Eskom has received a clean audit in its latest interim financial results released on Monday. Although auditors have cautioned the new board on its financial health, the newly appointed board is positive that it can turn things around.
The power utility’s municipal debt has increased from R9.2-billion to R12.4-billion for the period that ended September 30, 2017, citing a 33% increase in municipal arrears as well as a decrease of 9.1% in sales as the drivers for its poor financial position.
Although Eskom recorded a operating profit of R6-billion as of September 30, 2017 it also reported a R12-billion cash shortfall overall for the year. Chief financial officer Calib Cassim said a cash injection of R10-billion was needed by February 1 and another R10-billion by February 27.
We don’t have the money in the bank, but we have an agreement, said interim chief executive Phakamani Hadebe.
The announcement of its interims comes after Eskom delayed its results since November last year, facing the delisting of its bonds by the JSE if it failed to present its results by the end of January, 2018.
The results were late because auditors queried whether Eskom was a going concern, said Cassim. Eskom also did not want to receive another unqualified opinion, he said.
“Eskom is facing significant financial challenges”, said interim group chief executive officer Phakamani Hadebe.
He said Eskom’s dire liquidity is as a result lack of leadership and corporate governance as well as a shaky balance sheet. “Corporate governance has been the reason for the liquidity crisis,” said Hadebe.
The power utility’s dire financial position saw the state-owned entity’s credit rating being downgraded to junk by ratings agencies Moody’s over the weekend. Moody’s has put Eskom on review for further downgrades.
The new board headed by Jabu Mabuza has been tasked with fixing governance at the power utility. “Our mandate is non-negotiable, we need to root out financial mismanagement and maladministration, said Mabuza.
Eskom has lost five executives and senior officials in the last week including chief financial officer Anoj Singh, senior general manager Dhiraj Bhimma, group capital executive Prish Govender and acting commercial general manager Charles Kalima who all face allegations of impropriety or corruption.
Pressure has also mounted on former interim chief executive Matshela Koko to resign his position of group executive or face the termination of his employment contract. Former acting interim chief executive Sean Maritz has been given until Tuesday February 6, 2018 to give reasons why he should not be suspended for signing an unlawful deal with consultancy company Mckinsey.