Eskom is doomed

Money handed over to Eskom is wasted as it will simply be used to pay inflated salaries to many unnecessary workers and finance corrupt deals.

This is the view of journalist, political scientist, and historian RW Johnson, who shared his views in a column titled “Our coming train crash”.

Last week Eskom revealed that it made a R20.7-billion loss over the last financial year and amassed net debt of R430.8 billion.

Eskom CFO Calib Cassim said the level of debt will need to be reduced to R200 billion to be sustainable.

To keep it afloat the government is giving it a R128-billion bailout over the next three years, but Johnson argues this is a colossal waste of money.

He said it is impossible for Eskom to right itself without four things:

  • Large-scale redundancies (big job cuts at the company).
  • A purge of the innumerable insider business deals still going on.
  • An end to cadre deployment.
  • The substantial sale of assets.

The government is scared to implement these solutions, however, and continues to pour money in.

“This is a disastrous failure of governance and it means that the money handed over to Eskom will essentially be wasted,” Johnson said.

“In effect it will be used to keep paying inflated salaries to a large number of unnecessary workers and to finance all the sweetheart deals that make Eskom’s costs so high.”

“Ramaphosa has declared that the highest national priority is the maintenance of their high consumption levels.”

Eskom CEO confirms problems

Eskom’s R20.7-billion loss over the last financial year is the largest ever by a state-owned company in South Africa.

Eskom’s acting CEO Jabu Mabuza told Radio 702 that Eskom has overborrowed to the tune of R440 billion and that its revenue is not enough to service its current debt.

He added that Eskom is selling electricity at 90 cents which costs the company 112 cents to produce.

An additional problem is that many of the municipalities which it sells electricity to do not pay their bills. This, Mabuza said, amounts to around R40 billion.

While Eskom is heavily overstaffed, the company is prohibited from cutting jobs which makes it nearly impossible to become more efficient.

“The president said we can’t retrench, which means we are looking at other ways. The pain has to be taken by suppliers, customers, shareholders, employees, and management,” he said.

Eskom’s downward spiral

Over the past decade Eskom rapidly grew its workforce and expenses, but did not significantly increase its electricity output. In fact, it decreased in some years.

The graphs below show how Eskom landed in such a desperate financial situation.

Eskom Expenditure (lower is better)

Money owed to Eskom by municipalities (lower is better)

Eskom debt (lower is better)

Eskom profit (higher is better)

Now read: Eskom posts R20.7-billion loss

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Eskom is doomed