By Sibongile Khumalo for Fin24
Eskom suffered a net loss of R2.3bn in 2018, compared with a R0.9bn profit the previous year, the state-owned power producer revealed at its financial results presentation on Monday.
CEO Phakamani Hadebe said the poor results were compounded by allegations of corruption and mismanagement, challenges of governance and negative investor sentiment.
The power utility said its net cash from operations declined from R45.8bn to R37.6bn, as it struggled with leadership and operational challenges.
Eskom Chair Jabu Mabuza also said there had been R19.6bn in irregular expenditure since 2012, with much of the irregular expenditure being reported in 2018.
“This was a result of us shaking the cupboard so hard that so many skeletons came tumbling down,” he said.
“The verification and cleaning up exercise resulted in a significant increase in the number of reported irregular expenditure in 2018 (from R3bn to R19.6bn), with many of the items reported arising in prior years. Where information was not readily available, alternative methods were used where practical to identify irregular expenditure,” the utility said.
The power utility admitted that its “transition towards financial and operational sustainability required resolute, tough and decisive leadership”.
Its liquidity remained a going concern, with a massive R4.2bn owed to it by municipalities.
“Eskom continues to face significant financial and liquidity challenges in the short term, mainly due to the high debt burden, low sales growth and increased finance costs”.
Eskom debt has increased from R387bn to R600bn withing four years, but steps have been taken by the board to boost investor confidence, Hadebe said.
“We have raised 22% to date of [the] R72bn borrowing requirement for 2018/19, and have a firm commitment to increase funding to 62% of the 2018/19 borrowing requirement.” He said growing investor appetite for Eskom bonds was a concern.
The power utility, which has been hit by leadership challenges, is battling a long-standing financial stability crisis, including a debt of R13.5bn owed to it by a number of municipalities.
In March, Moody’s downgraded Eskom’s credit ratings from B2 from B1, citing an absence of concrete plans to place its business on a sound financial footing. B2 is the fifth rung of sub-investment grade debt.
The current wage demands by unions are also adding to the firm’s financial woes, with labour unions currently discussing Eskom’s latest options of 7% and 7.5% increases, which were tabled after a round of bruising negotiations.
The firm initially offered no increases, citing its difficult financial position. Eskom and the unions were drawn to the negotiation table by Public Enterprises Minister Pravin Gordhan in a bid to avert a crippling strike by workers.
In June, the National Energy Regulator (Nersa) has approved R32.69bn for Eskom’s multi-year price determination Regulatory Clearing Account (RCA) applications – funds Eskom must recover due to an electricity shortfall or an escalation in operating costs.
We have all heard economists warn of “tough economic times”, in preparation for which consumers must “tighten their belts”.
But for the over-indebted, whose belts are already pulled as tight as can be, the rising cost of living is an extra strain that puts them on the precipice of financial ruin.
The challenge always is knowing the difference between what you want and what you need, and living within your means.
The following habits can be used as the basic structures of smarter money management:
- Know how much you make and how much you spend
- Keep track of your spending so that you are always aware of where your money is going. Drawing up a budget helps you identify areas where you are throwing money down the drain and areas in which you can cut down.
- Make savings and investments a priority when you draw up a budget. These should be way up there with your rent or bond payments, insurance and medical aid.
- Spend less than you earn and save the difference:
- This means that you should live below your means, and try to save (invest) as much as possible.
- Have an emergency fund and keep a close eye on it. Get life cover, draw up a will. Start thinking about retirement now. Do not leave anything to chance; be prepared because you do not know what might happen tomorrow.
- Take good care of any credit accounts you have. Always pay your balance in full, do not max out your credit cards, and never use debt to pay off other debt. Try to save for items instead of turning to credit. If you are struggling to manage your debt, stop taking on more credit.
- Write down your financial goals and review them regularly. Whether you want to travel, buy a car, or are saving for a deposit on a house, always record what you want to achieve. The goal may not necessarily be a financial one, but realising it may hinge on your financial planning. Either way, having goals you can review regularly will keep you focused and on track.
- Always take the long view. Do not fall prey to get-rich-quick schemes. Make it your business to understand how wealth is created. Whenever you have money to save or invest, think long term.
Make sure to refer to some useful tips and suggestions for on-the-lot financing of your cars before buying them from any dealership.
Sticking to healthy money habits is difficult but not impossible.
Make it your business to understand money. The more you understand it, the better you will be able to use it to your benefit. The business of money does not have to be complicated or scary. A little education will go a long way.
For the overindebted, saving and investing might take a back seat as it is a struggle to keep up with monthly commitments. The following tips may help you stay afloat:
- Face your debt: Avoid paying ridiculous amounts in interest by sticking to your monthly payments.
- Speak to your creditors: If you are unable to make the agreed payments then negotiate the amount you can pay before your account is in the red. You will also avoid having your account handed over to a debt collection firm.
- If your account has been handed over: Negotiate payment terms before you attract more administrative costs and interest than necessary. Avoid being hounded and charged for it too.
- Get professional help: The National Credit Regulator is available to assist you with debt counselling should you find yourself unable to cope with the amount of debt you have. This process will have a massive effect on your access to credit and should be the very last resort.
Two newly-released studies show that a corporate commitment to environmental sustainability not only fulfils an ethical responsibility, but also delivers tangible returns to the bottom line. The studies were conducted by WWF (the World Wide Fund for Nature) and the Forest Stewardship Council (FSC), which provides certification of sustainably and ethically produced forest products.