Eskom’s viability at risk: Auditor-General

The financial viability of South Africa’s state power utility remains at risk even though it has stabilised the electricity supply, according to the nation’s auditor-general.

Eskom Holdings SOC Ltd. has gone 10 months without implementing power cuts that hobbled the economy for years and is taking measures to bolster its renewable-energy capacity. Yet significant underlying issues still need to be addressed, from cutting costs to collecting debt owed by municipalities, the watchdog said in a presentation to lawmakers.

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Eskom achieved less than 43% of its performance goals in the financial year through March 2024, including saving less than half of its target of R22.4 billion ($1.2 billion), the auditor-general said. “The current and historical audits found that Eskom does not have appropriate systems, processes and controls to quantify irregular expenditure, fruitless and wasteful expenditure, as well as losses due to criminal conduct.”

The utility’s initiative to increase revenue rests on its ability to effect operational efficiencies and the regulator’s determination on how much it can raise electricity costs. Higher prices that are considered cost reflective could spur demand for illegal electricity connections and vouchers, according to the presentation.

The National Energy Regulator of South Africa will announce its decision on tariffs Eskom can charge for the next three financial years on 30 January.

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Municipal debt to Eskom that has topped 95 billion rand remains one of the biggest viability risks confronting the utility after debt-service costs, said the auditor-general, which criticized the response to its previous findings. “The audit outcomes showed that there is very little progress in implementing recommendations made by auditors over the years to address the underlying root causes.”

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