ESKOM: No freebies this time
Market forces, not government, must help haunted power utility navigate its way to financial stability
Eskom’s dire financial situation was not sufficient to persuade finance minister Malusi Gigaba to bail out the power utility in his budget. Instead, he said government had prioritised leadership changes and improved corporate governance to make Eskom and other state-owned entities attractive to commercial lenders.
Late last year, commercial lenders closed their books to Eskom, insisting it appoint a credible board and get rid of senior employees accused of corruption.
In January, government appointed additional directors to the board, headed by chair Jabu Mabuza. Others included Sifiso Dabengwa, a former MTN group CEO who was previously a senior Eskom executive; current Imperial Holdings CEO Mark Lamberti; and former energy department director-general Nelisiwe Magubane.
Among the new board’s first decisions were the appointment of Phakamani Hadebe as interim CEO, and the shedding of seven executives, including chief financial officer Anoj Singh and former acting CEO Matshela Koko.
"The lenders are again engaging Eskom and it will be able to sort its funding requirements that way," said Gigaba. The utility has been teetering on the brink of financial collapse after running out of cash to fund operations and pay salaries and suppliers.
In November, Eskom admitted it would run out of cash at the end of December. It then raised a R3.5bn loan from China to operate during January. The Public Investment Corp then stepped in early this month with a R5bn loan. The utility is talking to other local commercial lenders to raise the R20bn loan it says it needs to keep operating until the end of the financial year next month.
Eskom has relied on government guarantees for R350bn of its debt, which stood at R540bn in the period to end-September 2017. Most of the funds have been used for infrastructure investments, including three power stations.
Gigaba also failed to make any changes to the utility’s guarantee, which was last year extended to March 2023.