Mismanagement at Eskom, from bonuses to bailouts

Eskom's financial results expose the fallacy that ANC government is able to run SOEs in "the public interest". The parastatal reported today a R9.7 billion loss for the last financial year. In 2007/8 Eskom had to be bailed out to the amount of R60 billion. It appears that Eskom needs an additional R 283 billion for its capital expenditure program. As a consequence, it seems likely it will once again have to be bailed out, a cost which will be borne by the South African taxpayer.

It is true that there is some evidence of a turn around, and this is to be welcomed. However, it is easy to lose sight of the big picture by focussing on one year's return and when one takes the ANC government's broader financial management of public enterprises into account Eskom's results constitute just one out of a great many public entities that are simply not able to function properly.

The situation is exacerbated by the awarding of bonuses to senior management, despite the dysfunctional nature of the institutions in question. Eskom is no exception. Last year it awarded several multi-million rand bonuses; indeed, over the past four years - which can only be described as catastrophically bad - Eskom has paid out millions in bonus shares. Once again, the taxpayer is ultimately paying for this largesse.

What makes it so much worse is the fact that if any directors are fired, the value of the bonus shares is still paid upon termination of employment. 

The commitment by Deputy Transport Minister Jeremy Cronin that "the government also has a responsibility to impose a longer term, public-interest, strategic discipline on state-owned enterprises" is clearly not met if billions of taxpayer rands are wasted without the slightest hint of accountability vesting in senior management. These results call into question whether government is either willing or able to manage SOEs to the benefit of the public, and whether it is not simply a way to entrench the system of cronyism that is eating away at the social fabric.

The DA is not against the payment of realistic performance bonuses where they encourage hard work and results, but certainly we are against bonus payments when they undermine accountability and when they are paid during a time when the SOE is itself in financial crisis.

Statement issued by Manie van Dyk, MP, Democratic Alliance shadow minister of public enterprises, August 27 2009

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