JOHANNESBURG - Eskom buckled under a barrage of serious strategic blunders, which include mismanagement and allegations of corruption, that cost it qualified opinion and negative investor sentiment during the year to end March.
Chief executive Phakamani Hadebe said yesterday that the utility’s corporate plan for 2017 also failed to lift Eskom, leading to it missing its targets for sales growth, primary energy spend, capital expenditure and over-reliance on the fiscus for bailouts.
Hadebe said municipal debt, which had widened by 44 percent to R4.2 billion also cost the utility.
“Levels of arrears debt, especially from municipalities, remains unacceptably high,” said Hadebe.
“In the short term our focus will remain on cost efficiencies to support financial sustainability.”
Yesterday, Eskom reported R19bn irregular expenditure, a R2.3bn net loss, flat revenue, falling sales and deteriorating gearing during the period.
Hadebe said the utility lacked a long-term integrated strategy and had a business-as-usual attitude that would not help it to change its fortunes. He said amid the difficulties Eskom had, however, made strides in easing its liquidity and financial problems.
These included raising R57bn since January this year. He said Eskom had raised 22 percent of its R72bn borrowing requirement for 2018/19. There were discussions with lenders to increase the funding to more than 80 percent of the 2018/19 borrowing requirement.
Hadebe said there was growing appetite for Eskom bonds.
Eskom chairperson Jabu Mabuza said the ballooning reported irregular expenditure since 2012, which points to past shareholder neglect and possible shoddy audit work, resulted in the qualification of the 2018 full-year results, in terms of the Public Finance Management Act.
Mabuza said the qualified audit opinion was due to the incompleteness of the irregular expenditure information and many allegations of financial mismanagement against senior officials.
“(The results) are qualified because, over the period, there has been irregular expenditure. Our systems and controls could not be relied on. This issue of irregular expenditure has been found to be incomplete. We have also been found not to be in compliance.”
Commenting about the emergence of new cases of irregular expenditure from previous years, Mabuza said: “We, unfortunately, find ourselves in a position where we still do not know what we do not know. As we further scrape the barrel, we could find other issues that could result in further irregular expenditure.”
Mabuza said Eskom continued to face serious financial and liquidity problems. He attributed these to, among others, high debt burden, low sales growth, higher primary energy and employee benefits expenses and finance costs.
While Eskom generated enough cash to meet its operational requirements, it had to borrow in order to service debt. Mabuza said that despite a good operational performance, the 2018 financial year was tumultuous and characterised by weak financial ratios and governance problems.
“It is no secret that a number of our challenges in the year under review stemmed mainly from the qualified audit opinion that was incurred in the year ended March 31, 2017,” said Mabuza.
He said the governance lapses were among the biggest contributors to the deterioration of confidence in Eskom by the financial markets. That, he said, constrained Eskom’s access to funding, putting into jeopardy the utility’s long-term viability and going concern status.
With its back against the wall, Eskom earlier this year had to raise R20bn within 30 days “after having no access to funding since July 2017".