Eskom’s new chief restructuring officer needs to be a ‘bad cop’
Besides the obvious need to address debt and revenue issues — thousands of inevitable retrenchments need to be undertaken too
Of all the executives, government officials and consultants being recruited to tackle the mammoth task of rescuing Eskom, the toughest task could fall to the person who has to take it apart.
President Cyril Ramaphosa said in June that a soon-to-be appointed chief restructuring officer (CRO) will be “expected to re-position Eskom financially with careful attention to the mix between revenue, debt and cost structure of the company”. That euphemistic job description skirts around what the person will inevitably have to do: fire thousands of workers, split it into three units, and help re-organize a R440bn debt mountain.
“They’ve got to have a guy who’s going to be the figurehead, the bad cop” to deal with over-staffing and take the other difficult decisions, and that’s likely to be the CRO, said Andrew Levy, managing partner of Andrew Levy Employment, which advises companies on labor relations. “The politicians — whether it’s Cyril or the cabinet or anyone else — can’t be seen to be in this arena, it’s too dangerous politically.”
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While Eskom says about a third of its 48,600 workers are superfluous, powerful unions that are allied to the ANC and which played a key role in helping Ramaphosa win power oppose job cuts. About 5,000 workers may take severance packages, according to a person familiar with recommendations presented to the presidency. That would leave about 11,000 who’ll have to be forced out. Those recommendations haven’t been made public.
The unions also opposed plans Ramaphosa announced in February to split Eskom into generation, transmission and distribution units under a state holding company, fearing it will be the precursor to job losses and privatisation. The government says the break-up will make it easier to manage the utility, which isn’t selling enough power to cover its costs and is contending with massive construction cost overruns on its new plants. Eskom is expected to report a loss for the financial year ending March 31.
“It’s difficult to restructure without retrenchments,” said Livhuwani Mammburu, a spokesperson for the National Union of Mineworkers (NUM), which represents about 15,000 Eskom employees. “If they retrench our members there’s going to be a war.”
Eskom came off second best in a showdown with workers last year. It sought to freeze salaries but was forced to backtrack in the face of illegal protests that shut down several of its plants and resulted in rolling blackouts, after public enterprises minister Pravin Gordhan intervened.
Eskom and the department of public enterprises, which oversees state-owned entities (SOEs), referred queries on the CRO to finance minister Tito Mboweni, who declined to answer questions on the appointment. Mboweni previously warned SOEs that the government can’t keep writing them blank cheques and said they have to implement plans to become self-sustaining.
The utility will be the biggest of the SOEs to call in a restructuring specialist. SAA appointed a CRO in 2017, but the carrier remains in dire financial straits and continues to seek government bailouts. There are also plans to appoint a CRO at the SABC, which is also at risk of going insolvent.
The work done by the CRO at Eskom could be a harbinger of things to come at other troubled SOEs, according to Levy. “They’re going to take on the unions,” he said. “That’s the curtain raiser” to the wider process of reducing the government’s bloated wage bill, which has left the country deeply in debt.
With Paul Vecchiatto