Eskom chairman Jabu Mabuza has warned that the energy parastatal has a shocking R19.6-billion in irregular expenditure – up from R3-billion recorded previously, after going back as far as December 2012.
He said it has received a qualified audit – the accounting equivalent of alarm bells.
“The qualified audit must be looked at within the perspective of our intensified efforts to clean up, which has in the medium term surfaced further irregularities.
“While we are disappointed that a qualified audit could not be avoided, we are comfortable that great strides have been made in our key focus areas with a number of initiatives being set in motion to address our key challenges in a sustainable manner.”
The auditors expressed concern over irregular expenditure, fruitless and wasteful expenditure and losses due to criminal misconduct.
Group Chief Executive Phakamani Hadebe said: "Despite satisfactory progress being maintained on the new build programme, as well as improved operational performance for the current financial year, Eskom continues to face significant challenges in the short to medium term.
“Revenue levels remain unsatisfactory, and the tariff increase of 5.2% for the current financial year further compounds the impact of the 2.2% tariff we received last year, and is therefore not expected to lead to much improvement."
Earnings increased from R37.5-billion to R45.4-billion mainly due to the containment of operating expenses.
- posted a net loss of R2.3-billion (2017: R0,9-billion profit) largely due to a substantial rise in depreciation and net finance cost.
- depreciation increased to R23-billion from R20-billion as a result of new power plants being put into commercial operation.
- finance costs, after capitalisation, increased to R26-billion compared to R19.6-billion in the same period last year.
Mabuza said “despite achieving good operational performance, Eskom experienced a tumultuous year, characterised by liquidity issues coupled with a myriad of governance-related challenges which mainly stemmed from the previous financial year’s qualified audit.
“Eskom has suffered an absence of ethical leadership at the highest level for some time, but we aim to rectify that as a matter of urgency. We believe this is one of the principles underpinning the stabilisation of Eskom and to set it up for sustained success, while fulfilling both its commercial and developmental mandate.
“Our challenges cannot be fixed overnight, as the damage was also not done overnight. We have to take some short-term pain to achieve the long-term gains and the Eskom of the future we all want to see,” Mabuza said
Hadebe said: “We are committed to turning around this institution. A strategic review is being undertaken to re-energise, shift direction and set a firm foundation for Eskom’s growth by strengthening Eskom’s financial position and balance sheet, reviewing the business model to respond to global energy industry changes, growing the business into new markets and products, improving trust and restoring labour, investor and stakeholder confidence.”
Said Natasha Mazzone, DA Shadow Minister of Public Enterprises: “The DA notes with concern the R2.3 billion loss Eskom has posted for the 2017/18 financial year, from a profit of R0.9 billion in the last financial year. These losses are no doubt the result of the years of corruption, mismanagement and the bloated staff complement at the utility.
“With 48 628 employees, Eskom’s staff complement has increased by 970 since the previous financial year. Remuneration for executives has also climbed to R66 million from R51 million in the previous year, this is a 29% increase.
“Other worrying trends include the increase in irregular expenditure, which has climbed to a whopping R19 billion; municipal debt increasing by R4.2 billion to R13.6 billion, a 44% increase and finance costs climbing from R19.5 billion to R25.9 billion, a 32% increase from 2016/17 to 2017/18.
“Eskom’s latest financials once again reiterates the need for a complete turnaround strategy for South Africa’s energy sector. The DA plans to introduce a Private Members Bill aimed at dismantling Eskom and creating a separate public entity which will govern and manage the country’s electricity grid and transmission lines. The remaining part of Eskom, responsible for generation, will be privatised and compete on an equal footing with other entities, including renewable companies, for generation capacity.”
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