Eskom board ‘cleaning up corruption and curbing costs’
Eskom is determined to rid the company of corruption and is investigating 239 matters disclosed via whistle-blowers, board member Nelisiwe Magubane told Parliament’s energy committee on Tuesday.
Eskom’s new board, appointed two months ago, has also instituted lifestyle audits of all employees two levels below the group CE and has prohibited employees from doing business with the state-owned utility as it attempts to repair the damage caused by years of corruption and maladministration.
This bid to strengthen corporate governance is critical if the parastatal is to win back the confidence of investors who were reluctant to buy Eskom bonds in 2017 because of its qualified audit and the lack of action against corruption.
Eskom executives briefed the committee on the implications of the decision of the National Energy Regulator of SA (Nersa) to approve only a 5.23% tariff increase for the 2018-19 financial year.
Magubane said the new Eskom board had spent the first two months inculcating a culture of effective and transparent governance, including ensuring that those engaged in fraudulent activities were held to account.
This process had led to the departure of five senior managers, including executives who were facing serious allegations of misconduct. A further four executives remain on suspension, two of whom will be facing disciplinary hearings in April and the other two in early May.
Magubane said the board was also working on a business strategy to ensure Eskom was sustainable. This would be completed by the end of September. The Eskom board expected to have appointed a permanent CEO and chief financial officer within the next month.
Eskom interim CEO Phakamani Hadebe also emphasised the need for Eskom to develop a sustainable business strategy that focused on maximising revenue and cutting costs. The plan is to cut capital expenditure by about R10bn annually over the next three years.
This would mean that, by 2021-22, Eskom would be generating more income than the cost of servicing debt.
Operational expenditure — mainly coal purchases (about R85bn annually) and employee costs (about R30bn) — would also have to be reduced.
The cost-to-revenue ratio needed to be reduced from about 70% to 65% over a short period, which would require "painful and difficult" decisions.
Hadebe noted that Eskom had raised a gross amount of R43bn (R33bn in net terms) of its 2018-19 funding requirement of R72bn. The first R20bn of this would have to be used to repay the R20bn bridging loan it obtained, which matures at the end of August.
He said this indicated that fund managers were beginning to welcome Eskom back into the financial market, which would assist in it being able to diversify its funding.
Eskom executives said in a presentation that the utility continued to experience liquidity and sustainability challenges and would have to show its auditors it was a going concern.