Eskom’s poor annual results cements its status as SA’s biggest risk

Calib Cassim, the acting chief CEO of Eskom. Screen shot of Microsoft Teams Presentation of live stream of Eskom’s results announcement for the financial year. Photographer: Screenshot

Calib Cassim, the acting chief CEO of Eskom. Screen shot of Microsoft Teams Presentation of live stream of Eskom’s results announcement for the financial year. Photographer: Screenshot

Published Nov 8, 2023


The Eskom 2023 annual financial results are out. Eskom suffered major losses due to reduced demand for electricity and increased costs. Eskom incurred massive revenue losses due to rolling blackouts and load shedding.

The results briefing was attended by the interim chairperson, Mteto Nyati, the acting group CEO, Calib Cassim and Eskom’s acting chief financial officer, Martin Buys, together with Eskom executives and the board.

Mpho Makwana was absent at the briefing because his last day at Eskom was on October 30. The annual results delivered by the team were late and delivered seven months into the new financial year.

Eskom’s year-end results were marked by a disappointing period for Eskom, the state-owned enterprise, experienced a huge decline in operational and financial performance compounded by increasing operational expenses and overall revenue decline losses attributed to lower sales.

Eskom reported that it incurred a net loss after tax of R23.9 billion, this is a significant increase in revenue loss from the R11.9bn net loss reported for the previous financial year. As a result, the losses incurred doubled.

Primary energy expenses went up. In particular the expenditure to supplement generation capacity through the usage of diesel in the open-cycle gas turbines (OCGTs), was the biggest contributor to the financial loss.

The total cost of R29.7bn was spent on Eskom and independent power producers (IPPs) OCGTs in the period under review. This had doubled from the R14.7bn, which was spent in the previous year on diesel alone.

It was a tough year and Eskom underwent many changes. The results could have been worse but Eskom was saved further losses because it implemented the aggressive Generation Recovery Programme.

In its media brief statement, Eskom said it had identified several key features that were responsible for poor performance. The coal costs, water and environmental levy increased heavily.

Key features of the Eskom 2023 results:

- Revenue increased to R259.5bn due to 9.61% tariff increase, however, this was negated by a 5% decline in sales volumes.

- A decline in Ebitda by R14.9bn, from R53bn in 2022 to R38bn in 2023.

- Operating profit significantly declined to R5.6bn from R20.9bn.

- The net loss after tax increased to R23.9bn, double from the R11.9bn incurred in 2022.

- OCGTs spend increased twofold to R29.7bn from R14.7bn in 2022.

- Arrears municipal debt remains an area of concern and had accumulated to R58.5bn by March 2023.

- A gross debt of R424bn attracted debt servicing costs of R72bn comprising capital repayments of R39bn and interest payments of R33bn.

- R21.9bn equity support was received from the shareholder.

- The energy availability factor (EAF) continued to deteriorate, reaching a low of 56.03% from 62.02% in 2022, resulting in 280 days of load shedding.

- Generation unplanned maintenance was at 31.92% (2022: 25.35%), however, planned maintenance remained acceptable at 10.39%.

- Kusile Unit 4 achieved commercial operation on May 31, 2022.

- Transmission network performance declined while distribution network continued to achieve good performance.

Nyati outlined Eskom’s six priorities going forward: to stabilise the leadership team; an operational turnaround of Eskom; to fight against fraud, corruption and criminality; Eskom restructuring/unbundling (three subsidiaries generation, transmission and distribution); and to strengthen Eskom’s balance sheet and line function priority reporting departments.

The key group executives running the show at Eskom, who form part of the Eskom executives committee, are:

– Bheki Nxumalo, the group executive for transmission, and his team have delivered beyond schedule, namely on the Kusile and Tutuka power stations. The team returned Kusile units ahead of schedule. Pushing Eskom’s energy availability factor (EAF) from 49% to 62% to settling on 56% EAF. Eskom, as of last week, was sitting on 202 days of load shedding and seven months into the new financial year.

– Kgomotso Skeepers, the group executive for transmission, focusing on grid stabilisation and grid development plan, unlocking grid capacity and working to make more space for incoming IPP renewables. Grid allocation rules such as the first ready first served rule.

- Monde Pala, the group executive for distribution, focusing on demand side management and municipality debt recovery. Monde works closely with the Treasury on the municipality debt crushing Eskom finances. Focusing on operational and financial turnaround of Eskom.

Eskom received R60bn for the current financial year. And R254bn debt relief to fund capital requirements to capitalise operations.

Audit Opinion

Eskom received an IFRS unqualified audit opinion. There is an emphasis on matters relating to Eskom as a going concern due to Eskom experiencing losses and Eskom relying on the shareholder for support.

On the Public Finance Management Act, the auditors issued a qualified opinion due to the fact that they had a concern around the accuracy and completeness of the records at Eskom. Eskom has had incidents of irregular expenditure, fruitless wasteful expenditure and material losses amounting to R6bn for the year.

Eskom revenue increased from R246bn to R259bn yet incurred massive year-end losses despite increased revenue. Eskom’s primary energy costs and fuel costs rank among the highest costs.

The plan of unbundling of Eskom is not yielding positive results. Instead, in the long run, it will turn out to be Eskom’s albatross. It is not a wise business decision to legislate one’s own entity into extinction.

Eskom implemented 280 days of load shedding in the reported financial year in review. Each day of the 280 days of load shedding cost the economy a whopping R2.8 trillion in financial losses.

At this rate of financial losses and overall economic performance, Eskom is the single biggest risk facing South Africa. Apart from Kusile’s remaining units coming into operation, Eskom has no other plans for the new builds programme.

There is not a single new power station planned under development or in the construction phase under Eskom’s power stations fleet portfolio. At this rate, South Africa’s economy is set on a path of doom and gloom.

The state has obviously abandoned its role to lead the economy and drive the plan for a developmental state. The state has instead opted to go the privatisation route, which will collapse the economy.

The size of the economy is neither that big, nor strong enough to give rise to total privatisation of the critical levers of state economic infrastructure and intervention support and control. It is a big mistake to let Eskom fail.

Crown Prince Adil Nchabeleng is president of Transform RSA and an independent energy expert.

* The views in this column are independent of Business Report and Independent Media.