You’re going to pay either way
When news of Eskom’s gross management failures first circulated we thought the issue centred on inadequate long-range planning. Subsequently it emerged that problems at the utility company have a great deal to do with money too. Despite years of record pr
A stitch in time saves nine
When we were in junior school we clearly remember learning the idiom “a stitch in time saves nine.” What the phrase conveys is that if a job needs doing, it’s always best to do it without delay. The longer one delays the task the more difficult it becomes. Eskom provides a great demonstration of this ancient English idiom in action. Because they failed to take corrective steps when they were needed the current management faces an almost insurmountable challenge today. Years of neglect (each a stitch in time) mean the company now lacks the resources to fix the mess.
What are these ‘missing’ resources? Firstly Eskom lacks the skills to carry out its grandiose rescue plan. The skills shortage has been sneaking up on Eskom over the last decade or more as it focussed on affirmative action programmes. Eskom went as far as basing bonus calculations on human resources achievements while the company’s core objective of producing electricity suffered. Earlier this year Eskom was advertising 848 positions in areas of core competency… Secondly Eskom lacks the financial resources to implement its restructure. They claim they don’t have enough money to fix things and that we need to pay rates equivalent to the rest of the world.
We’re sick and tired of the minister of public enterprises and Eskom management telling us we benefit from the cheapest energy costs in the world. A well managed Eskom was the cheapest energy producer for a reason. It was acknowledge as one of the best run public utility companies in the world. And as a state asset put to use for the benefit of the people Eskom’s fees should be as low as possible.
What happened to the money during the seven good years?
What we want to know is where the profits from the good years have disappeared to. Over the last decade Eskom has declared ‘super’ profits despite being a world acclaimed low-cost producer… The group’s five year review shows accounting profits of no less than R29.711bn (R5.454bn in 2002; R5.276bn in 2003; R7.886bn in 2005; R4.641bn in 2006 and R6.454bn in 2007). Incidentally 2004 fell away due to a change in the accounting year end.
If they’d invested even a fraction of these profits in infrastructure instead of distributing them to government we wouldn’t be in the mess we are today. How can any top company expect to finance capital expenditure from current earnings? Eskom’s argument that their predicament is due to huge increases in the price of coal doesn’t wash either. Most of their coal contracts are negotiated years in advance with extremely favourable conditions. If this is no longer the case then the oversight again lands squarely on management’s shoulders. Eskom’s management have had adequate time to negotiate coal supply and cost and adjust the company’s electricity price accordingly.
The real scandal is that despite the mediocre supply outlook Eskom’s management has bled the country of millions of rand in the last three years. If we add executive pay, bonuses and non-executive pay for the period 2005 to 2007 Eskom has dropped a whopping R142.8m in payroll to a handful of individuals.
Catch a wake up
We’ve been told to look for the good in every situation. But it’s difficult to muster enthusiasm when an entire country is facing power shortages for the next five to 10 years. What many of you forget is granting Eskom their extra 60% this year will not improve power supply. This increase will simply allow Eskom to balance the costs of its current insufficient production with the rising expenses associated with it.
This disaster proves you can’t buy your way out of a problem that has been more than 10 years in the making. The only good that can come from this situation is that the management of other public enterprises and government departments take note of (and acknowledge the importance of) long-range planning. And the hope is that once they’ve done this they will immediately busy themselves to ensure long-term success in their respective institutions or departments.
Editor’s thoughts:
We’re so deep in the power crisis that Eskom is almost ready to play open cards. They won’t tell us all the detail behind their planned electricity price increase; but they remain adamant the consumer will have to pay. What would you prefer? A 60% hike in electricity prices this year or a hefty 100% increase in 2009? Add your comments below, or send them to [email protected]
