South Africa’s embattled state power utility Eskom Holdings SOC Ltd. will be temporarily led by Jabu Mabuza, its chairman, who will take over the roles of interim executive chairman and acting chief executive officer starting from next month.
The interim appointment comes after Phakamani Hadebe announced that he would step down as CEO at the end of July because his health was suffering due to the “unimaginable demands” of the job. He will become the 10th person to vacate the post in as many years.
Mabuza is a “safe pair of hands” and his appointment is a positive development, according to Raymond Parsons, a professor at North-West University’s Business School in Potchefstroom, west of Johannesburg.
“Under normal conditions combining the two posts is not ideal, given oversight concerns,” Parsons said. “But having the same person in two usually distinctively and separate roles at Eskom is clearly only a temporary arrangement and could be accepted in Eskom’s present unusual circumstances.”
The government and Eskom have been under pressure to install executives at Eskom who are capable of transforming the loss-making utility from an almost century-old monopoly that generates about 95% of the nation’s electricity into an efficient and sustainable business comprising three units under a state holding company.
Eskom’s board will identify a suitable candidate to take on the permanent CEO role within three months, Minister of Public Enterprises Pravin Gordhan said in a statement on Monday. The utility began advertising the post last week and applications are due to close on Aug. 2.
The appointment may raise questions over whether Eskom has a deep enough talent pool from which to draw senior executives, and whether Mabuza has enough time to devote to the job. Earlier this month he took on a non-executive director role at pay-TV company MultiChoice Group Ltd., adding to his positions as chairman of Anheuser-Busch InBev’s Africa board, Sun International Ltd. and the Casino Association of South Africa.
The dire state of Eskom’s finances will be put on display on Tuesday when it is set to post its second consecutive multi-billion rand annual loss.
The utility forecast in January that its loss would widen to about 20 billion rand ($1.4 billion) in the year through March, from 2.3 billion rand the year before. But Anton Eberhard, who sits on a government team that’s advising on a rescue plan for Eskom, told a conference in Lisbon last month the shortfall would be at least 25 billion rand.
Either way, the loss would be a record for a state company, eclipsing the 14.6 billion rand state oil and gas company PetroSA Ltd. burnt through in the year through March 2015 after a massive asset writedown. The utility’s precarious financial state has now become a national problem, with the government giving it a 128-billion-rand bailout over the next three fiscal years to keep operating.
Eskom has been struggling to produce enough power to meet demand from its ageing coal-fired plants, and two new ones currently under construction are running years behind schedule and way over budget. The utility isn’t generating enough cash to service both its interest and debt repayments, despite having secured tariff increases of more than 500% since 2007, according to Eberhard, a professor at the University of Cape Town.
The government has yet to announce the appointment of a new chief restructuring officer for Eskom, who will help reorganize its debt and oversee the process of splitting it into generation, transmission and distribution units.
The utility revealed in May that it owed 440 billion-rand at the end of March, 273 billion rand of which was government-guaranteed.