fin24, 13 November, 2017.
Johannesburg – Struggling power utility Eskom’s poor governance has left it teetering on the edge of insolvency, with only R1.2bn of liquidity reserves expected to be in hand at the end of the month.
Eskom’s latest report to its shareholder representative, Public Enterprises Minister Lynne Brown, showed that the state utility’s liquidity is fast drying up, as it struggles to raise funds in an unsympathetic market.
The report for the second quarter of 2017 painted an alarming picture of funding difficulties and declining liquidity, primarily driven by perceptions of poor governance.
Most importantly, the report, which has been viewed by EE Publishers and Fin24, raised issues of Eskom’s status as a going concern by its auditors. In the report, Eskom tells Brown that its governance issues are having a negative impact on financial sustainability and the utility’s ability to keep going.
Several key Eskom executives, including suspended chief financial officer Anoj Singh, ex-Eskom boss Brian Molefe and suspended executive Matshela Koko are being investigated for their role in state capture at the state utility, while parliament has heard shocking revelations of how looting took place at Eskom with the assistance of key executives.
Eskom spokesperson Khulu Phasiwe told Fin24 that drawdowns from committed facility agreements are being expedited to improve liquidity as a main priority. He added that investors had told 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.”
Asked about whether the reinstatement of Koko was a risk to Eskom, Phasiwe said the indication from investors is that a stable management structure is required to access additional funding.
Ministerial spokesperson Colin Cruywagen said Brown as a practice did not comment on correspondence between her and other parties, including state owned enterprises.
“This is an Eskom operational matter,” he said.
Only R1.2bn left in the kitty
The reports showed that the state utility will only have R1.2bn cash in hand at the end November 2017 against a target of R20bn.