It was business as usual at Eskom over the holiday period with the utility’s liquidity problems parked as executives took leave to reconvene in the new year.
This lack of urgency to address Eskom’s problems is tantamount to treason at a governance level, says Ratings Afrika corporate governance expert Charl Kocks.
Finance minister Malusi Gigaba earlier named problems at Eskom as the biggest threat to the South African economy.
Eskom admitted in November that it is experiencing liquidity problems and spokesperson Khulu Phasiwe said the utility has expedited its drawdowns on existing loan facilities to pay for “basics”, including salaries.
According to reports, Eskom’s own assessment was that it would have R1.2 billion cash at the beginning of December and move to a R5 billion negative liquidity position by the end of this month.
Moneyweb asked Phasiwe on Monday morning about Eskom’s response to the crisis. He said Eskom executives would meet next week, when everybody is back from the holidays, to address the issue.
This comes as an insider told Moneyweb Eskom “has no room left to manoeuvre”.
The utility has stated publicly that it has secured only 57% of the R57 billion funding it requires for the current year ending March 31 and funders told it in September/October last year that they have closed the taps pending an improvement in corporate governance.
“Investors want assurance that the (governance) issues will be dealt with,” Phasiwe said on Monday. They want to see progress and a plan to address outstanding matters, he said.
According to Phasiwe, following the management deliberations Eskom plans an overseas roadshow to give feedback to investors, but no dates have yet been set.
Eskom has survived the past few months by expediting drawdowns from a R3 billion loan from the China Development Bank. According to its Integrated Report it had a total of R6.25 billion available in committed bank facilities at year-end on March 31 2017. This includes the R3 billion China Development Bank facilities.
The balance of R3.25 billion is however available for dedicated purposes only and not for general use and paying salaries, Moneyweb has learnt.
Apparently Eskom executives are pinning their hopes on bond sales set to resume next week, but since little has changed on the governance front, it is doubtful that there will be much appetite.
Since late last year, a permanent Eskom board has been appointed and two suspended executives Matshela Koko and Prish Govender returned to duty after surviving disciplinary hearings. Koko’s hearing has been widely criticised as a sham aimed at his return to Eskom.
Public response to these developments has however not been positive. Attacking Public Enterprises Minister Lynne Brown, Business Leadership SA said in a statement: “As well as retaining Mr Zethembe Khoza as chairman of the board of Eskom, by returning both Messrs. Koko & Govender, Ms Brown has failed to meet the country’s, Eskom’s investors and regulators expectations of high governance standards”.
A further two executives are still on suspension with no timeline set for their disciplinary hearings. They are financial head Anoj Singh and Abram Masango. Masango has been fingered by Koko in the manipulation of contracts at Kusile, but has denied any wrongdoing.
Three senior managers are also on suspension with no definite plans for their disciplinary hearings.
No concrete steps have yet been taken towards the appointment of a permanent CEO for Eskom.
Another pressing matter that will be discussed by the Eskom executive only next week, is the delay in the release of its financial results for the six months ended September 30.
In the past Eskom has published these interim results in October or November.
Moneyweb earlier reported that the auditors are not satisfied with Eskom’s response to R3 billion of irregularities that led to a qualified report for 2016/17 and are questioning the utility’s going concern status.
This has been exacerbated by the decision of energy regulator Nersa to effectively reduce Eskom’s allowed revenue from tariffs by R15 billion compared to the current year and R30 billion less than Eskom applied for.
Phasiwe said last month the interim results would hopefully be released in the first half of January, but on Monday he admitted that no date has yet been set.
Phasiwe said Eskom is not going to approach National Treasury for a bailout or further government guarantees.
Asked whether it is in discussions with Eskom about its liquidity crisis and delayed results, National Treasury merely said it “will be engaging with Eskom and its external auditors and the Department of Public Enterprises to understand the reasons for the delay in the publication of the entity’s interim financial results”.
Kocks said Eskom appears to be sitting back and allowing the crisis to unfold, knowing Eskom is “too big to fail”. He says that it is playing with fire in a highly irresponsible way and tantamount to treason at a governance level.
He said the utility clearly has problems accessing funding on capital markets and it is useless to pin its hopes on bond sales.
“When things are this bad, it is all hands on deck,” he says. Leave should be cancelled and all attention should be focused on solving the immediate problems, he says.
“Executives should work around the clock to bring the severity of the problem to the attention of Public Enterprises Minister Lynne Brown,” he says.
Unfortunately Brown has questioned Eskom’s frankness and truthfulness in the past and therefore executives have to convince her now that what they are presenting is a real crisis that has to be addressed without delay, Kocks says.
Parking the issue over the holidays however creates the impression that Eskom’s management does not even appreciate the extent of the problem, he adds.