Eskom, which hasn’t had a permanent chief executive officer since
late 2016, has been roiled by a series of scandals, including
allegations of wrongdoing linked to the politically connected Gupta
family. Finance Minister
Malusi Gigaba has described the utility as his “biggest worry” and
S&P Global Ratings said on January 18 that there was a “clear danger” that
Eskom could default on its debt. The company is the largest recipient
of state guarantees.
The new board announced at the weekend includes high-profile South
African executives including Telkom Chairperson
Jabu Mabuza, who was named chairperson at Eskom, as well as Imperial
Holdings CEO
Mark Lamberti and former MTN Group CEO
Sifiso Dabengwa. Executives who face allegations of corruption or other
impropriety must immediately be removed, according to the government’s
statement.
Mabuza canceled his trip to the World Economic Forum in Davos, which
he was due to attend with South African cabinet ministers and business
leaders, to instead meet with the Eskom executive team on Monday,
Johannesburg-based Business Day reported.
“We are hoping that the events that happened on Saturday are going to
send a clear message to the market that Eskom and government are taking
this issue of corporate governance very seriously,” Phasiwe said.
“The
board has been given a fresh mandate that they need to move with speed
on the issues that Eskom is facing.”
Chief Financial Officer Anoj Singh,
who was suspended following allegations of corruption, submitted a
formal letter of resignation on Monday, which the board accepted.
Yields on Eskom’s $1.25bn on bonds due February 2025 plunged 31
basis points to 6.26%, the lowest on a closing basis since
September 15. The rate on $1.75bn of debt due January 2021 plunged
51 basis points to 5.45%.
While the appointments address corporate governance at Eskom, “it
will need to be followed by quick action to shore up liquidity in the
near-term before addressing the underlying long-term concerns,” said
Elena Ilkova, a Johannesburg-based analyst at FirstRand’s Rand
Merchant Bank unit. These include Eskom’s business model and
“unsustainable cost structure”, she said.
Eskom’s next immediate priority is to release its overdue interim
results by the end of the month, Phasiwe said. The Johannesburg Stock
Exchange said it is considering “a possible suspension” that would
freeze trades on listed debt securities if the results are not published
in January.
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