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Eskom Scrutinizes Staff Numbers, Assets in Cost-Structure Revamp

  • Utility employs ‘too many’ people compared to peers: chairman
  • Needs to agree on price path with independent producers

Africa’s biggest power utility is reviewing its business, including staff numbers and possible asset sales, to find a way out of massive debt and develop a more sustainable model, according to its chairman.

South Africa’s state-owned Eskom Holdings SOC Ltd. will hold a strategic session next week as part of an effort to address flaws that forced it to take a 5 billion rand ($422 million) loan for the month of February to maintain essential liquidity levels.

“Our cost structure is definitely not right,” Jabu Mabuza, Eskom’s chairman, said in Cape Town, where he attended a Bloomberg conference. “We have to have to help the organization to be structured with people, assets, funding in a manner that is appropriate.”

Above Benchmark

Eskom employee numbers steady as demand has slumped

Source: Eskom

Eskom’s financial crisis stems from factors including weak demand, delinquent municipalities that don’t pay their bills and allegations of graft. The utility bought itself some breathing room this month by signing a 20 billion rand short-term credit facility with a group of banks, but the issues remain. Mabuza was appointed chairman in January as part of an overhaul of the board as President Cyril Ramaphosa rose to power, promising better management of state-owned companies and a crackdown on corruption.

The business needs to address “unacceptable” debt-to-equity ratios, which are above 70 percent compared to the benchmark of around 50 percent, Mabuza said. It needs to look at disposing non-core assets, including a housing company it owns.

“When you don’t have money you need to look at anything that is of value that you can sell,” he said.

Renewable Power

The utility must to agree on a price path for renewable power from independent producers, he said. A government program to diversify South Africa’s energy mix has been held up for more than two years since Eskom refused to sign agreements allowing the projects to progress.

“Whether it is human or office, everything needs to be looked at” in terms of cost, Mabuza said. He declined to give a target for how much the utility should reduce its current number of almost 42,000 employees, but said it will also be reviewed. “Benchmarked against our peers globally, Eskom is definitely employing too many people,” he said.

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