(3 minutes read)
· Eskom’s losses is expected to cross R2.5 billion a month
because of reduced demand in electricity by intensive users
· The outstanding municipal debt was R20bn, while the
cumulative debt around R450bn. International
· Any effort to revamp the operations of the utility by
rationalizing its operations including retrenchment of employees has
met with stiff resistance from the labor unions.
A few months back, South Africa’s power utility –Eskom- had a
different challenge of meeting the peak demand. While it could not do
so due to a variety of reasons, the alternative was severe power cuts.
Now the situation is somewhat reversed but the end result is the same;
the utility continues to make huge losses. The loss is expected to
cross R2.5 billion a month because of reduced demand in electricity by
intensive users. Many feel that the demand would continue to slide
even after the lockdown since manufacturing units may take time to
come to the full swing in the production cycle.
The lockdown, which began on March 26, is expected to be lifted in
stages. The first phase of lifting of lockdown is expected to be on
1st May, which may relax carrying out certain activities, which will
be incrementally opened up later, provided the assessment of the
relaxation is positive. The one good thing for the utility is that
the financial year ending on 31st March 2020 will not reflect the huge
losses on account of the Covid-19. But the legacy problems of the
utility are huge and in all likelihood, the financial results will be
accordingly very depressing.
In September, the power utility reported a net loss of R 70.7 billion
for 2018/19. The outstanding municipal debt was R20bn, while the
cumulative debt around R450bn. International lenders and ratings
agencies are considering the mounting debts as one of the key threats
to SA’s public finances. Also, the huge maintenance cost to be
incurred on the age-old power stations and equipment have a bearing
on the bottom lines of the deeply indebted company. Many feel that
Eskom is one of the major reasons for low credit rating of South
Africa. Any effort to revamp the operations of the utility by
rationalizing its operations including retrenchment of employees has
met with stiff resistance from the labor unions.
