EDITORIAL: Why Phakamani Hadebe really threw in the towel
Hadebe leaves Eskom not because he has failed in his duties, but because the shareholder would not let him and his team do the job for which they were hired
This week Telkom said it would pay about R720m in dividends to the government, its single largest investor with 39.8%. That’s from an annual R3.3bn profit for the year ended March.
On the other hand, Phakamani Hadebe will soon present a disastrous set of financial results for Eskom’s year to the end of March. The approximately R20bn net loss will be Hadebe’s swansong, since he announced last week that he has quit, as his health has been suffering.
It makes him the utility’s 11th CEO since 2009. There have also been about that number of different boards, and as many chief financial officers over that period too.
The situation of the two companies shows clearly what works, and what doesn’t. Telkom has been paying dividends and taxes consistently since the board and management team led by Jabu Mabuza and CEO Sipho Maseko took over in 2011. On the other hand, Eskom has been haemorrhaging skills and cash since 2009, and relying on cash bailouts since 2014.
While Telkom has been a paradise of stability since Mabuza and Maseko took over and the politicians stayed away, the plight of Eskom has worsened as it became the playground of politicians and their corrupt paymasters. The electricity provider is perhaps the central stage on which the grand project of state capture played itself out over the past decade.
Since 2009, politicians, who had not a clue about what it takes to run a sustainable business, let alone a complicated engineering and financial behemoth such as Eskom, have taken over operational power. They have effectively reduced the professionals who should be running the place to paper-pushing admin jockeys, whose job was to channel contracts to whoever had the ear of the most influential politician.
The bottom line is that over the past 10 years, losses to the taxpayers topped R200bn (if you include the operational losses, bailouts and ballooning expenditure projects).
Why? Well, it’s true that successive boards of directors, management teams and public enterprises ministers have come and gone over the past 10 years. But what has remained constant has been the shareholder — the government.
By contrast, the Telkom model, in which the government owns just under 40% of the stock, shows what can be achieved when the private sector is allowed to play its role. Driven by the other investors, Telkom focused on maximising the returns for cash invested.
In Telkom’s case, corruption diminished and governance improved (though the sorry tale of how Telkom simply stopped paying suppliers NetXCom showed it’s not an entirely clear slate). Overall, the services offered by the company improved, and clients returned.
As returns improved, the company started paying taxes and dividends. There is not, as the saying goes, much rocket science to it.
Hadebe now leaves Eskom, not because he has failed in his duties, but because the shareholder would not let him and his team do the job for which they were hired. That job was to restructure and fix the company, through cost-cutting and purging the corrupt elements, while collecting the debt owed by nonpaying municipalities.
It now leaves the government with another headache to replace him, while breaking up Eskom into three entities. Then the government must stand aside and let the board and management fix what is wrong.
Lastly, the government must sell a minority stake in Eskom, if only to instil good governance and a culture that puts clients’ needs first.