# Eskom to get R59bn, but T&Cs are onerous

- Link: https://dearsouthafrica.co.za/2019/10/14/eskom-to-get-r59bn-but-tcs-are-onerous/
- Published: 2019-10-14T15:07:26+02:00
- Author: dearSA

![](https://cdn.dearsouthafrica.co.za/wp-content/uploads/2019/10/20191235/Screenshot-
2019-10-14T145819.846.png "Screenshot - 2019-10-14T145819.846")

A Special Appropriation Bill was recently tabled in Parliament to provide Eskom 
with much-needed finance over the next two years. If approved, it will see the troubled
utility get R26 Billion in the 2019/20 financial year and R33 Billion in the following.

This is not, however, a blank cheque.

National Treasury, in consultation with the Department of Public Enterprises (DPE)
have released these conditions, which are not only onerous, but some may be near-
on impossible to implement.

Eskom’s responsibilities

Provide daily updated liquidity positions, including underlying income, operational
expenditure, working capital, capital expenditure and financing cash flows.
 Submit
and present monthly management reports (signed off by the group CEO). Reports to
include IFRS standard profit and loss, cash flow and balance sheet update, including
commentary addressing all deviations from the annual budget that individually exceed
R100 Million during the month (for each division such as generation, transmission
and distribution, as well as at group level). Submit a quarterly board-approved 
schedule of redemptions and interest payments for the full duration of loan agreements
within a week after the enactment of the bill. Use the additional finance only to
settle debt and interest payments. Submit a monthly report on the amount and actions
underway to recover all and any sums outstanding for electricity sales. Provide 
monthly updates on the status of actions being taken to dispose of Eskom Finance
Company. The target disposal date is prior to March 31, 2020. Provide a justification
for the continued use of the Eskom Insurance Captive for risk written outside the
Eskom group, and an independent valuation of the insurance captive by December 31,
2019. Submit a plan to manage the cash of the business within its available resources.
Not more than a month from the enactment of the bill. Submit a monthly report on
the initiatives being implemented to reduce the primary energy costs. Provide a 
detailed cost, timing and benefit plan for completion of Kusile and Medupi. Not 
more than a month from the enactment of the bill. Provide a monthly statement of
expected capex spend. Provide a report on the defects on the build programme and
how they will be fixed by not more than a month from the enactment of the bill, 
and quarterly thereafter. Provide monthly reports on the measures being implemented
to improve the Energy Availability Factor (to 80%). Provide a report on the initiatives
being implemented to address the irregular expenditure not more than a month from
the enactment of the bill and thereafter quarterly. Submit a report on the measures
that have been implemented to deal with all the individuals implicated in the irregular,
fruitless and wasteful expenditure in regard to 2018/9, to be updated quarterly.
Produce separate financials for generation, distribution and transmission for March
2020. Provide monthly updates on the progress of the restructuring of the business.

DPE’s responsibilities

Ensure that that board is strengthened by December 31, 2019.
 Ensure (through the
board), that Eskom’s executive management performance agreements are linked to the
deliverables as contained in the shareholder compact and the conditions as set out
by the Minister of Finance by December 31, 2019. Publish a special paper on Eskom
restructuring roadmap. Not more than a month from the enactment of the bill. Provide
quarterly reports to Parliament (Standing Committee on Appropriation and Select 
Standing Committee on Appropriation) on adherence to conditions. Ensure appointment
of the permanent group CEO. Not more than a month from the enactment of the bill.
Approve, with National Treasury, the capital plans. No incentive bonuses will be
paid to executives in the years where equity support is provided. Treasury shoots
own goal

In its eagerness to get the ball rolling on fixing Eskom, National Treasury has 
shot too far, and has lost sight of the ball.

Producing monthly management accounts compliant with IFRS is, quite frankly, nonsensical.
Management accounts are drawn up on a different basis to IFRS financial statements,
and IFRS adjustments are made annually (for example, mark to market, capitalised
interest, etc.) An IFRS statement of profit and loss does not contain the details
that management would require. Why not do as other CEO/CFOs do, and study the cash
flow statement and schedule of loan commitments on a monthly basis, and study the
management accounts on a quarterly basis? Oh, wait …

Eskom’s financial woes are not due to inadequate financial management.

To name just a few problems: state capture, bloated inefficient labour force, procurement
problems, coal transport, quality of coal, coal contracts, badly maintained plant,
and all sorts of problems in completing Medupi and Kusile.

Introducing some cash management and financial planning into Eskom is ideal, but
overkill is not.

[Article](https://www.moneyweb.co.za/moneyweb-opinion/columnists/eskom-to-get-r59-billion-but-tcs-are-onerous/)
by Money Web