Overburdened with staff and debt, dealing with shrinking profits, declining sales, and disappearing liquid assets, according to its interim results released yesterday, 2018 is going to be Eskom’s annus horribilis as the new board tries to help turn the ailing utility around.
How it intends to do that without a solid game plan is anyone’s guess; and yet, with only 10 days on the job, the board under Jabu Mabuza has managed to stave off the Johannesburg Stock Exchange’s suspension of trading in Eskom bonds.
Partner at Mining & Energy Advisors and energy expert Ted Blom, had a dark outlook of the report.
“This presentation was prepared by management, not by the board so they were largely reading off stuff which had been spoon-fed to them,” said Blom.
“I’m not impressed. This board has not demonstrated it has the ability to fix Eskom, there’s time lines, there’s no identification of problems, in fact there is not even a mention of a turnaround plan and the board is adamant it will be hands off which I feel is a corrupter’s dream.”
Certainly, the interim results are dire and as acting chief financial officer Calib Cassim noted, cash from operations were not enough to cover increasing debt but they had secured commitments for R10 billion by tomorrow, plus another R10 billion by the end of February to keep going.
Interim CEO Phakamani Hadebe said the reason the utility found itself in its situation was poor leadership across Eskom.
“Decisions had to be taken and now we are where we are. The second issue was a lack of corporate governance and integrity. “We were always in the news for the wrong reasons and the liquidity issue is the outcome of that,” Hadebe said.
With Eskom owing more than R474 billion, year-on-year shrinkage in revenue is the result of the standing joke that the utility is the only company in the world which doesn’t want people to buy its product because of blackouts caused by its failure to build power stations timeously.
On March 31, 2017 Eskom had more than R177 million gross revenue, down to R97 million in September 2017, and down again yesterday to R95 million.
After deductions, Eskom’s reported profit was down from R9.5 billion in September, to R6.3 billion yesterday. And municipalities are not helping either, having accrued arrears of R12.4 billion.
Positively bouncing with suppressed energy, Hadebe said the board had to recognise the 47 000 staffers waking up every day to do their best to make sure South Africans received power.
“I am confident Eskom can turn the corner. The challenges Eskom is facing are less about core operational issues but more about individuals who are after certain things outside their mandate and we will deal with them as soon as possible,” Hadebe said.
Market analyst Chris Gilmour said there was always hope.
“But with total debt approaching R500 billion, any action plan by definition will be ultra-long term,” he said. And it’s those plans South Africa is eagerly awaiting.