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Eskom to get R59bn, but T&Cs are onerous

Monthly ‘management’ reports compliant with IFRS mandated. Seriously?
Strict terms for Eskom. Image: Waldo Swiegers/Bloomberg

A Special Appropriation Bill was recently tabled in Parliament to provide Eskom with much-needed finance over the next two years. If approved, it will see the troubled utility get R26 Billion in the 2019/20 financial year and R33 Billion in the following.  

This is not, however, a blank cheque.

National Treasury, in consultation with the Department of Public Enterprises (DPE) have released these conditions, which are not only onerous, but some may be near-on impossible to implement.

Eskom’s responsibilities

  • Provide daily updated liquidity positions, including underlying income, operational expenditure, working capital, capital expenditure and financing cash flows.
  • Submit and present monthly management reports (signed off by the group CEO). Reports to include IFRS standard profit and loss, cash flow and balance sheet update, including commentary addressing all deviations from the annual budget that individually exceed R100 Million during the month (for each division such as generation, transmission and distribution, as well as at group level).
  • Submit a quarterly board-approved schedule of redemptions and interest payments for the full duration of loan agreements within a week after the enactment of the bill.
  • Use the additional finance only to settle debt and interest payments.
  • Submit a monthly report on the amount and actions underway to recover all and any sums outstanding for electricity sales.
  • Provide monthly updates on the status of actions being taken to dispose of Eskom Finance Company. The target disposal date is prior to March 31, 2020.
  • Provide a justification for the continued use of the Eskom Insurance Captive for risk written outside the Eskom group, and an independent valuation of the insurance captive by December 31, 2019.
  • Submit a plan to manage the cash of the business within its available resources. Not more than a month from the enactment of the bill.
  • Submit a monthly report on the initiatives being implemented to reduce the primary energy costs. 
  • Provide a detailed cost, timing and benefit plan for completion of Kusile and Medupi. Not more than a month from the enactment of the bill.
  •  Provide a monthly statement of expected capex spend. Provide a report on the defects on the build programme and how they will be fixed by not more than a month from the enactment of the bill, and quarterly thereafter.
  • Provide monthly reports on the measures being implemented to improve the Energy Availability Factor (to 80%). 
  • Provide a report on the initiatives being implemented to address the irregular expenditure not more than a month from the enactment of the bill and thereafter quarterly. 
  • Submit a report on the measures that have been implemented to deal with all the individuals implicated in the irregular, fruitless and wasteful expenditure in regard to 2018/9, to be updated quarterly.
  • Produce separate financials for generation, distribution and transmission for March 2020.
  • Provide monthly updates on the progress of the restructuring of the business.

DPE’s responsibilities

  • Ensure that that board is strengthened by December 31, 2019.
  • Ensure (through the board), that Eskom’s executive management performance agreements are linked to the deliverables as contained in the shareholder compact and the conditions as set out by the Minister of Finance by December 31, 2019.
  • Publish a special paper on Eskom restructuring roadmap. Not more than a month from the enactment of the bill.
  • Provide quarterly reports to Parliament (Standing Committee on Appropriation and Select Standing Committee on Appropriation) on adherence to conditions.
  • Ensure appointment of the permanent group CEO. Not more than a month from the enactment of the bill.
  • Approve, with National Treasury, the capital plans. 
  • No incentive bonuses will be paid to executives in the years where equity support is provided.

Treasury shoots own goal

In its eagerness to get the ball rolling on fixing Eskom, National Treasury has shot too far, and has lost sight of the ball.

Producing monthly management accounts compliant with IFRS is, quite frankly, nonsensical.  Management accounts are drawn up on a different basis to IFRS financial statements, and IFRS adjustments are made annually (for example, mark to market, capitalised interest, etc.) An IFRS statement of profit and loss does not contain the details that management would require. Why not do as other CEO/CFOs do, and study the cash flow statement and schedule of loan commitments on a monthly basis, and study the management accounts on a quarterly basis? Oh, wait …

Eskom’s financial woes are not due to inadequate financial management.

To name just a few problems: state capture, bloated inefficient labour force, procurement problems, coal transport, quality of coal, coal contracts, badly maintained plant, and all sorts of problems in completing Medupi and Kusile.

Introducing some cash management and financial planning into Eskom is ideal, but overkill is not.

Read more on Eskom:

This is how Eskom throttles the economy

October is deadline time for Eskom

Two mammoth power plants are sinking Eskom and South Africa



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In a country that has such high unemployment, such poor economic activity and economic growth. Coupled with dysfunctional State Owned Entities, poor academic results bordered by a growing economically in-active population: Where does the government get the money for such bail-outs, year after year?

They steal it from the taxpayers and poor in real Africa style. What a joke.Still ignoring the elephant in the room.

Borrowing – a way out of trouble!!

Probably the taxpayer. But i was thinking the other day – does the government actually have any more money left?

@ boombang. From you and me !!!!!!!

“…Eskom finance Company…”
Maybe Eskom should change to a home loan bank and then a bank(s) should change to electricity generation…………..

All well and good, what are the repercussions for Eskom staff and Management when these conditions are not met, cause we all know that they wont be ??

Ya, well no fine. If eskom doesn’t meet all these conditions then there won’t be any money, and then Eskom will be liquidated by creditors and shut down.

Then the country will have no electricity and the whole of SA will just collapse.

And all of this will happen because the monthly accounts are not IFRIS compliant.

The whole thing is a joke

The conditions tell you a lot about National Treasury – f.k all experience (and knowledge) of how business works.

Management will be kept busy compiling reports for their political masters, rather than fixing the core issues. A cunning plan to kick the can down the road and look good doing it.

@ Black Tin, the government has already run out of money.
This is why “prescribed assets” is the new agenda.
They now want to steal from our pension funds.

The ANC have let everything go wrong that could go wrong with this SOE.

What happens if Soweto do not pay Eskom. The funding be withheld? Never!!
These conditions are as much rubbish as the actual bail out. But SA taxpayers must be the most useless lot ever to tolerate this nonsense! How about a tax boycott until Eskom is sustainable on its own.

How SAM : How IN PRACTICE do u propose a Tax Boycott when the vast Majority pay PAYE : Await your sage solution ?

“Too big to fail.”

The excuse has already been made.

Eskom management can score 0/28 and there will still be a bailout.

MW why are comments being removed?

End of comments.



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