THE BOTTOM LINE
Will somebody now please run Eskom like a proper company
From a financial point of view there is no justification for its existence. An inspired plan is urgently needed
As costs continue to rise, Eskom’s new management must deliver a new strategy for the state-owned enterprise quickly.
Eskom increasingly is being crippled by its mountain of debt. Already at R388bn, the utility plans for it to balloon to R600bn in the next four years – largely because the Medupi and Kusile projects are years behind schedule.
A plan to ask the Public Investment Corporation to convert some of its debt into equity was abandoned by Eskom over concerns that the market might see it at a default, chairman Jabu Mabuza said this week.
On Thursday the utility signed a wage agreement that it can’t afford – as evidenced by its initial wage offer of 0%. The agreement, which will cost the utility R3.9bn, included salary increases of 7.5% this year, 7% in the next and 7% in the 2020-21 financial year, as well as a housing allowance and a once-off cash payment of R10,000 after tax.
The increases will be financed by either borrowings or cost savings. Jobs cuts now appear inevitable.
Reports from Moneyweb are that Eskom is now also seeking another 15% tariff hike a year for the next three years, although the energy regulator will probably grant price hikes sparingly. History has shown, however, that higher prices have only served to suppress electricity demand.
From a financial point of view there is no real justification for Eskom’s existence. An inspired plan is urgently needed.