The South African government is currently ironing out the final details on a R230 billion bailout package designed to get Eskom back on track.
If that sounds like a lot of money, it is. If you think that it will be enough to save the utility, think again.
It won’t be nearly enough to cover all of the damage done by mismanagement, cost overruns, and a bloated wage bill over the last couple of years.
BusinessTech has some sobering numbers to wrap your head around:
Eskom Holdings SOC Ltd supplies about 95% of the electricity used in South Africa. It also has more than R440 billion of debt—about R250 billion more than Chairman Jabu Mabuza says it can afford to service.
The government aid, which will be rolled out over a few years, will mostly be absorbed by ongoing losses.
The following graphs illustrate the extent of Eskom’s problems:
Eskom’s annual operating and maintenance costs are expected to increase by 17% over the next five years. The costs of fuelling the mainly coal-fired plants will go up by 50%.
Eskom has been granted permission to raise tariffs by an average of 7,6% every year until March 2022. That means that the cost of electricity is going up even more.
Eskom currently employs around 48 600 people – 16 000 more than a decade ago, and 16 000 more than they actually need to operate.
Job cuts could be tricky, though. They are opposed by the country’s powerful labour unions, which played a key role in helping President Cyril Ramaphosa win power.
Eskom needs R300 billion to be able to comply with emissions laws at its coal-fired plants by 2025. It has committed to spending only R63 billion by cutting costs via less expensive equipment, to reduce its emissions of particulate matter and nitrogen oxides.
Am I the only one who feels like this isn’t the right place to cut costs?
Get ready for a few more years of load shedding, and other headaches from our power utility.
[source:businesstech]
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