JOHANNESBURG - The soon to be appointed board of Eskom looks set to find a company in financial ruin following media reports which indicated that Eskom is fast running out of cash and only has R1.2bn of liquidity reserves to last it until the end of this month.
According to a report by News24, Eskom will be left with just R1.2bn of liquidity reserves at the end of the month, despite having a target of R20bn.
The worrying news can be attributed to poor governance within the company. In the report handed to the minister, it was reported that it stated the financial troubles was because of poor governance and is impacting on Eskom being able to go on.
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Eskom spokesperson Khulu Phasiwe told News24 that investors informed Eskom that the parliamentary inquiry was vital in revealing issues that need to be dealt with.
“Once in the open, a way forward can be paved for addressing the issues and potential future investment,” Phasiwe added. More alarming was that the report predicted that Eskom would then move into a negative liquidity position of R5bn at the end of January 2018.
The national energy provider said that they would have to considerable reduce short term capital expenditure by R5bn to R10bn until the funding issues had been resolved.
The power utility is set to have a new board this month after Public Enterprises Minister Lynne Brown last month said she intends to arrange a special general meeting of Eskom this month to appoint a permanent board.
The media reports also came hot on the heels of the South African Reserve Bank’s Financial Stability report released last week that warned that fiscal slippage and the impact of state-owned enterprises underperformance on the government’s balance sheet pose a significant risk of further sovereign credit ratings downgrades.
In its Financial Stability report, the central bank warned that the contingent liabilities of government are becoming more of a concern as SOEs either fail to raise new capital in the market or fail to roll over existing debt.
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The central bank also said that the majority of governments guarantees exposure is to Eskom, which has increased from an actual exposure of 36% of the R350 billion available in the 2013/14 financial year to 62% in the 2016/17 financial year.
“This amount could be even larger when the R200.2 billion in guarantees made to Independent Power Producers (IPPs) are included, which would be activated in the event that Eskom is unable to meet its obligations to purchase the power generated by the IPPs,” SARB said.