![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2018\/10\/Eskom3.png\")
<\/a><\/p>\nFixing Eskom is arguably president Cyril Ramaphosa\u2019s biggest challenge as he attempts to modernize South Africa, boost growth, provide jobs and overcome years of entrenched corruption. And shore up his support ahead of national elections next year. So important is Eskom that he mentioned it specifically in his first state-of-the-union address in February.<\/p>\n
\u201cAction we have taken at Eskom to strengthen governance, root out corruption and restore its financial position is just the beginning,\u201d Ramaphosa said. \u201cThis is the year in which we will turn the tide of corruption in our public institutions.\u201d<\/p>\n
Eskom isn\u2019t just a utility, it is South Africa\u2019s biggest recipient of state loan guarantees. And its costs are out of control: The biggest union, the National Union of Mineworkers, has a contract requiring a wage increase of 23 percent over three years and a bonus, after protests and sabotage resulted in power cuts.<\/p>\n
Ramaphosa\u2019s odds of changing that are weighted by the fact that he himself co-founded the union in 1982.<\/p>\n
\u201cUltimately political constraints are going to prevent him from moving as rapidly as perhaps one would like,\u201d said Daniel Silke, the director of Political Futures Consultancy in Cape Town. \u201cThe one thing that he doesn\u2019t want to be accused of is overseeing job losses in the runup to an election.\u201d<\/p>\n
There are no good statistics about Eskom.<\/strong><\/p>\n The utility has had 10 CEOs and six boards in the same period, and the new management has found around $1.5 billion in irregular expenditures, mostly involving procurement. \u201cIt\u2019s not generating enough cash to cover both its operating costs and its cost of capital,\u201d said Anton Eberhard, professor at the University of Cape Town\u2019s Graduate School of Business, in an emailed response to questions.<\/p>\n \u201cEskom\u2019s losses will increase this year unless they conjure up an accounting trick, sell off some non-core assets.\u201d<\/p>\n Ramaphosa has installed some experienced executives. Jabu Mabuza, chairman at Telkom SA, took the same role at Eskom, and Phakamani Hadebe, a former National Treasury official, became chief executive officer. Boston Consulting Group has been hired to develop long-term strategic plans for the company and Lazard Ltd. for financial advisory services. The utility is careful about describing the role of Lazard, given the sensitivity of potential asset sales, saying only that it will provide a report on options.<\/p>\n The new leaders have already put the utility\u2019s mortgage business up for sale and in July they reported highlights of their governance cleanup: almost a dozen criminal cases opened. Most involve senior executives. The company has also concluded about half of 239 whistle-blowing complaints, and begun an investigation of all irregular supplier contracts\u2014the kind of graft that helped put Eskom into its present situation.<\/p>\n But the big new direction is proving elusive. Management delayed until November a recovery program that had been due to be announced last month. In the backdrop is electricity demand that\u2019s been sinking for years, dragging on revenue. To make matters worse, the South African economy entered its first recession since 2009 in the second quarter.<\/p>\n Eskom declined to reply to a list of questions ahead of the release of the corporate plan. A spokesman recommended reading the annual report.<\/p>\n A $2.5 billion loan from the Chinese Development Bank will bring the utility closer to fulfilling its funding needs for the year, while it still faces interest payments alone of 215 billion rand over the next five years. Ramaphosa recently assured lawmakers that the loan will not entitle the bank to ownership of the assets, but said its terms are confidential.<\/p>\n \u201cThere\u2019s nothing in Eskom that gives Eskom hope,\u201d Matshela Koko, acting CEO from 2016 through last year, said in an interview near his Johannesburg home. After working his way up for over 20 years, Koko resigned after being re-suspended for wrongdoing that he has denied. He was found not guilty on all charges in a disciplinary hearing in December and then Eskom served him with new charges.<\/p>\n The utility was a target in corruption scandals linked to ex-president Jacob Zuma and the influential Gupta family, which also involved international firms. US consultancy McKinsey & Co paid Eskom back about a billion rand in fees and interest it collected in an attempt to distance itself.<\/p>\n To make matters even more complicated, Eskom faces increasing competition from customers who generate their own power. And as part of an investment drive for South Africa, Ramaphosa has put back in motion renewable-energy generation run by independent producers with which Eskom signs contracts.<\/p>\n Many unions oppose the projects out of fear that they will eliminate jobs associated with coal-powered stations.<\/p>\n<\/a><\/p>\n<\/a><\/p>\n