South Africa’s Eskom expects fresh loss as it keeps lights on

Eskom, the South African state-owned power utility, is set to publish figures showing a R15bn ($820mn) annual loss, but its chief executive said an end to electricity blackouts meant it could be profitable next year for the first time since 2016.

Speaking to the Financial Times as the company said it had managed to go 100 days without cutting off the power, Dan Marokane said his mission now was to fix Eskom’s reputation with global investors, which has been badly damaged by 16 years of broken promises to fix the problem.

Blackouts, dubbed “load shedding”, began in 2008 but have become increasingly frequent in recent years, dooming Africa’s most industrialised economy to a decade of less than 1 per cent GDP growth.

Public anger over the blackouts, which resulted from a growing backlog of maintenance problems, were a big reason the ruling African National Congress lost its majority in May’s elections for the first time since the end of apartheid. In 2023 there were blackouts on 280 days of the year.

Marokane acknowledged that it was a measure of how broken Eskom had become that the 100-day mark was significant.

“In the days before load shedding, this would have been a non-event,” Marokane said. “But considering the intensity and frequency of the cuts over the last two years, this really is a major step. Now we need to get to the days again where this is the norm.”

But rebuilding trust with investors, who buy Eskom’s bonds in the global debt markets, would take far longer, Marokane said.

“You can only rebuild trust with empirical evidence over time that shows you’re continuing to deliver. So, to sustain this, Eskom has brought in new executives, and we also haven’t had a board anywhere close to this level of talent mix for some time.”

Marokane said he hoped investors would be encouraged by his prediction that Eskom may make a profit for the year to March 2025, after clocking up combined losses of R111bn since 2019.

Eskom will only release financial results for the year to March later this year, but the preliminary numbers show a loss of R15bn, the FT has learned.

This is largely due to R33bn spent on buying diesel, which is burnt in open-cycle gas turbines to keep the lights on.

That loss, however, would be less than the R23.9bn recorded a year earlier, placing a heavy burden on taxpayers.

“We saw record use of diesel last year, hence record losses. But we’ve really cut down on diesel, so we should see a substantial financial improvement this year. If we maintain our trajectory, there’s no reason we shouldn’t even see a profit,” Marokane said.

The 100-day mark is the longest period in three years without blackouts, and comes after widespread scepticism that Eskom had been blowing through billions of rands burning diesel in order to keep the lights on ahead of the election and stem the ANC’s bleeding in the polls.

The ANC’s opponents, including Julius Malema, firebrand leader of the Economic Freedom Fighters, claimed in the run-up to the polls that blackouts would return after the vote.

But Mteto Nyati, Eskom’s chair, told the FT this was simply a “conspiracy theory”, and the utility had been fixed by focusing on proper maintenance at the six worst power plants of its 14-strong fleet, while overhauling its management.

Marokane said the reliability of the power grid was “not exactly where we want it just yet, but we’re comfortable that if we can sustain our trajectory, there’s a very low risk of load shedding returning anytime soon”.

Eskom’s energy availability factor — which shows the percentage of its coal-fired stations able to deliver power, rather than broken down or in maintenance — has improved from 54.3 per cent a year ago to 61.3 per cent over the past three months, according to company data.

South Africa’s new unity government — which includes the ANC and the pro-market Democratic Alliance — would be positive for Eskom’s recovery, he said. 

Analysts warned that had the ANC chosen more radical partners, such as Malema’s EFF or former president Jacob Zuma’s uMkhonto weSizwe party, Eskom’s board was at risk of being overhauled. On Sunday, President Cyril Ramaphosa appointed Kgosientsho Ramokgopa as the minister of energy to oversee Eskom, extending a role he had held for more than a year. 

“We see this as supporting the continuity of our recovery plan. Ramokgopa has been instrumental in the progress at Eskom, so we’re very thankful that he’ll still be there,” Marokane said.

Busisiwe Mavuso, CEO of Business Leadership SA, said Eskom’s apparent recovery “changes the investment narrative” around the country’s economic potential.

“Many international investors had raised their concerns about South Africa’s energy stability, and many small businesses had to shut their doors because of load shedding. So, Eskom getting its house in order is a huge positive for the trading environment,” she said.

Large companies that invest in South Africa have warned in the past that the lack of power could make them rethink their investment in the country.

In December, Thomas Schäfer, chief executive of Volkswagen Passenger Cars, which exports cars it builds in South Africa to 38 countries globally, warned that blackouts made the country “less competitive”.

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