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Eskom’s tin ear

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Eskom’s tin ear

1st December 2017

By: Terence Creamer
Creamer Media Editor

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There were very few sharp exchanges during the National Energy Regulator of South Africa’s (Nersa’s) public hearings into Eskom’s 2018/19 revenue application. However, one particular exchange between Nersa CEO Chris Forlee and Eskom interim CEO Sean Maritz stood out.

During the first of three days of hearings in Gauteng, Forlee posed the following question to Martiz: “In this environment of declining sales, you’ve got your capital expenditure and you’ve got operating costs that are increasing. If you were a private business, or you owned this company, what would you do? Would you continue to operate at a loss? What would you do if you had carte blanche to fix the problem?”

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Maritz’s response that it required an entirely different mind-set to run a business for the sustainability of the country than would be the case if he were running a profit-maximising private enterprise failed to satisfy Forlee. He asked the interim CEO to use the weekend to think about his question and “to return on Monday” with a more comprehensive reply.

In the event, Maritz did not answer the question, with the team delivering Eskom’s wrap-up response merely adding the following two bullet points to their ‘In Conclusion’ slide:
• As a State-owned enterprise, Eskom’s business model is determined by policy.
• We don’t have the latitude to pursue only profitable customers or stop supplying nonpaying customers.

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Eskom may have perceived the lack of follow-up form Forlee and the other regulators on the panel as an indication that these points were satisfactory. In reality, though, the statements fell far short of what was required.

In fact, it demonstrated that Eskom had a tin ear and that the leadership was simply not alive to the public’s broad-based rejection of its ‘business as usual’ application.

The response also showed that Eskom had not heard presenter after presenter pleading for it to demonstrate a greater internal responsiveness, particularly given the pall of corruption hanging over the business and the serious economic and employment risks posed by a further 19.9% hike.

Naturally, there were definite risks to providing a genuine answer, as a ‘carte blanche’ response might have included the need for large-scale retrenchments, more aggressive debtor management, the decommissioning of expensive plant and the curtailment of the build programme. It might even have included proposals for sweeping restructuring, including the sale of noncore and even core assets.

Of course, such suggestions conflict with government policy. However, if nothing else, a fuller answer could have clarified precisely the constraints under which Eskom is operating. It might even have made some members of the public more sympathetic to the balancing act being performed by Eskom’s leadership.

These are exceptional circum- stances, demanding exceptional responses. Sadly, none was forthcoming.

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