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Financial chief to quit

Eskom chief executive Brian Dames’ announcement that chief financial officer Paul O’Flaherty would leave the parastatal when it presented its annual financial results next July, was interpreted yesterday to be evidence that the finance chief might have been unable to rise to the challenge of managing the company’s massive capacity expansion programme.

It was also suggested that, alternatively, O’Flaherty was simply not able to withstand bullying and political cajoling and was thus unable to “cut it” in the job.

Iraj Abedian, the chief economist at Pan-African Investment, said he did not wish to comment on individuals, but Eskom’s management as a collective had “demonstrated a vivid inability to rise” to the challenges facing the state-owned electricity monopoly. The key issue was the routine massive tariff hikes imposed.

Abedian said it might have been the case that O’Flaherty had wanted to take the company in a different direction, but this had not been accepted by those in power.

However, O’Flaherty’s replacement, said Abedian, would need “hard-nosed” experience as a capex management and be an able project manager.

“Managing a multi-year capital spending [expansion programme] is a difficult exercise… more difficult than managing a well-oiled machine.”

Eskom will spend R300 billion on its expansion programme over the medium term.

Economists.co.za chief economist Mike Schussler said he had “no idea” why O’Flaherty was departing. However, it was ironic that he had been working for an entity which publicly discouraged consumers from using its product.

Eskom had managed to drive down power consumption by 2.8 percent on the total electricity sales figure of five years ago. “We are losing a lot less power,” he said.

O’Flaherty had, however, been much more reasonable about the calls for tariff increases, reducing last year the figure down to 16 percent and 11 percent for households. One predecessor had called for 45 percent annual tariff hikes.

However, Eskom’s procurement costs – at a time when international coal prices were dropping – had increased steadily, Schussler noted.

Meganomics economist Colen Garrow simply noted that Eskom seemed to suffer from perennial management problems.

“One wonders if they can’t get management right… how will they manage the development of the infrastructure. It places a question mark on how reliable Eskom’s generation and distribution businesses are.”

O’Flaherty might have wanted greater private sector involvement in the energy sector, Garrow suggested.

This was possibly stonewalled by his peers.

Abedian said: “Eskom is off the rails and has been off the rails for a while… it needs to be brought [back] on track.”

It was making profits from an inefficient and uncompetitive environment, it continued to “bump up prices” and impose “massive costs” on the economy, Abedian said.

O’Flaherty’s successor would need to be “impervious to political pressure and bullying”, he said. – Donwald Pressly

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