[DEBATE] : Eskom's bloated gravy train

[Russell Grinker]

Eskom’s bloated gravy train

Top Eskom executives have been paid R143m in the past three years,
apparently with the mandate of castrating a critical national utility.
Barry Sergeant

23 Jan 2008 01:48
JOHANNESBURG -  
As the furore around South African parastatal Eskom continues to explode,
all kinds of inconvenient evidence is starting to rise to the top, just as
certain brown stuff rises. One area where there can be no argument is over
how much Eskom's top brass has been paid, apparently with the mandate of
emasculating the utility supplying 95% of the country's electrical power.
The evidence for executive pay is found in the fine print of Eskom's annual
reports. In the past three financial years, Eskom's top brass has been paid
a total of R143m. This total includes bonuses, and, for 2005,
extraordinarily high payments for "expiry of five-year contracts", as if
people on such bloated packages wouldn't come back for more. Erstwhile Eskom
CEO Thulani Gcabashe, who long ago qualified with a Bachelor of Arts in
Botswana, was paid a mind-boggling R13,1m in 2005.
For years, Eskom executives have been paid "normal" bonuses running into
millions of rands. Its top brass has lived the life of royalty, with monster
Eskom-funded housing loans, and contributions for everything from retirement
funding to fees for miscellaneous expenses. This is a gravy train of B-grade
movie proportions, crushing anything in its way as its passengers wallow in
bling.
Gcabashe was paid a bonus approaching R1m for the 2005-2006 period that
included the inexcusable problems at Koeberg, a power station near Cape Town
powered by a nuclear reactor. The problems triggered incessant power outages
in the Western Cape, said to have cost the private sector billions of rand.
Gcabashe set the mould for his successor, Jacob Maroga, when he told people
to use less electricity, the very thing over which Eskom holds a monopoly
and which was sold to settle Gcabashe's overstuffed pay package. 
As for Koeberg, the National Energy Regulator of South Africa found that
Eskom had been negligent; had failed in its maintenance obligations, and had
breached its licence conditions. But never mind those tadpole-sized facts.
Gcabashe and his fellow executives at Eskom appeared to be more interested
in finding new ways to mine money out of Eskom, given that the "payments on
expiry of five-year contracts" had been wrung dry (the device was used in
2006 by the Industrial Development Corporation, now a rat-bitten parody of
its former self). 
Eskom invented an ingenious and inglorious form of what is best described as
"ghost shares", which assumes, for the sake of executive remuneration, that
Eskom is a listed stock. Gcabashe and other Eskom luminaries have been
awarded millions of these ghost shares, which are "valued" from time to
time. 
Eskom (Rm)
2005
2006
2007
Executives
26.2
20.8
24.4
Bonuses*
46.3
4.9
5.9
Non-Execs
5.1
4.5
4.8
Total
77.6
30.2
35.0
*2005 includes bling for expiry of five-year contracts.
 
The most recent details of the Eskom ghost shares are to be found on page
169 of the 2007 Eskom annual report. While the numbers and explanation are
as close to gobbledygook as any Eskom scion would wish, it appears that all
the ghost shares are under water, ie, worthless. This should not surprise
anyone. Practically every South African wishes that Eskom's bosses would
take a one way flight to a cannibal country where people have been badly
starved for years.
Eskom should have started building new power capacity more than ten years
ago. Every last piece of paper and contract, etc, was ready for signing in
1995, but the approvals took 12 years. Lately, Eskom's royal set have been
attempting to dump on customers with the Nuremburg style excuse - "we were
just doing what we were told". Wallowing in those tens of millions, how
could they have heard a thing at all?
What's happened since 1995 is that the new, empowered Eskom top brass has
ridded itself of any serious talent, especially if it's been pale. Its
insolent top brass have tried to pump up the value of Eskom's ghost shares
by slashing costs, which has entailed vast cutbacks on maintenance by people
who often don't really know what they're maintaining. 
By last year Eskom was unable to fully supply itself with coal, and started
to outsource, naturally enough, to "black economic empowerment" companies
who only know rudimentary things about coal mining. Eskom's coal stocks are
now good only for days, rather than months. Chaos is the order of the day.
As generators have failed at Eskom, or been taken down for "maintenance", so
other generators have been over-worked by turbines spinning above nameplate
capacity. Surely it's time to rack up pay for the top brass at Eskom to R1bn
a year? They would be able to find time to breed with each other, and take
over all serious power utilities across the globe.