn, from R13.6bn in March.
On top of that, Soweto owes about R12.6bn.
Yet the appeal for government intervention is likely to fall on deaf ears.
Considering what is at stake – the potential collapse of the whole economy – the government has been lax in its approach to Eskom.
Eleven months since the appointment of a new board, there’s still no turnaround strategy, at least not one that has been approved by the shareholder.
It seems odd that ministers spend more time discussing SAA.
Though important, the airline can hardly be said to be systemically important. As finance minister Tito Mboweni suggested, this is a state-owned enterprise that could, and probably should, be closed down.
Unfortunately, no such option exists for Eskom, which, according to its chair, Jabu Mabuza, is simply not sustainable as it is currently operating.
Which brings us to another important number in the Eskom results, which surprisingly failed to attract attention. It is worth highlighting, as it shows how the government has been a hindrance rather than a support for the Eskom board.
While the company’s revenue was up just 3% in the six months to September, its wage bill jumped 12% to a whopping R17bn.
And this is a company that its own chairperson has in the past suggested is overstaffed by about 30%.
CEO Phakamani Hadebe and the board recognised this early in their tenure and started to work on a solution.
One proposal was to offer no wage increases. Instead of supporting the board, public enterprises minister Pravin Gordhan intervened in June in a most destructive way.
At the first sight of violence and sabotage, the government forced the board to cave in and settle for increases that are unsustainable.
Based on that, it’s clear that Hadebe and the board won’t be able to count on Gordhan when they come to making the hard decisions on trimming jobs.
What is happening at the SABC may well be a foretaste of the support Eskom’s management will get.
At the public broadcaster, the government appointed a new board and executive team with a mandate to get the company, which lost about R1.5bn in the past two years, into shape.
Chief financial officer Yolande van Biljon again stated last week that the SABC would simply not be financially viable if it didn’t take “drastic measures”, including cutting staff numbers. And who has been the loudest critic?
The very government that appointed the leadership and presumably gave it a mandate to clean up the corporation.
New communications minister Stella Ndabeni-Abrahams is reportedly “at war” with the SABC and has decided to “desist from all engagements” with it due to disagreements over planned retrenchments.
Presumably she thinks she can convince Mboweni to approve yet another bailout for the SABC. Based on what he’s had to say about SAA, for example, it’s hard to see him agreeing to that.
President Cyril Ramaphosa made cleaning up the state-owned enterprises a central feature of his presidency and much has been made about Gordhan’s appointment of new boards. But there has been little else after that.
In the case of Eskom, the government, due to ideology and perhaps with an eye on the 2019 election, has done the opposite of its stated objective and failed to back a board which, according to Mabuza, is fighting an uphill battle to make sure we don’t soon talk of Eskom in “historic terms”.
Lukanyo Mnyanda is the editor of Business Day...

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