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Eskom's captains don't see mass job cuts or huge R8bn shortfall

May 15 2018 16:36
Khulekani Magubane

Cape Town – Eskom’s new captains maintained on Tuesday afternoon that they do not envisage mass downsizing, government bailouts or a massive shortfall of R8bn in the troubled power utility’s immediate future.

They were responding to questions from reporters during Minister of Public Enterprises Pravin Gordhan’s briefing ahead of his budget vote in Parliament. Eskom chair Jabu Mabuza and interim CEO Phakamani Hadebe maintained that they would steer the battered ship responsibly.

In an economic climate where the utility has sought tariff hikes to make up for losses and the World Bank has reported a bleak picture for Eskom’s prospects, the parastatal’s new leadership has its work cut out for it in improving perceptions and restoring stability.

During his briefing to reporters, Gordhan said Eskom had come a long way since the days when it was at the centre of state capture. He recalled a site visit where he saw for himself that the Optimum Coal Mine owned by Tegeta had not been serving Eskom as it should.

“The Optimum Coal Mine had conveyor belts which Eskom invested in and were supposed to supply coal to Eskom... they were not doing that at the point when we visited. Three payments were made to this business and now it is in business rescue after public purse investments into it,” said Gordhan.

He said the department of public enterprises was preoccupied with ensuring that the utility had the right capacity to lead it out of its quagmire.

“Balance sheet issues have been looked at and Hadebe has led a road show with creative plans to keep the entity going. Soon we will be able to announce a permanent CEO and permanent CFO. The COO position has already been advertised,” Gordhan said.

Mabuza told reporters that the conclusions of the World Bank report was founded on the World Bank mis-categorising the entity and comparing it to counterparts which did not have the variety of mandates that Eskom did.

“What the World Bank has used as a utility is far different from what Eskom is. They benchmarked Eskom against utilities that don’t have the kind of services and staff that Eskom does. They don’t have sales, services or technical divisions,” said Mabuza.

“We look to explain our cost structure to Nersa and that is why we are in the situation that we are in. We can’t continue to say that what we should get without clarifying the increases that we have and the revenue projections linked to those,” said Mabuza.

Mabuza insisted that in reviewing the operations and structure of Eskom, the leadership was not prepared to sacrifice jobs to pay for the misdeeds of past leadership.

“We have not stated that we will be retrenching people. We have said that we are looking at our structure. Not just the staff structure but the operational structure. Part of our problems include that we are top heavy, there are many things to look at. But it is wrong to say the lower ranks must pay with their jobs,” Mabuza said.

Hadebe told reporters that Eskom’s position was unique as it not only had a power generation mandate, but a developmental one as well. He said these factors were not considered by the World Bank when it concluded that the entity was overstaffed by more than 60% and that jobs may have to be shed.

“The numbers from the World Bank are informed by the previous corporate plan. The new board came in and decided that Eskom can’t be run in the usual way. Severe decisions must be taken and we opted to review the current corporate plan, finding that borrowing on R600bn would be trading recklessly,” said Hadebe.

Hadebe said the entity was looking to avoid a conversation about depending on bailouts in the long term in order to function.

“We have to look at the business revenue stream, capital and operational spending. We have had discussions with National Treasury on our business and even if government assists us, it will not rescue us from our problems,” Hadebe said.

Hadebe told reporters that Eskom would conclude its financials by September, which would also account for any possible losses. He said the financials so far reflected the shortfall of Eskom would not likely add up to R8bn.

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