Allan Gray points out the real problem at Eskom – a productivity meltdown

By Alec Hogg

The folk at top rated money manager Allan Gray join the financial dots better than most. At Biznews we often refer to their graphic of South Africa’s debt-to-GDP ratio – which shows a 45 degree rise from virtually the same day Jacob Zuma took office.

An Eskom Holdings Ltd.’s sign is seen at the entrance to the company’s Kendal power station in Delmas. Photographer: Nadine Hutton/Bloomberg

Allan Gray’s chief investment officer Andrew Lapping did so again during a recent roadshow, this time drawing numbers from Eskom’s own annual reports to expose the extent of the mismanagement at South Africa’s electricity providing monopoly.

Lapping pointed out that in 2003, Eskom employed 32,000 people. Today that number stands at 47,600, up almost 50%. The average annual salary of each Eskom employee has risen from R220,000 to R785,000 – massively over the inflation rate (R400,000).

But here’s the real crunch. Eskom’s electricity production is the same as it was in 2003. In other words, today it employs 50% more people and pays them almost double the real wages of 14 years ago. Yet they deliver the same amount of power. That’s called a productivity meltdown. No mystery to why taxpayers are expected to keep coughing up billions in bailouts.