Eskom and its shareholder are likely to face increasing pressure from its lenders to put a competent and credible board and management team in place, with at least two of SA’s big banks having written to the power utility to ask what it plans to do to address the issues raised in the qualified audit report on Eskom’s recent financial results.
Eskom put its chief financial officer Anoj Singh on special leave on Thursday night amid reports that the Development Bank of SA (DBSA) had threatened to recall its R15bn loan to the utility if no action was taken against Singh.
The Sunday Times reported on Sunday that Rand Merchant Bank and Barclays Africa had also written to Eskom, raising concerns about the qualified audit and poor governance.
Barclays Africa CEO Maria Ramos disclosed on Friday, at the release of the banking group’s annual results that the group had taken up the issue.
"We have written to Eskom, and to the ministers of public enterprises and of finance, to ask them to explain more fully to us what the qualified financial statements mean and how we should understand them," she said. Other banks declined to comment.
The DBSA loan and some of Eskom’s bonds are understood to have covenants that require a clean audit report, with the qualified report technically triggering a default.
But even when there are no specific covenants, bankers would generally expect clean audit reports from companies to which they lend – and want explanations and promises of remedial action if not.
Eskom has multibillion-rand loan facilities from all SA’s big banks, over and above its bond market funding. It called all the banks into a meeting on the qualified audit report the day before it released its results.
A banker said calling in loans would be an "extreme" measure, but the audit report provided a formal basis for his bank to engage with Eskom to see what it planned to do to remedy the governance problems.
Auditors Sizwe Gobodo Ntsaluba cited almost R3bn of irregular expenditure, saying Eskom’s leadership did not exercise adequate oversight or take steps to prevent fruitless and wasteful expenditure.