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Cash-strapped power utility Eskom has suffered a net loss of R2.3 billion in 2018 and R19.6 billion has been haemorrhaged through irregular expenditure since 2012.
The state-owned power producer revealed these findings at its group integrated financial results presentation for the year ended March 2018 on Monday.
In what came across more as a strategic feedback session than a financial results announcement, both Eskom chairperson Jabu Mabuza and chief executive Phakamani Hadebe acknowledged the tumultuous nature of the financial year but emphasised that the results only reflected “just 69 days of the new board’s tenure”.
“It is important to contextualise the audit results and for people to be aware that the 12-month period under appraisal falls outside the current board and Phakamani’s [Hadebe] tenure. Only 69 days of the current administration’s tenure falls under this time period,” said Mabuza.
Both Mabuza and Hadebe dilly-dallied over the current board and management’s improvement of operational performance‚ governance and control systems‚ before diving into the appalling annual results.
Mabuza said the board was disappointed by the fact that it could not avoid a qualified audit and revealed that the cash-strapped power utility had incurred the net loss of R2.3 billion in 2018 after posting a R900 million profit in 2017.
On the R19.6 billion irregular expenditure – an increase from R3 billion in the previous financial year – Mabuza said “this was a result of us shaking the cupboard so hard that so many skeletons came tumbling down.
“The verification and cleaning up exercise resulted in a significant increase in the number of reported irregular expenditure in 2018 (from R3 billion to R19.6 billion), with many of the items reported arising in prior years. Where information was not readily available, alternative methods were used where practical to identify irregular expenditure,” said Mabuza.
The chairperson of Parliament’s portfolio committee on public enterprises, Lungi Mnganga-Gcabashe, expressed concern over Eskom’s announced irregular expenditure saying: “The committee will make time in its programme to invite Eskom, so that members are briefed on the latest financial results.”
Mnganga-Gcabashe said the committee would continue to engage with Eskom to address its challenges and restore public and investor confidence.
The DA’s shadow minister of public enterprises, Natasha Mazzone, also came out and slammed Eskom’s loss of billions of rands, saying: “These losses are no doubt the result of the years of corruption, mismanagement and the bloated staff complement at the utility.
“Other worrying trends include the increase in irregular expenditure, which has climbed to a whopping R19 billion; municipal debt increasing by R4.2 billion to R13.6 billion, a 44% increase and finance costs climbing from R19.5 billion to R25.9 billion, a 32% increase from 2016/17 to 2017/18,” said Mazzone.
Hadebe admitted that Eskom’s “transition towards financial and operational sustainability required resolute, tough and decisive leadership.
“For an entity that has had the privilege of having 168 tariff increases in 12 years plus recapitalisation to the tune of R83 billion to find itself facings such challenges is a shame,” said Hadebe.
Hadebe said Eskom continues to face significant financial and liquidity challenges in the short term, mainly due to the “high debt burden, low sales growth and increased finance costs” as well as the massive R4.2 billion owed to it by municipalities.
He said the entity, under its new board and management, was taking steps at cleaning up its image remaining sustainable.
“Ten implicated senior executives have fallen by the wayside and 11 criminal cases have been opened so far. There are 1049 disciplinary hearings that have been constituted. 628 have been concluded and 75 employees have been fired,” said Hadebe.
The chief executive said it was time for the entity to come up with a different operational strategy which should filter down to the day-to-day activities of the company and drive the entity to its former glory.
Hadebe said there was still a lot that Eskom could contribute to the nation: 1.3% of Eskom’s income goes to the South African Revenue Service directly and indirectly Eskom contributes 5.4% to Sars.
Mabuza concurred with Hadebe’s sentiments and added that “the damage at Eskom was not done overnight therefore the solution would not be found overnight”.
The financial announcement came amid protracted wage negotiations between the power utility and workers unions representing Eskom workers.
The National Union of Mineworkers (NUM) said it was still open to negotiations despite its concern over Eskom’s latest announcement.
“We are serious about negotiations. Our members have indicated that a bonus is a deal-breaker. In this case, we are surprised now that Eskom has announced that our members are not getting a bonus and they are extremely angry,” said the NUM’s Livhuwani Mammburu.
Eskom has already announced that it cannot afford to pay bonuses this year while the wage negotiations with unions representing Eskom workers are expected to resume on Friday.
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