https://www.polity.org.za
Deepening Democracy through Access to Information
Home / Opinion / Real Economy RSS ← Back
Close

Email this article

separate emails by commas, maximum limit of 4 addresses

Sponsored by

Close

Embed Video

Financial stability the ‘first’ priority

Engineering News editor Terence Creamer
Engineering News editor Terence Creamer

7th February 2014

By: Terence Creamer
Creamer Media Editor

SAVE THIS ARTICLE      EMAIL THIS ARTICLE

Font size: -+

In recent conversations with both the outgoing CEO of Eskom, Brian Dames, and the State-owned utility’s chairperson, Zola Tsotsi, it became clear that, more than anything else, the next CEO will be expected to have the capacity to wrap his or her arms around the financial difficulties currently confronting the group and to then rapidly devise a credible sustainability plan that can be sold to stakeholders.

That’s not to say that the ongoing operational challenges can be ignored, nor can any less attention be given to ensuring that the build programme, which is already well behind schedule, does not slip further. Indeed, any additional slippage to the Medupi, Kusile and Ingula schedules will only serve to compound the financial pressures, as further delays will result in fresh operational and opportunity costs and lower revenues.

Advertisement

But safeguarding the long-term sustainability of the organisation is likely to be the number one priority. Or, as Tsotsi explains it: “The new CEO’s first and most important task.”

The magnitude of the problem is significant, with Eskom having indicated that the cumulative financial shortfall will be R225-billion for the five-year period to 2018.

Advertisement

As has been widely reported, the shortfall is attributed to the fact that the National Energy Regulator of South Africa sanctioned yearly tariff increases of 8% over the period, rather than the 16% sought. Eskom also stresses that it will only effectively be receiving 6% yearly increases, with the balance set aside for the introduction of independent power producers.

It will be up to the new CEO, Tsotsi asserts, to understand the gaps and to “build a convincing picture” of how they should be closed – a picture that the shareholder can accept and endorse and one that is also palatable to consumers.

Dames stresses that Eskom can ill afford to return to where it had been ahead of the finalisaiton of its funding plan in late 2010. “You don’t want to be back to where you start questioning your going-concern status,” he avers.

What the inevitable restructuring is going to mean in practice is far from certain. Could it result in the dismantling of Eskom as a national utility? Or will it simply be a case of trying to convince taxpayers and consumers that it is worthwhile bailing Eskom out through more injec- tions, guarantees or higher tariffs?

What is certain is that the new CEO will not have the luxury of time as the financial sustainability clock is truly ticking.

EMAIL THIS ARTICLE      SAVE THIS ARTICLE

To subscribe email subscriptions@creamermedia.co.za or click here
To advertise email advertising@creamermedia.co.za or click here

Comment Guidelines

About

Polity.org.za is a product of Creamer Media.
www.creamermedia.co.za

Other Creamer Media Products include:
Engineering News
Mining Weekly
Research Channel Africa

Read more

Subscriptions

We offer a variety of subscriptions to our Magazine, Website, PDF Reports and our photo library.

Subscriptions are available via the Creamer Media Store.

View store

Advertise

Advertising on Polity.org.za is an effective way to build and consolidate a company's profile among clients and prospective clients. Email advertising@creamermedia.co.za

View options
Free daily email newsletter Register Now