- The portfolio committee on public enterprises heard how Eskom is 'technically insolvent' and, at this rate, won't make it past April 2019
- The Department of Public Enterprises briefed members of the committee earlier today highlighting the issues at the power entity
- Medupi and Kusile power stations featured prominetly as 'badly designed and badly constructed' projects
Power entity Eskom is 'technically insolvent' and the odds are unlikely that it will make it past April 2019.
This is according to the Department of Public Enterprises, who highlighted issues at the entity, while briefing members of the portfolio committee today.
Currently, with R420 billion in debt and representing 15% of the nation's debt in total, a default in payment at Eskom could threaten the economy according to the department's submission.
This state of affairs at the power utility is due to a number of factors, including coal purchase volumes, stunted growth capacity and increased employee costs.
More money going out than coming in
The expenses at the state-owned entity grew faster than it's revenue, despite revenue increasing more than four times since 2007.
Employees grew from 32 000 in 2007 to 48 000 by 2018, the associated costs increased from R9.5 billion to R29.5 billion.
The operating profit has failed to cover interest costs and support capital expenditure, growing municipal debt has also added to the entities woes.
Human error a large part of the problem
Another challenge has been maintaining operational sustainability. The average age of the generation fleet is almost 40 but essential refurbishments have not been carried out. Claims of the 'poor quality' of maintenance due to 'poor workmanship' were also made.
Minister Pravin Gordhan claims that 40% of plant breakdowns are due to human error. There has also been a loss of critical skills and low staff morale.
Projects suffering from cost 'overruns' and dismal performance have also added to the burden:
"Medupi and Kusile have suffered massive delays and cost overruns due to poor planning, poor engineering designs, poor procurement practices and poor contracting and corruption,"
Medupi, estimated to cost R24.9 billion, rose to R145 billion while Kusile doubled from R80.7 billion to R161.4 billion.
Credibility continuously threatened
As for Eskom's governance "systemic corruption, malfeasance, fraud and state capture project" has compromised the credibility of the utility and almost destroyed investor confidence.
The effects of the corruption has filtered down through to consumers and the government:
"The ongoing revelations continue to threaten the credibility of the institution,"
Speaking during the SONA debate in Parliament yesterday, Gordhan had confirmed he had met with Eskom's board on Monday to get a firm understanding of the reason for loadshedding at the utility.
The minister had told MPs that Medupi and Kusile power stations had been 'badly designed and badly constructed' and were 'not performing at optimum levels'.
Briefly.co.za reported last week that President Cyril Ramaphosa had announced the split of Eskom into three entities- generation, transmission and distribution.
Finance Minister Tito Mboweni will be giving details of how the state will aid Eskom during the National Budget which will be delivered on the 20th of February.
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