Pravin’s bald truth about Eskom

Public Enterprises Minister Pravin Gordhan yesterday laid bare Eskom’s bones as he described to parliament how the state-owned entity was in far worse shape than anyone thought it was – and how it came to be there.

In his presentation to the portfolio committee on public enterprises, Gordhan noted Eskom was technically insolvent and would cease to exist at its current trajectory by April.

He has come up with a rescue plan for the embattled state-owned entity.

What this meant, said energy expert Chris Yelland, was that if people started calling in their loans to Eskom, the state would have to start servicing them.

“This would have severe consequences and would trigger other debtors calling in their loans and affect the country’s credit rating,” Yelland said.

By the latest estimates, Eskom had used about R336 billion of a R350 billion government guarantee. The rest of Eskom’s R420 billion debt is on the power utility.

The country spent another day yesterday under a stage three load shedding lockdown and people’s moods were similarly dark on Twitter.

“Lenasia is due to have load shedding later this afternoon but many of the street lights are on during the day,” said Ibrahim Daya.

Tendani Thidela said there was load shedding at his office from 8am so he went home to work until that, too, was cut, upon which he returned back to his office.

On a lighter note, Oelof de Meyer noted load shedding was just in time for Valentine’s Day. “Candle light dinner whether you single or not,” he wrote.

There was little to joke about Gordhan’s presentation.

“The first point – because human memory tends to be short – is to remind ourselves this is the committee which had the inquiry into Eskom and in your report, you said the following: ‘The collective conduct of the previous Eskom Board and management rendered Eskom potentially financially unsustainable due to irregular procurement, mismanagement and non-compliance of existing policy and saw the purging of highly qualified, experienced and skilled senior staff members,’” Gordhan said. “That’s from your report.”

Released on November 28, the report still reads like a horror story and, despite being handed to the Commission of Inquiry into State Capture, action has yet to be taken.

Gordhan noted the cumulative effect of years of problems – particularly corruption – at Eskom had damaged the institution.

Gordhan said the R420 billion debt was 15% of the country’s debt and defaulting on it would place the economy at risk.

In his presentation, it was noted the cash being generated did not cover operating and debt servicing costs while municipal debt – and Soweto’s debt (R28 billion) – was growing at R1 billion a month.

The number of employees increased from 32,000 in 2007 to 48,000 in 2018, with the cost growing from R9.5 billion to R29.5 billion.

Despite the growth in numbers of employees, Gordhan pointed out poor quality of maintenance due to poor workmanship and that 40% of plant breakdowns were due to human error.

Add a 37-year-old-on-average generation fleet, which had not had “essential mid-life refurbishments”, a significant loss of critical skills and low staff morale, combined with ongoing coal shortages due to poor management and lack of investments in cost-plus mines.

Gordhan said Finance Minister Tito Mboweni would indicate next week at the budget speech what kind of financial “support” Eskom would be receiving from government “given the current fiscal constraints and economic constraints we are confronted with”.

– amandaw@citizen.co.za

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