Eskom has not been having a particularly good time lately, financially or reputationally.
The JSE publicly censured it and imposed a suspended fine for Eskom’s failure to publish policies dealing with loans to, or procurement contracts with, directors or executives timeously. And the Treasury docked R4bn from its R254bn debt relief package because Eskom failed to meet the deadline set by the Treasury to sell its housing loan book — a piece of Eskom’s business that is entirely noncore to its real business of supplying electricity.
The power utility does seem to have a problem sticking to time frames. But the two different sanctions hint at some of the broader challenges involved in the turnarounds at Eskom and other state-owned enterprises (SOEs), particularly Transnet.
Eskom moved quickly to try to control any damage from the JSE rebuke on Friday. It issued a statement that said, in effect, that its memorandum of incorporation and 2019 conflict of interest policy prohibited it from making loans to or doing business with or procuring from directors or executives anyway.
So, while it acknowledged it had failed to comply with JSE requirements, it argued its listed bondholders had not been prejudiced by this, and its failure to publish had minimal impact. And of course Eskom made sure to emphasise that it was not accused of doing anything wrong — just of not publishing the policies as required.
One has to have some sympathy. Eskom’s recent success in slashing the number of breakdowns at its power stations and keeping SA’s lights on for more than three months inspire even more sympathy, and indeed praise.
However, doing business with employees, whether in the form of loans or procurement, goes to the heart of the kind of cronyism and corruption that have plagued the SOEs, and even if Eskom now has its own, watertight policies, it should be going out of its way to be transparent and timely about these policies.
Nor is this the first time Eskom has run into trouble with the JSE for not meeting deadlines — a few years ago it was almost booted off the exchange for failing to file its financial results on time. The JSE’s public censure this week has come as a useful reminder that Eskom’s bonds are listed on public markets and that there is a regulatory mechanism to hold the power utility to account. The JSE did well to use it.
The Treasury has held Eskom to account to even greater effect. Docking the R4bn sends a clear message to Eskom that its restructuring needs to happen, and urgently. It sends a similarly clear message to other SOEs that the Treasury is serious about the “tough love” approach to which finance minister Enoch Godongwana is committed. He made it clear that Eskom would have to deliver, on time, on the list of conditions for the three-year debt relief package agreed last February.
In Transnet’s case he has refused to accede to requests for a bailout package, instead agreeing in 2023 to a R47bn guarantee, which also came with a stringent list of conditions. At both Eskom and Transnet those conditions require that the companies implement far-reaching restructuring of their operations and open key parts of their business to new private sector partners, or concessionaires.
They have to push ahead with the structural reforms the government has outlined if they want the money, or guarantee. Essentially, they have to give up their monopoly power. It is a challenging and a contested process, but the Treasury is pressing ahead with using the financial clout it has over them to try to ensure it happens.
In answer to a question at last week’s Bureau for Economic Research conference about resistance to reform at Eskom and Transnet, Treasury director-general Duncan Pieterse reminded the audience that the Treasury made debt relief to Eskom and Transnet highly conditional, with the Transnet conditions going even further than those at Eskom.
The Transnet conditions focus strongly on implementing the government’s freight logistics road map, with its emphasis on private sector participation in the sector. Transnet is on notice to finalise the network statement that will allow new private sector operators to come on to its rail lines. It must also introduce private partners into its ports.
Transnet’s insistence that it can fix its Cape Town port on its own, without private sector partners, sits rather oddly with this. And it has yet to sign the Durban container port terminal partnership deal it announced a year ago. But Transnet has at least made a start on reforms, even if progress is slow. Eskom has come a long way too.
It is up to the Treasury, the JSE, parliament and the new unity government ministers to hold those SOEs to account on reforms. Sanctions by the Treasury and the JSE are one way to do that.
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