Adviser flags Eskom leadership instability

Eskom Medupi Power Station.
Eskom Medupi Power Station.
Image: Business Times

Leadership instability at state power producer Eskom and the absence of a clear strategy to improve its financial viability have been highlighted as serious concerns by the commission that advises the government on fiscal policy.

Financial and Fiscal Commission chair Professor Daniel Plaatjies briefed parliament’s appropriations committee on the Special Appropriations Bill that allocates R59bn to Eskom over two years – R26bn in 2019/2020 and R33bn in 2020/2021 – to help it deal with its debt of more than R440bn.

“The commission underscores the point that financial challenges are only a fraction of Eskom’s problems,” he said.

“The situation of Eskom epitomises the governance, leadership and general inefficiencies that characterise all state-owned companies.

“What is required are sound and monitorable implementation plans and strategies to turn around these institutions with clear deliverable and reporting time frames.

“There is also a need to ensure that the electricity generation space is open for more independent power producers, that Eskom tariffs are fair and cost-reflective and that municipal debt is resolved.”

Plaatjies said the Eskom bailout should be accompanied by a plan for establishing the utility on a sound footing.

He said Eskom’s poor performance was the culmination of serious deficits in governance, leadership, efficiency and effectiveness in the management of public resources.

Plaatjies noted the R59bn bailout would result in a widening of the budget deficit to above 5.7% in 2020, especially as poor economic growth would result in revenue undercollection. The bailout would also result in the widening of the debt-to-GDP ratio.

Taken together, this would put SA’s investment grade status by Moody’s Investors Service at risk of a downgrade.

“The above worrisome situation will be compounded by the fact the bailout is not anchored in a sound and monitorable plan or strategy to get Eskom out of the doldrums into a sustainable growth path.

“Furthermore, the bailout is given in the context of a leadership void at Eskom.”

The commission recommended that conditions be attached to the Special Appropriations Bill, including subjecting Eskom management to intense parliamentary scrutiny.

Also needed was the acceleration of the establishment of legislative and regulatory frameworks for a transition towards cheaper renewable power generation and the unbundling of Eskom into three separate units. - BusinessLIVE

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