South Africa: Eskom job cuts will not be enough, says former CEO Koko
Africa's largest utility will soon be without a CEO and is drowning in debt.
In a short and surprising statement released on Friday, Eskom board chairperson Jabu Mabuza said that CEO Phakamani Hadebe will step down at the end of July 2019.
- Mabuza said “Phakamani has been instrumental in driving stability at Eskom during a very challenging period at the organisation.”
Former acting CEO Matshela Koko has intimate knowledge of the entity. He is viewed with suspicion by some, while others say during his tenure Eskom actually kept the lights on.
In an exclusive interview with The Africa Report on the state of the utility and whether President Cyril Ramaphosa can keep his promise of turning the electricity utility around, Koko was frank and critical of the state of Eskom and does not have much confidence in its board.
Koko says Hadebe’s resignation did not take him by surprise.
- “I think Hadebe was fed a poisoned chalice. I have never been convinced that he or the board are capable of dealing with the current challenges the country is faced with. The problem that we have at Eskom is a reflection of the failure of the government’s energy policy.”
- Koko also said that under Hadebe’s watch the country suffered load shedding, which wiped R66bn ($4.5bn) off the economy.
Koko says despite promises from President Ramaphosa that Eskom is too big to fail, the continued bailout is not helping the utility. Eskom has debt of more than R400bn, which is government guaranteed.
- “I have consistently said no amount of bailout will save Eskom. And I say this because in 2015/2017, when I was the CEO of Eskom, I received a bailout of R83bn”, says Koko. “We say Eskom is too big to fail, but I don’t think we really mean it.”
- Economist Mike Schussler told Morning News on Enca that Eskom’s debt could reach close to R1trn by the end of 2019.
Solutions to Eskom’s woes
For Koko, Eskom sales revenue is the problem – “since 2007 it has been in decline” – and he blames the new crop of independent power producers (IPPs).
- One answer to Eskom’s woes is trimming the work force at the entity. It is estimated that Eskom employees increased from 32,000 in 2003 to 47,600 in 2017.
- According to AfricaCheck Eskom’s 2016/2017 annual report states that the utility is “targeting a reduction in the Eskom company workforce to 36,746” by the 2021/2022 financial year.
But Koko argues the utility cannot only cut staff but must also look at the IPP and coal costs: “Unbundling Eskom is not the answer either – all that unbundling does is to separate the system and the market operator from transmission so that IPPs sell directly to the market operator.”
- For example, Cape Town council is heading to court to buy electricity directly from an IPP.
Rather than allow the IPPs to get access to the market without having to pay for “big cost items”, says Koko, everyone should share the pain.
He also argues that there is more revenue to be found in the region. “Eskom has to export more power to the region. The neighbouring countries can no longer trust Eskom to deliver, and it has failed countries like Botswana, Mozambique and Namibia.”
A trusted perspective?
Koko denies the allegations of corruption levelled at him and his former boss Brian Molefe.
- “The peak of state capture is defined as 2016-2018, and it coincided with Brian being moved to Eskom. But Eskom’s annual results show you the best-ever performance since 2002 was in 2016/2017/2018 – both technically and financially.”
Koko says he will remain outspoken on Eskom’s affairs, as the entity is unable to meet the demands of the South African economy and the Southern African Development Community region.
- It will, he says, have to look at a mix of energy including wind, solar, coal and nuclear. Something, he says, which has become politicised.