Eskom’s forward-looking figures just don’t add up

Brian Dames, the Eskom chief executive, and his outgoing finance director Paul O’Flaherty, talked up the power monopoly at the media briefing on the “interim integrated results presentation” for the six months to September at Megawatt Park in Johannesburg.

In the disclaimer it stated: “Certain statements in this presentation regarding Eskom’s business operations may constitute ‘forward-looking statements’. All statements other than statements of historical fact included in this presentation, including without limitation, those regarding the financial position, business strategy, management plans and objective for future operations of Eskom are forward-looking statements.”

Forward-looking statements were not intended to be “a guarantee” of future results, but instead constituted Eskom’s expectations based on reasonable assumptions. Forecasted financial information was based on certain material assumptions which included – but were not limited to – continued normal levels of operating performance and electricity demand in the distribution and transmission divisions and operational performance in the generation and primary energy divisions “consistent with historical levels and incremental capacity additions through the Group Capital division at investment levels and rates of return consistent with prior experience, as well as achievements of planned productivity improvements throughout the business activities”.

There were good, if wordy, warnings. “Eskom neither intends to nor assumes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.”

One of the tables headlined “triple bottom line: financial highlights” stated that revenue was up to R73.3 billion in the six months to September. (2011 R63.9bn). At the same time electricity sales contracted by 2.9 percent. Sales were 110 766 GWh (2011: R114 043 GWh).

Despite the strong revenue run, net profit was down to R12.6bn. Despite all the talking up, these figures scream that there is something wrong somewhere in the business model. page 5


The theory behind the parliamentary portfolio system is wonderfully democratic. One of its great democratic purposes is to ensure that our elected representatives hold civil servants, who run our government institutions, to account. To this end the various portfolio committees haul in the top executives of government entities, such as Public Investment Corporation, SAA, Eskom and most recently the competition authorities, to explain how they are progressing citizens’ interests.

However, the problem is that in practice members of the portfolio committees are as obviously overworked as the rest of us and often don’t have the time to do the preparation necessary to make these presentations as effective as they should be.

This week's presentation by the competition authorities to the Economic Development Department’s portfolio committee was a case in point. Much of the usual old ground was covered relating to job creation and employee development and there was the usual political grandstanding as members of the different parties used up much valuable time asking long-winded questions, some of which had already been asked or which demonstrated poor preparation.

Because there was no effective chairing of the presentation much time was wasted, to the extent that only the Competition Commission had time to make a presentation and the tribunal will have to schlepp back to Cape Town again next year.

On the matter of SAA’s state-owned status and its R5 billion guarantee seeming to justify a competition investigation, the commission was at pains to explain to the portfolio committee members, none of whom made any reference to predatory pricing, that being state-owned or receiving a guarantee did not lead to a presumption of anti-competitive behaviour nor automatically justify an investigation.


It would be the battle of the brands as Tiger Brands focuses more on renovating its core brands while keeping an eye on new competition from Rainbow Chicken and Foodcorp’s latest deal.

Last week Rainbow Chicken, which competes with Tiger Brands in the supply of chilled and processed meat, announced its R1 billion acquisition of a 64.2 percent stake in Foodcorp.

Yes it is true, Foodcorp, which owns brands such as Yum Yum peanut butter, Ouma Rusks, Pieman’s meat pies and Bobtail and Dogmor pet food, is a small player against Tiger Brands.

Although the Tiger Brands’ chief executive, Peter Matlare, tried to play the deal’s impact down yesterday, he did admit that it would intensify competition in the food manufacturing sector.

“Foodcorp has always been our competitor, as well as Rainbow Chicken in the chilled foods segment.”

I guess Matlare has nothing to worry about as Tiger Brands is indeed the conglomerate of brands in South Africa.

The company has more than three or four brands each of the following segments: milling and baking, home, personal care and baby products, snacks and treats, beverages and groceries.

Some of its products are popular among South Africans such as Tastic Rice and Black Cat peanut butter.

If I recall the words of Rainbow Chicken’s chief executive Miles Dally, the deal was mainly to add more brands into the company’s basket.

But, more importantly, was Dally’s hunger for brands and his contribution to the Rainbow Chicken polony and other chilled chicken products which have stolen a market share from Tiger Brands. So the Tiger better keep a sharp eye on the Chicken. page 3

Edited by Peter DeIonno. With contributions from Donwald Pressly, Ann Crotty and Nompumelelo Magwaza.