Finance minister Tito Mboweni will table the Special Appropriation Bill before parliament soon as part of the government’s multipronged plan to alleviate Eskom’s financial crisis.
The bill follows the announcement by President Cyril Ramaphosa in his state of the nation address that the energy utility will be given R230bn over the next decade.
Sadly, this is the end of good news for Eskom’s stakeholders and South Africans. None of this means Eskom will be better run, sell more electricity or that the lights will stay on during the planned enormous restructuring. What unfolds next is a big unknown.
To cut through the shroud of secrecy about what lies ahead, it is worth recapping what is known. South Africans have been told that Eskom is too important to fail; it is in a crisis; it needs a durable solution, which is to split it into three subsidiaries — generation, transmission and distribution; and an all-knowing chief restructuring officer (CRO) will be appointed by Mboweni and Pravin Gordhan, his public enterprises cabinet colleague.
Post restructuring, Eskom will have four boards: one for the Eskom holding company and three for the newly spun-out subsidiaries.
Meanwhile, Eskom, a subject of multiple inquiries, will continue implementing its turnaround plan approved by the current one-year-old board, which, if it agrees to stay on during the restructuring, will be part of the new Eskom’s holding company.
Despite protestations that Eskom is too important to fail, information about its future has been drip-fed slowly to the public like poison to a body. This in part explains why morale of staff at Megawatt Park, its Sunninghill headquarters, is low and talent is leaving. This week, the group’s treasurer announced he would be leaving. Phakamani Hadebe, who was appointed CEO in 2018, has left after a bruising, short tenure.
Writing off the PIC’s portion of Eskom’s R440bn debt would have given Eskom a much-needed breather without hurting the pensioners and setting a problematic precedent that’s inherent in the debt-equity swap proposition
In the past month, two pieces of information have been leaked: who the messianic CRO might be and options for resolving Eskom’s debt problem. These are interlinked.
Bloomberg reported last week that the Public Investment Corporation (PIC), the scandal-ridden manager of R2-trillion worth of social funds, had considered converting its Eskom debt into equity. This means that instead of writing off the debt or a portion of it — another option — the government (guarantor of the pensioners whose funds are managed by the PIC) preferred to convert the debt into shares.
Writing off the PIC’s portion of Eskom’s R440bn debt would have given Eskom a much-needed breather without hurting the pensioners and setting a problematic precedent that’s inherent in the debt-equity swap proposition.
According to Dan Matjila, the former PIC CEO who appeared before the Mpati inquiry into the PIC last week, the debt-equity swap option was abandoned because there was no agreement on conditions, which included a bigger say on the board and executive appointments at Eskom.
This condition is in itself problematic. The PIC has no history of making inspiring board appointments. Worse, it has no track record of executive management appointments in investee companies.
If revived, this debt-equity proposal would mean that the pensioners (former and existing government employees) will become Eskom’s shareholders alongside the state. In a way, this would be the privatisation of Eskom through stealth, something the unions have threatened to fight.
The unions, which have been very vocal about the opaque nature of Eskom’s proposed restructuring, might not be critical of government employees owning a share of Eskom, but they are likely to oppose other owners of Eskom’s debt — such as private asset managers and the World Bank — following the PIC’s route.
There is no suggestion yet that the PIC would have demanded retrenchments at Eskom, as has been hinted by other bondholders who have enthusiastically welcomed the impending split of Eskom.
Enter the CRO, Eskom’s white knight. Only two things are known about this position: the appointment is imminent; and it will be made jointly by the ministers of finance and public enterprises.
What is unknown about it is even more crucial. Will this individual report to the current Eskom board or will he or she be accountable to Gordhan and Mboweni? Will this person also be appointed to the Eskom board? Will Eskom fill the CEO position before the split or will the CRO be a de facto CEO or, better still, executive chairperson? Assuming the latter scenario, what role will the current Eskom board play in the restructuring?
These questions raise two other important questions: who is ultimately in charge of Eskom, and is Eskom the latest subject of economic experimentation by an army of expensive lawyers, accountants and auditors?
• Dludlu, a former Sowetan editor, is executive for strategy and public affairs at the Small Business Institute.
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