South Africa‘s struggling state-run power firm Eskom said on Monday it was considering cutting staff and selling assets after reporting a $171 million loss which underlined the gravity of its financial position.
Eskom, Africa‘s largest public utility, was embroiled in corruption scandals under former president Jacob Zuma and narrowly avoided a liquidity crunch early this year after banks halted lending. Zuma has denied wrongdoing.
The company is critical to South Africa. It supplies more than 90% of the country’s power, has around R270 billion ($20 billion) of state-guaranteed debt and is often cited as a threat to South Africa‘s credit ratings, which hover on the edge of junk status.
Cash-strapped Eskom has also become one of the most visible examples of the effects of corruption at state-run companies in South Africa, as a pay dispute with unions triggered protests leading to a spate of rolling blackouts last month.
New President Cyril Ramaphosa replaced Eskom’s entire board and top executives in January, in one of his first interventions since becoming leader of the ruling African National Congress (ANC).
“Eskom is undoubtedly facing one of the most difficult times in its history,” Eskom Chairman Jabu Mabuza told reporters. “We are not able to tell you today that all the skeletons are out.”
Eskom blamed the R2.3 billion loss for the financial year which ended in March on increases in financing costs and depreciation of assets like Kusile and Medupi, two massive coal-fired power stations which have suffered significant delays and cost overruns.
It also reported R19.6 billion of irregular expenditure and said it had R15.8 billion of cash at the end of March, down from R20.4 billion a year earlier.
Eskom’s new management is combing its finances from late 2012 in an effort to recover money lost through corruption. It has asked for criminal cases to be opened against some former employees and suppliers.
Chief Executive Phakamani Hadebe said Eskom had started discussions with the government about getting its staff numbers right, a veiled reference that the firm is considering cuts to its bloated 47 000 workforce.
Analysts have long called for Eskom to take action to reduce ballooning staff costs, and Eskom Chairman Mabuza said on Monday the company believed it had around one-third too many employees.
Eskom executives also said they were looking at whether to sell non-core assets to shore up the firm’s balance sheet.
ANC sources told Reuters this month that Ramaphosa had secured the backing of senior figures in the ruling party for steps to boost private investment in the power supply industry, including by selling off non-essential parts of Eskom’s business.
Eskom has already announced plans to sell a mortgage lender it owns.
“We are busy with the process of optimising our balance sheet,” Chief Financial Officer Calib Cassim said, warning that high financing costs would continue to drag on Eskom’s bottom line in the 2018/19 financial year.
Cassim added: “We are leaving all our options open.”