Eskom's executives told Parliament’s Portfolio committee on Public Enterprises on Wednesday that the power utility’s progress in rooting out maladministration and turning the entity around were undermined by its dire financial situation.
According to Eskom's annual results for the year ended March 2019, its net loss after tax went up to R21bn from from R2.3bn in the previous year. The utility's debt also exceeded R440bn.
Eskom acting CEO and chair Jabu Mabuza said one silver lining in Eskom's cloud was that the power utility's nine-point recovery programme was showing progress through winter, as Eskom has not had to load shed since March.
Cost of preventing load shedding
The financial side, he said, told a different story.
"The result remained disappointing because of the decline in financial performance.
"There is encouraging progress in improving governance and rooting out maladministration. Elements of the strategy we can implement continue to be implemented," Mabuza said.
Mabuza said the utility had to spend R6.5bn on diesel-generated power in order to minimise the risk and magnitude of load shedding. As this happened, the utility's environmental performance deteriorated and arrear debt from municipalities grew to R20bn.
Eskom CFO Calib Cassim said Eskom’s irregular expenditure of R1.5bn must be taken in context of a raft of new contracts the entered into in the period under review. He said Eskom was on the right track to resolve spending issues and compliance with the Public Finance Management Act.
"Cash from our operations is not sufficient to meet our debt service requirements. Debt servicing includes interest and capital requirements. Going forward with R440bn debt, there are significant debt service requirements...
"Eskom has a cost of capital of 10%, which we are not allowed to recover. We will always see the pressure build up on the balance sheet and the debt in general," said Cassim.
'Close the doors'
Committee member for the Democratic Alliance Johannes Marais said Eskom's financial position bode ill for its ability to continue operating as is.
"If I were doing higher grade Accounting in high school, as I did, and I received these financial statements to study, the first thing I would say about this company is 'close the doors'. Because this is a company on the verge of being bankrupt," Marais said bluntly.
In a moment of grim frankness, Mabuza agreed with the opposition MP, adding that the breaking down of Eskom into separate entities sought to mitigate the financial risks to the fiscus being concentrated into one entity.
"Honourable Member Marais, you would have passed that paper. We cannot lie to you about the situation. Looking at unbundling, everything that happens will affect the whole electricity supply. The president’s view of separation is about mitigating concentration risk," Mabuza said.
'I will never fail to try'
African National Congress MP Judith Tshabalala urged Mabuza to come to grips with Eskom's debt crises, to which Mabuza said: "I might try and fail, but I will never fail to try".
Regarding future finance considerations and the unbundling of the entity, Mabuza said Eskom was in talks with "various funders" but that the discussions were at a very sensitive stage.
He said Minister of Finance Tito Mboweni's medium term budget policy statement at the end of the month was likely to have implications for Eskom.
He said ratings agencies would continue watching developments surrounding the entity including when President Cyril Ramaphosa will announce details of the Eskom special paper.