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Eskom scrutinises staff numbers, assets in cost-structure revamp

The state power utility will hold a strategic session next week.

Africa’s biggest power utility is reviewing its business, including staff numbers and possible asset sales, to find a way out of massive debt and develop a more sustainable model, according to its chairman.

State-owned Eskom will hold a strategic session next week as part of an effort to address flaws that forced it to take a R5 billion rand loan for the month of February to maintain essential liquidity levels.

“Our cost structure is definitely not right,” Jabu Mabuza, Eskom’s chairman, said in Cape Town, where he attended a Bloomberg conference. “We have to have to help the organization to be structured with people, assets, funding in a manner that is appropriate.”

Eskom’s financial crisis stems from factors including weak demand, delinquent municipalities that don’t pay their bills and allegations of graft. The utility bought itself some breathing room this month by signing a R20 billion short-term credit facility with a group of banks, but the issues remain. Mabuza was appointed chairman in January as part of an overhaul of the board as President Cyril Ramaphosa rose to power, promising better management of state-owned companies and a crackdown on corruption.

The business needs to address “unacceptable” debt-to-equity ratios, which are above 70% compared to the benchmark of around 50%, Mabuza said. It needs to look at disposing non-core assets, including a housing company it owns.

“When you don’t have money you need to look at anything that is of value that you can sell,” he said.

Renewable power

The utility must to agree on a price path for renewable power from independent producers, he said. A government program to diversify South Africa’s energy mix has been held up for more than two years since Eskom refused to sign agreements allowing the projects to progress.

“Whether it is human or office, everything needs to be looked at” in terms of cost, Mabuza said. He declined to give a target for how much the utility should reduce its current number of almost 42 000 employees, but said it will also be reviewed. “Benchmarked against our peers globally, Eskom is definitely employing too many people,” he said.

© 2018 Bloomberg L.P

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CEO of Eskom: Ok guys lets hear it. At this meeting of the board we will be doing a strategic SWOT analysis. What are our strengths?

Board member: We have got an ANC-guaranteed monopoly, and a captured client base and we are the largest contributor to BEE projects. Our biggest asset however is the board of Nersa, and the fact that they are a bunch of morons and more incompetent than us.

CEO: Great! what are our weaknesses?

Board member: We have the most clueless board-members in the world, led by a CEO who won’t even be appointed as a sweeper at a small branch of any international utility, and employees who are hopelessly overpaid and incompetent. On top of that we have rampant corruption and those who do not steal from us are to drunk to do so.

CEO: Ok, so how do we use our strengths to overcome our weakness?

Board member: We lobby the ANC to ensure our monopoly and to reaffirm their commitment to the BEE project. Then we have the ANC captured.

CEO: Excellent. So what are our opportunities guys?

Board member: We have got a opportunity to lobby the ANC and to convince them that we have to support BEE schemes. We also have the opportunity to keep on bullshitting NERSA for they are a clueless bunch of morons paid to look important. We can also keep milking government because they are committed to this moronic developmental state idea. They will keep on trowing bad money after good money. The guys in Luthuli House have got a political agenda. They don’t care much about value for money, as long as they fund BEE schemes.

CEO: Wonderful. And what are the threats to our business model?

Board member: Actually the biggest threat to our business model is the reality that we do not have a viable business model. We are hopelessly inefficient because we are a parastatal. Green energy projects are way more efficient, as a matter of fact, any farmer in the Karoo with an old Lister engine generates electricity more efficient than us.

CEO: Ok. so how do we use our strenghts to tackle the threats?

Board member: We buy green energy and sell it to the general public at a 100% markup. That way we make more profits from green energy than the green energy companies themselves. Further we lobby the ANC to ban all Lister Engines.

CEO: Ok thanks for great input guys. We sorted this out. We will just shift our problems down to our clients and keep on lobbying the ANC for protection. Now join us at the bar for Johnny Walker….

Excellent! Should have been published instead of the original article, I will speak to my editor.

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