Beleaguered Eskom uncovers R19 billion in irregular expenditure
Eskom has reported a loss after tax of R2.3 billion in a disturbing set of results that reveal that the state-owned enterprise's woes are far from over.
Eskom, which generates about 90% of South Africa’s power, has reported a loss after tax of R2.3 billion in a disturbing set of results that reveal that the state-owned enterprise’s woes are far from over.
Eskom chairman Jabu Mabuza (pictured) released the power utility's 2017/18 financial results on Monday.
Mabuza announced that irregular expenditure of R19 billion since 2012 had been uncovered at the power utility. Eskom sais 60% of the incidents relating to this irregular expenditure related to administrative noncompliance‚ and noted that irregular spending was not necessarily fruitless and wasteful expenditure.
Mabuza said the significant rise in irregular expenditure was “a result of us shaking this cupboard so hard that all the skeletons are coming out”. He described Eskom as being at a “tipping point”.
Mabuza said the state-owned enterprise was committed to rooting out corruption from within its ranks and remained focused on finalising investigations into suspended executives, while also improving corporate governance.
“I believe that the action taken within a relatively short space of time against those who played a key role in some of the critical governance lapses over the past few years demonstrates how serious we are about rooting out corruption and irregular practices,” Mabuza said.
“We will continue to pursue those engaged in wrongdoing and take corrective action within the South African legal framework. We are determined to clear the company of corruption in all its forms, with about 250 cases reported through Eskom’s whistleblowing channels currently under investigation.”
Eskom also announced that the amount owed to it by municipalities had increased by 44% to R4.2 billion and a net loss after tax of R2.3 billion, down from a R0.9 billion profit in 2017.
Eskom CEO Phakamani Hadebe said that there were extenuating circumstances for the poor results, as the enterprise had had 10 CEOs and six boards over the past 10 years. He stressed that Eskom’s revenue levels remain inadequate and tariff increases awarded by the national regulator are not expected to improve the situation.
However, he was confident that there was a way around the multiple challenges the organisation was facing.
"One of our biggest tasks is rooting out the corrupt behaviour of some of our own employees, which has threatened Eskom’s financial viability, another real challenge that we are managing," he said in a statement.
The utility was undertaking a strategy review, expected to be completed by September 2018, and its turnaround plan included improving the EBITDA margin to at least 35% by growing revenue and reducing costs, managing liquidity, including the recovery of arrear debt, investing in cost-plus mines to benefit from cheaper coal, restricting capital expenditure to R45 billion per year for at least the next three years and reducing reliance on debt financing through optimisation of the balance sheet.
Wage negotiations with trade unions continue, after weeks of the parties being unable to find a way through the impasse.