Political meddling in resolving a power struggle at Eskom has raised questions about South Africa’s ability to run state-owned firms and could backfire with investors hesitant to commit new funds.
Eskom chairperson Bobby Godsell resigned on Monday after he said the government failed to support the board’s bid to oust the company’s CEO, Jacob Maroga, after the two clashed over issues of how to run Eskom, the state-owned firm that is struggling to keep South Africa’s lights on.
But rather than resolving the dispute within the board, Eskom and the government have left it to unions, the opposition and interest groups to dominate the debate in the public sphere.
Alistair Sparks, a political analyst at Standard Bank Securities, said the lack of government backing for the board will have serious implications for when Eskom needs to raise funds for its R385-billion expansion programme.
“Serious institutions will be much more reluctant to lend money to Eskom and if they do, it will be at a much higher interest rate because the risk seems to be higher,” he said.
Eskom’s leadership crisis is the latest in a series of disputes at South Africa’s state-owned enterprises, raising doubts about the ability of President Jacob Zuma and Public Enterprises Minister Barbara Hogan to provide leadership.
“Government intervention may be the prime cause of current chaos in the company,” investment bank Fairfax said in a research note, adding that Eskom’s ability to supply South Africa’s key mining industry could be jeopardised as a result.
Key roles at logistics group Transnet and South African Airways (SAA), which along with Eskom fall under Hogan’s jurisdiction, have been left unfilled as the companies struggle to resolve internal battles.
The crisis could further strain the patience of investors already worried that Zuma’s allies may be pressuring him to change policies to the left.
No leadership
The African National Congress’s militant youth league and the Black Management Forum asked for Godsell to quit, saying he drove a racist agenda against Eskom’s black chief executive.
Meanwhile, the government remained silent, with Zuma vowing to stay away from leadership disputes at state-owned firms.
Hogan said last week that she was trying to resolve a breakdown in relations between the board and Maroga.
“The Eskom issue is receiving urgent attention from the minister, and we are confident it will be resolved soon so that Eskom can refocus on its primary mandate — that of ensuring security of electricity supply for the country,” the minister’s spokesperson, Ayanda Shezi, said.
Analysts said Zuma was confronted with too many opposing views within the ANC and chose to do nothing to remain neutral.
“He’s not calling elements of his party that are misbehaving to order and is not allowing people that have been put into positions of responsibility to do their job,” Sparks said.
Economists said the dispute could have serious repercussions on the utility and other state-owned enterprises as investors might be less willing to send money their way if they sense political manoeuvring, or might ask to lend at much higher rates.
Both Transnet and Eskom are struggling to raise all the funds they need to pay for their vast expansion programmes needed to feed fast-rising demand, especially as credit markets tightened on the back of the recession.
Konrad Reuss, Standard & Poor’s managing director for South Africa and sub-Saharan Africa, said that while the ratings agency did not expect the dispute to have an impact on the government’s willingness to underwrite Eskom’s guarantees, it was an unnecessary distraction nevertheless.
“We have an economy that is slowly moving out of a recession, we have key government-owned firms that are important for the future economic development of the country … this kind of leadership debate is an unnecessary distraction,” he said.