Johannesburg - Thirty of Eskom’s executives will be forfeiting their annual performance bonuses this year.
The power utility said it would only disclose how much these bonuses would have amounted to when it announced its annual results.
However, if last year’s numbers are anything to go by, it could be looking at a saving of more than R8 million from its directors and the group executives alone.
Last year the former chief financial director, Paul O’Flaherty, and the then chief executive, Brian Dames, received R8.76m in bonuses combined.
They were given a further R10.08m under a long-term incentive bonus scheme, which was paid out in June 2012.
Eskom announced yesterday that all of its senior executives would forego their bonuses for the 2013/14 financial year.
It said this move was taken in order to cut costs as it was trying to close the R225 billion revenue shortfall it had forecast for the third multi-year price determination period between 2013 and 2018.
Eskom announced last year that it would have this revenue shortfall because the National Energy Regulator of SA (Nersa) had granted it an 8 percent tariff increase instead of the 16 percent increase it had applied for.
This meant that Nersa approved total revenue of R863bn while Eskom needed to generate just over R1 trillion during the five-year period to sustain its operations and fund its capital expansion.
Since then, Eskom has embarked on a number of initiatives to cut costs, including the delaying of projects, using recycled fuel at its Hendrina power station, as well as laying off staff.
Lynn McGregor, a senior research fellow at the Stellenbosh University Business School’s unit for corporate governance, said this step of foregoing bonuses genuinely portrayed Eskom’s priority: to make sure that the lights kept burning.
“It’s a very good message from the executives. Whether it makes a huge financial difference or not will depend on their business plan and budgeting. But it is in good spirit.”
McGregor said that Eskom’s action should be a common feature at corporates.
Eskom’s acting chief executive, Collin Matjila, said that even after this, the revenue shortfall would remain because it could not be achieved by belt-tightening alone.
“It remains important to move towards a cost-reflective tariff urgently. Eskom, through its shareholder ministry, the Department of Public Enterprises, is in discussions with the National Treasury to find a long-term solution,” he said yesterday.
The executives’ bonuses are linked to performance targets and keeping the lights on at all times is one of the targets the payment is assessed against.
Of the 53 key performance indicators in its 2013 annual report, it managed to achieve 35 over the five-year period from 2008 to 2013. But this was before Eskom declared two power supply emergencies last year and before plunging the country into darkness for one day in March this year.
However, McGregor said that assessing Eskom’s performance using those blackouts was not clear-cut.
“While there could have been underperformance, we need to look at all details to be fair because (management) inherited a difficult situation.
“They have done reasonably well considering the difficulty Eskom had in raising money to upgrade its plants all those years ago.” - Business Report