Eskom exec suspensions: With R23bn on the line, it’s the right thing

The Zuma Administration's suspension of Eskom's top four executives today can be read one of two ways. The SA Government says it is been done to guarantee an investigation team unfettered access over the next three months. The team will assess the poor performance of Eskom's existing plant; the delays in bringing in new plant; the utility's steeply rising costs and what caused Eskom's cash flow difficulties. Critics like London-based Peter Attard Montalto of Nomura, have been quick to condemn the move as unnecessary. In a note distributed this afternoon Montalto said the news "adds further negativity to the Eskom bond story and sovereign credit…..we do not believe the inquiry is necessary. We think it does not indicate that a crisis is being sorted out or dealt with, but the exact opposite." Perhaps. On the other hand, one might interpret the move as an admission by Government it needs to better understand what's going on at Eskom. An admission that the policy of cadre deployment into so critical an institution is unaffordable. The realisation that greater respect is required for the technical complexity of a utility once regarded as among the best in the world, now one of the least efficient. That is how trade union Solidarity is interpreting the news (its statement is at the bottom of the page). I've got a feeling the trade union, rather than the investment analyst, is closer to the truth. Treasury is poised to write Eskom cheques totalling R23bn. Its highly respected technocrats will want to know the money isn't going into a bottomless pit. Rightly so. It's your tax money and mine that's being spent here. – Alec Hogg  

By Peroshni Govender

JOHANNESBURG, March 12 (Reuters) – The chief executive of South Africa's power company Eskom has been suspended while an inquiry is held into the operations of the troubled utility, its chairman said today.

Eskom, which provides virtually all the electricity in Africa's most developed economy, is facing a funding crunch as it races to bring new power plants online and has had to stage power cuts to prevent the grid from being overwhelmed.

Chairman Zola Tsotsi stressed that there was "nothing sinister" about the temporary suspension of CEO Tshediso Matona and three other executives. Matona was appointed only in August last year to head the state-owned utility.

"To ensure that this process is as transparent and uninhibited as possible, the board has also resolved that four of its senior executives, including the chief executive, should step down for the duration of this enquiry," Tsotsi said, adding that the probe into Eskom's problems should take three months.

Zethembe Khoza, an Eskom non-executive board member and former managing executive at South Africa's Telkom will assume the position of interim chief executive, said Tsotsi.

The chairman said the independent probe would look at a number of the challenges facing the utility, citing "poor performance of generation," delays in building new plants, and cash flow issues

Eskom said the inquiry would be conducted by "external parties, who will be selected within the next week".

Last week Matona told Reuters the cash-strapped utility might sell some of its assets to raise capital, including a home loan book for its employees.

The National Union of Mineworkers (NUM), which claims about 16,000 members out of around 46,000 employees at Eskom, said it would oppose any attempt to sell assets, especially its finance company which helps provide home loans to employees.

Eskom's funding gap to 2018 is estimated at 200 billion rand ($16 billion) and it is getting a 23 billion rand cash injection from the government this year.

Weary South Africans are subjected to frequent blackouts, and the government has said its economic growth forecast for 2015 could halve to 1 percent because of power constraints. – REUTERS

Trade union praises suspensions

From Solidarity

Trade union Solidarity today welcomed the suspension of Eskom's CEO Tshediso Matona and three other senior executives and expressed the hope that the suspensions and independent inquiry into Eskom will ensure that the power utility is no longer run like an extension of the state.

According to Deon Reyneke, head of the Energy Industry at Solidarity, the independent inquiry will pave the way for changes that need to be made to Eskom's management style.

"Because of the way in which Eskom was managed over the past few years, highly skilled and experienced individuals left the utility's service. Eskom employees have lost confidence in senior management and the new CEO's first order of business should be to gain their confidence," he said.

Reyneke moreover expressed the hope that the independent inquiry will lead to Eskom appointing skilled and experienced persons instead of individuals with political connections in future.

"The time has come for Eskom to be run like a business and not a state department," said Reyneke.