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JOHANNESBURG - Eskom top brass have said that they will consider cutting the staff headcount in order to curtail costs.

Eskom chairperson Jabu Mabuza said yesterday that employee and primary energy costs remained the proverbial elephant in the room, as they were the two biggest elements in the income statement.

Mabuza said Eskom should aim for a 39percent to 41percent earnings before interest, taxes, depreciation and amortisation (Ebitda) margin, to be able to pay its debt and meet its developmental mandate.

“Anything outside of that, even if you were to get a R100billion injection today, in four years, you will be back in the state you currently are,” said Mabuza. “What does it cost you to produce what you can sell? If you produce higher than what you can sell for, you are going to go bust.”

Mabuza’s assertion came as unions fumed yesterday over Eskom’s decision to offer a zero percent wage increase.

Eskom and trade unions have been at each other’s throats over the wage negotiations. The National Union of Metalworkers of South Africa (Numsa) said yesterday it had decided to walk out of the wage talks.

“This was the second round of wage talks, but we simply could not continue. because of Eskom’s hostile attitude towards workers,” said Numsa.

Mabuza said that in order to get a positive Ebitda, Eskom had to either generate more revenue or reduce costs.

“We need to start to sell, collect our debt and to look at our costs,” he said. Cost containment entailed optimising staff costs.

He said the power utility was making strides in its capital raising initiatives.

Between January and March this year, Eskom had raised R43bn. Since April, the power utility had secured 22percent of the required funding for the new financial year.

Comfortable

Chief executive Phakamani Hadebe said Eskom planned an issuance of debt in the debt capital markets on the back of improved investor sentiment. Hadebe said the power utility had raised R15bn this year.

“We are really comfortable where we are sitting. We are looking at the appetite of the demand. Are we happy? Yes, we are happy, if you (consider) that this is the same institution that, from July last year until January this year, could not raise R1bn. We are planning to go for a foreign issuance in another two months.

"The situation has changed drastically,” said Hadebe.

Mabuza said the Eskom board had approved a financial viability plan which would be submitted to Public Enterprises Minister Pravin Gordhan.

He said Hadebe and his executive team were developing a long-term plan “that will move Eskom towards achieving the economic and financial sustainability that we all require”.

Last month Eskom said the strategy document would be completed in September.

Mabuza said Eskom had commenced with mandatory lifestyle audits for executives and senior managers two levels below Hadebe.

Gordhan said the new leadership at Eskom had made strides in restoring the utility’s credibility in the financial markets, allowing Eskom to raise funding and improve its liquidity.

He said Eskom would soon work on its business model “so that we are assured that what constitutes the Eskom group is what Eskom requires in the next 10 or 15 years. And whether all those elements need to be the focus of their work and whether there are changes to be made”.

- BUSINESS REPORT