Registered users can save articles to their personal articles list. Login here or sign up here

‘Bad cop’ set to be named to oversee Eskom rescue

The incoming chief executive will have the mammoth task of firing workers and re-positioning Eskom’s finances.

Of all the executives, government officials and consultants being recruited to tackle the mammoth task of rescuing South Africa’s state power utility, the toughest task could fall to the person who has to take it apart.

President Cyril Ramaphosa last month said a soon-to-be appointed chief restructuring officer will be “expected to re-position Eskom financially with careful attention to the mix between revenue, debt and cost structure of the company.” That euphemistic job description skirts around what the person will inevitably have to do: fire thousands of workers, split it into three units and help reorganise a R440 billion debt mountain.

“They’ve got to have a guy who’s going to be the figurehead, the bad cop” to deal with over-staffing and take the other difficult decisions, and that’s likely to be the CRO, said Andrew Levy, managing partner of Andrew Levy Employment, which advises companies on labour relations. “The politicians — whether it’s Cyril or cabinet or anyone else — can’t be seen to be in this arena, it’s too dangerous politically.”

While Eskom says about a third of its 48 600 workers are superfluous, powerful labour unions that are allied to the ruling party and played a key role in helping Ramaphosa win power oppose job cuts. About 5 000 workers may take severance packages, according to a person familiar with recommendations presented to the presidency. That would leave around 11 000 who’ll have to be forced out. Those recommendations haven’t been made public.

The unions also opposed plans Ramaphosa announced in February to split Eskom into generation, transmission and distribution units under a state holding company, fearing it will be the precursor to job losses and privatisation. The government says the breakup will make it easier to manage the utility, which isn’t selling enough power to cover its costs and is contending with massive construction cost overruns on its new plants. Eskom is expected this month to report a loss for the financial year ending March 31.

“It’s difficult to restructure without retrenchments,” said Livhuwani Mammburu, a spokesman for the National Union of Mineworkers, which represents about 15 000 Eskom employees. “If they retrench our members there’s going to be a war.”

Eskom came off second best in a showdown with workers last year. It sought to freeze salaries but was forced to backtrack in the face of illegal protests that shut down several of its plants and resulted in rolling blackouts, after public enterprises minister Pravin Gordhan intervened.

Blank checks

Eskom and the Public Enterprises Ministry, which oversees state companies, referred queries on the CRO to finance minister Tito Mboweni, who declined to answer questions on the appointment. Mboweni previously warned state-owned enterprises that the government can’t keep writing them blank checks and said they have to implement plans to become self-sustaining.

The utility will be the biggest of the state companies to call in a restructuring specialist. South African Airways appointed a chief restructuring officer in 2017, but the carrier remains in dire financial straits and continues to seek government bailouts. There are also plans to appoint a CRO at the South African Broadcasting Corporation, which is also at risk of going insolvent.

The work done by CRO at Eskom could be a harbinger of things to come at other troubled state companies, according to Levy.

“They’re going to take on the unions,” he said. “That’s the curtain raiser” to the wider process of reducing the government’s bloated wage bill, which has left the country deeply in debt, he said.

© 2019 Bloomberg L.P.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

COMMENTS   2

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

Seriously? The CRO position was announced on 20 Feb. Since then, nothing.

The CEO handed in his resignation months ago too. Since then also nothing.

No positions advertised in the press. Must be a deployment instead.

You could be forgiven for thinking that this is some Mickey mouse operation that doesn’t need a proper executive team.

But the government run operations aren’t run so much as they’re looted. And if you try and actually do the job you get undermined by the politicians. Like the SAA CEO. Or like the SABC board that tried to achieve something. Or like Hadebe who opened up with a zero salary increase number.

Okay, so not only will you be undermined by your bosses, you also have to go to war with the unions. And the layers of executives and middle managers you need to fire too. And half the towns and cities in the country who are illegally connected. And Zimbabwe who can’t pay.

Why not give it to Kieswetter?

Oh forgot. He’s needed for extorting taxpayers. By now it’s the only job in town.

If ESKOM themselves say one third of the 48600 workers are superfluous it goes without saying the actual number is probably closer to two thirds.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
Insider GOLD
ONLY R63pm

Moneyweb's premium subscription is a membership service which will give you access to a number of tools to take charge of your investments.
Or choose a yearly subscription at R630pa - SAVE R126

Get instant access to all our tools and content. Monthly subscription can be suspended at any time.

Podcasts

SHOP NEWSLETTERS TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2