JOHANNESBURG - The woes facing South Africa’s embattled economy compounded this week with state-owned power utility Eskom posting a record loss of R20.7 billion for the 2018/19 financial year and the unemployment rate for the second quarter reaching an 11-year 29 percent.
Eskom which remains the main source of contingent liability risk for the fiscus said it expected to report similar losses for the current financial year despite billions in financial assistance from the government, the latest being a R59bn over two years bailout.
Energy expert Ted Blom said government has opted to leave intact a Board with near Zero of the requirements Eskom desperately needs to turn around the sinking ship, while leading Eskom to its biggest loss in history.
"A proper cleanout of Eskom – especially the costly oversized headcount of over 30 000 persons - would have placed Eskom on a leaner and more agile platform able to reduce electricity tariffs from around R1/kwh to a pre-corruption level of R0.40/kwh (which we were told does not carry the President’s blessing)," Blom said.
The utility appointed South African Institute of Chartered Accountants chief executive Freeman Nomvalo to the newly created role of chief restructuring officer with the task to cut down Eskom's R440bn debt.
Board chairperson Jabu Mabuza was also appointed acting chief executive after the resignation of Phakamani Hadebe. Moody’s deemed the additional funding to Eskom as “credit negative”, while Fitch downgraded the country’s outlook to negative from stable.
In another blow to the ailing economy, data from Statistics South Africa more South African we losing their jobs, sign that bodes ill for demand.
Annual gross domestic product (GDP) growth is expected to disappoint relative to last year and will keep employment growth muted. By extension, this will continue exerting
pressure on households’ income and their ability to spend.
GDP slumped 3.2 percent which was followed by revision on this year's growth forecast to well Belo 1 percent by South African Reserve Bank, Moody’s, the International Monetary Fund and Fitch.
Rekang Jankie from the Alternative Information and Development Centre said the unemployment crisis calls for a massive increase in state led spending on public social infrastructure.
"We need the state to invest in a low carbon industrial strategy. This entails, but is not limited to, a wide scale housing programme, expanded public transport, an ESKOM driven renewable energy programme," Jankie said.
"On that latter point, the One Million Climate Jobs campaign should be a rallying point for all. Research indicates that we can create one million climate jobs, specifically: 250 000 renewable energy jobs, 390 000 public transport jobs, 200 000 construction jobs and 100 000 agriculture jobs and 110 000 jobs in waste, industry and education."