The plans to fix Eskom are making me nervous. In our quest to sort out the crisis at the state-owned energy supplier we might just end up destroying it.
A major confrontation is brewing within the governing alliance over the state’s plan to break the utility into three subsidiaries — generation, transmission and distribution — under a holding company.
Everyone agrees Eskom is in a mess. That’s the end of the agreement.
President Cyril Ramaphosa announced the unbundling plan as a key part of the solution. Quite rightly, he said there is no silver bullet to sort out the crisis. His finance minister, Tito Mboweni, has given Eskom almost R69bn over the next three years.
Mboweni has also said he and his public enterprises colleague, Pravin Gordhan, will be appointing a chief restructuring officer to oversee the unbundling process. Gordhan has committed to thorough consultation with social partners — a key meeting is taking place at Nedlac next week.
The current board and executive also have a nine-point turnaround plan, which seemingly enjoys the support of the government, Eskom’s only shareholder. Italian experts are also being roped in to assist.
The budget allocation is too small to make a difference to Eskom’s debt problem. Mboweni is correct in saying that injecting cash into Eskom without a plan will be like pouring water into a sieve. Which begs the question: what’s the plan? Is it the nine-point plan or the unbundling plan? Both plans enjoy the government’s support, but what about other Eskom stakeholders?
The unions don’t support the unbundling of Eskom. Do Eskom’s financiers support it, or better still did they demand it in exchange for further cash injection? The less said about the nine-point plan the better.
Eskom’s annual financial statements are clear about the performance of each of the three divisions. What they don’t do is apportion debt to each of these units, thanks to the present unitary structure. Supposedly, the benefit — perhaps the only positive — of the mooted unbundling would be to make this clearer and enable each to approach the capital markets directly.
Then the drama starts. Mboweni and Gordhan — two politicians, and not Eskom’s board — will appoint the chief restructuring officer. Who will the chief restructuring officer report to? If appointed by the ministers, he or she is unlikely to be accountable to the board, whose authority is appearing to wane.
Assuming the pair can make the appointment before the May general election, what if both are reshuffled after the elections in a reconfigured cabinet? What will be the fate of this individual? After all, chemistry and political support are often more important than technical competence. which is always assumed in such assignments.
What will be the relationship between the chief restructuring officer and the board and current Eskom executive management? Eskom CEO Phakamani Hadebe has sought to downplay this by saying provision has been made for the position. But typically such appointments are made by the CEO in consultation with the board and chair of the human resources and remuneration committee as representatives of the shareholders, not directly by the shareholder.
Is it possible that the chief restructuring officer — both the position and the appointee — was demanded by Eskom’s financiers? If so, what else did they demand? A headcount reduction, which has stalled at Eskom?
Then the real games begin. During the unbundling, employee morale, which is already low, will sink further, affecting productivity. Assuming that the chief restructuring officer will be based at Meggawat Park, Eskom’s Sunninghill headquarters, the place will be swarming with consultants — lawyers and accountants — causing further resentment and resistance among employees.
While the festival of consultants is under way, accountability lines will be blurred. After the separation, which is likely to come only after years, Eskom will essentially have four boards: one for Eskom Holdings and three for the newly spun-off subsidiaries. Will the government, as Eskom’s sole shareholder, be appointing these boards, or will this responsibility be shared with Eskom’s funders?
There has been talk of inviting private-sector players to buy equity in Kusile and Medupi power stations, but the design flaws as well as cost and schedule overruns are making these assets unattractive.
Eskom executives have previously hinted that one of Eskom’s options is to convert its debt into equity. This has not been canvassed further. Few fund managers have mandates that allow them to hold stakes in state-owned companies. This opens up the possibility of selling Eskom’s debt to cash-flush banks. This is unlikely to come without strings attached. For a start, these new stakeholders are likely to demand board representation. The government’s authority to appoint boards and executive management will be significantly diluted.
More concerning is that none of these interventions is likely to translate into operational improvements — the core of Eskom’s problems. That’s why I’m nervous.
• Dludlu, a former Sowetan editor, is executive for strategy and public affairs at the Small Business Institute.
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