Johannesburg - If Eskom had kicked out its old board and been placed under the control of the “troika” headed by Cyril Ramaphosa a year earlier, the current liquidity crisis would not have happened, said the utility’s interim CEO, Phakamani Hadebe.
Eskom has become an example of what a real investment strike by big banks and asset managers looks like.
“What broke the camel’s back is when the market participants decided no, we are no longer going to lend money,” said Hadebe, himself a former banker.
Funders started partially turning off the taps on Eskom after its financial results last year contained a qualified audit.
That qualification was due to auditors not being able to determine the full extent of irregular expenditure.
An audit of Eskom’s procurement is ongoing to clear that up.
“I was with Barclays up until May. I know the discussions on that side,” said Hadebe.
“You had this event, the qualified audit, then investors, smaller ones here and there, started withdrawing.”
Then Eskom announced a new board in December filled with old and unwelcome faces.
“The board that was appointed in December made the situation worse. The market expected a board that resembled something of this sort [the second new board appointed on January 20]. They were expecting new people,” said Hadebe.
Eskom’s creditors refused to extend any more money despite Eskom’s debt being guaranteed by government, Hadebe said.
“I think it was a statement from the market that we have gone too far to take you seriously, guarantee or no guarantee.”
With Eskom facing a cash crunch and unable to publish financial statements as a “going concern”, the powers that be stepped in with a new board full of business-friendly faces appointed on January 20.
Within two weeks of the new board and Hadebe’s own appointment there is money again.
Eskom needed R20bn to make it to the end of its financial year at the end of March.
Hadebe said R10bn of that is in the bag and the other R10bn is fairly certain.
He appeared confident of getting the R72bn Eskom will have to borrow in the coming financial year.
The announcements that former executives enveloped in state capture allegations would be disciplined was “well received” by Eskom’s creditors, said Cassim.
“They have consistently said they want to see these moves before we sit around a table.”
It should have happened a lot sooner, said Hadebe.
“If it had been done a year before we would be far from here. We would probably have avoided the default, the liquidity issues would not have come to fruition and we would have been facing normal challenges as any other institution,” he told City Press.
“If you are looking purely at financial performance you would note that if Eskom did not get that qualified audit because of corruption, we would be operating just as in any other year.”
Instead, the new board and Hadebe “are starting at ground zero”, he said.
“Now it needs another 12 or 14 months for us to work it out.”
Former chief financial officer Anoj Singh has resigned; Hadebe’s immediate predecessor as interim CEO, Sean Maritz, is suspended and awaiting disciplinary action.
Matshela Koko, head of generation and previous frontrunner to be Eskom CEO, is likewise suspended and will square off against Eskom in the labour court next week.
“We’ll see what happens on the sixth of February. Cases like these are usually not immediate, but we will see,” said Hadebe.
At the moment all that Eskom has achieved is to buy more time from the creditors.
“We are not going to be in a position to come up with a solution to the capital structure within a month or two,” said Hadebe.
“Because we have this borrowing, it gives us this period of time to work out the capital structure and the sustainability ... My opinion is somewhere by November we should know what is to be done.”* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER