If you want to see what throwing money into the void looks like in business terms, look no further than Eskom.

Whether it’s one damning image of their CEO woes or four graphs that sum up the mess that lies ahead, the state-owned enterprise has become synonymous with gross mismanagement and incompetence.

Sadly, it’s the taxpayers who are footing the bill, and the latest bill is a really hefty one.

According to MyBroadband, the government is expected to grant Eskom a R230 billion bailout to try and save the power utility, but even that may not be enough to turn things around:

Speaking to the Sunday Times, Econometrix chief economist Azar Jammine said that the bailout of R230 billion for 10 years (or R23 billion per year) would be insufficient and force Eskom to seek further loans and accrue more debt.

“We are really talking about R50 billion to R60 billion needed every year given current tariffs that have been awarded by Nersa,” Jammine said. “They are way too low to put Eskom on a cost-reflective pricing scale.”

He added that public debt will have to rise in response, which could result in a credit ratings downgrade further down the line.

The government is currently working on a special appropriation bill which will enable the allocation of more funds to Eskom, and National Treasury has not stated whether the power utility will be required to pay back the amount.

Well, isn’t that lovely? Also, how will Eskom ever pay back the bailouts when it is falling apart at the seams?

With the CEO woes continuing after Phakamani Hadebe announced his resignation, and the company struggling to pay interest on its debts and employee salaries, there is another danger sign on the horizon:

Looking further ahead, Eskom will be greatly affected by the new carbon tax bill expected to kick in from 2023.

The implementation of this bill would result in Eskom being taxed billions every year due to the major contribution it makes to the country’s CO2 emissions.

Eskom’s array of existing problems and the impending troubles ahead mean it is sorely in need of a government bailout, but a payment of this magnitude might directly affect consumers in the form of tax hikes.

There it is.

Years of criminal mismanagement, and we’re going to foot the bill.

We can just hope that the next acting CEO cracks the whip, although that ship might have already sailed.

[source:mybroadband]