5 June 2014
Senior executives at Eskom, South Africa’s state electricity company, will forfeit their annual bonuses for the 2013/14 financial year as the parastatal seeks ways to overcome a R225-billion five-year revenue shortfall.
“Eskom’s senior executives will not take their annual bonuses … in light of the R225-billion revenue shortfall experienced over the five-year period between 2013 and 2018,” Eskom interim chief executive Collin Matjila said in a statement on Wednesday.
“The executives at Eskom have acknowledged the financial constraints by agreeing to forgo their annual performance bonus this year as one of the efforts to cut costs.”
Matjila said the board had welcomed this move as the company was implementing efficiency intervention initiatives to achieve long-term financial sustainability.
In its application for a tariff hike to the National Energy Regulator of South Africa (Nersa) in October 2012, Eskom had asked the regulator to grant it a total 16% hike over a five-year period. The approved tariff increase of 8% left Eskom with a major funding gap.
The company then set up a business productivity programme in order to extract efficiencies within the business.
“It became necessary to rally around all our employees to deliver efficient services with less resources,” Matjila said. “We will continue to drive a conscious and concerted effort to cut waste across our business.”
At the beginning of this financial year, Eskom’s board and executive committee established a special joint committee that is considering a range of non-conventional sustainable funding solutions, including equity/equity-like instruments.
“While significant shifts have been made in terms of business operations to achieve internal efficiencies, the company is certain that this revenue shortfall cannot be achieved by belt-tightening alone,” Matjila said. “It remains important to move towards a cost-reflective tariff urgently”.
The company was also in discussions with the National Treasury, through its shareholder ministry, the Department of Public Enterprises, to find a long-term solution.
At the same time, Matjila said, the utility was acutely aware of its obligations and would continue to guarantee security of electricity supply in support of economic growth.
“It is important that Eskom remains financially sustainable to enable us to keep the lights on, whilst we complete the new build programme that will ease the pressure on the national grid,” Matjila said.