Minister of Public Enterprises Pravin Gordhan on Monday appointed Eskom chairperson Jabu Mabuza as the acting chief executive of the embattled state-owned power producer following the resignation of Phakamani Hadebe, who leaves office next week.
Gordhan said in a statement that Mabuza would temporarily serve as both executive chairperson of Eskom and acting chief executive of Eskom. “Within the three-month period during which Mr Mabuza will be the executive chairperson and acting chief executive, the Eskom board will conclude the process of identifying a suitable candidate to become the next Eskom group chief executive.”
Mabuza is the utility’s 14th chief executive since 1994, in what is arguably one of the toughest jobs in South Africa.
Hadebe resigned from the role in May, citing the negative impact on his health due to the demands of the task to turn around the fortunes of the debt-laden power producer.
Eskom’s debt now accounts for more than 8.5 percent of gross domestic product and was recently handed another lifeline by the government to the tune of an additional R59 billion to meet its debt obligations.
Energy expert Ted Blom said Eskom needed a chief executive with industry experience. “The only chance of saving Eskom is to appoint a former Eskom leader who has the industry and streetwise experience and a clear vision as to where Eskom needs to be positioned, as well as a clear mandate to follow the necessary strategy to get Eskom to its goal destination,” Blom said.
The news of Mabuza’s interim chief executive role came as rating agency Moody’s said that the mooted additional financial support for Eskom transfers would be credit positive for Eskom. Joanna Fic, a Moody’s senior vice-president, said the extra support for the utility was evidence of the government’s unwavering commitment to Eskom, given its strategic importance.
“If passed, the increase in the government capital transfers to R105bn will be credit positive for Eskom, as they will help the company meet its interest and principal debt repayments, as well as support the proposed separation of the company’s business into three entities,” Fic said. “Nevertheless, the scale of the support is also reflective of the pressing operational, financial and liquidity challenges faced by Eskom, which carried debt of around R440bn as of end-March 2019.”
The National Treasury and Department of Public Enterprises are yet to announce who will take over the newly created chief reorganisation officer for Eskom after the position was first announced in the February Budget. While Moody’s has applauded the government’s move to rescue Eskom from certain financial ruin, last week it said the move was careless in the absence of a credible plan to stabilise the entity. Moody’s is the only one of the major rating agencies that still has the country’s sovereign debt above junk status. Dawie Roodt, the chief economist at the Efficient Group, said it was highly likely that ratings agency Moody’s would downgrade South Africa’s sovereign debt to sub-investment grade later in the year and that this would have a negative impact on consumers.
“The moment the government and its state-owned entities have to pay more to borrow money, both locally and internationally, it has no option other than to pass those increased borrowing costs on to the consumer,” Roodt said. Fitch Ratings and S&P Global Ratings have both taken a dim view of the government’s latest bailout for Eskom. The utility is expected to release its annual results today, with reports suggesting that it would post losses in excess of R20bn, a figure that if proved true would be a record loss for a stateowned entity.