Eskom’s debt refinancing is undoubtedly a critical burning platform. The clock is most definitely ticking and the consequences of not closing the immediate financial chasm will be dire not only for the utility, but also for citizens.

That said, government is extremely unlikely to allow Eskom to default. It intervened at the eleventh hour to prevent South African Airways from hitting the wall, even though the national carrier is hardly comparable when it comes to economic significance. In many ways, therefore, the current discussion about Eskom’s ‘going concern’ status is moot, as Eskom is too big and important to fail.

That’s not to say the nature of the intervention is not of material concern. In fact, it is vitally important. The support package that eventually emerges can either take the form of a bandage to staunch the visible bleeding, or surgery to tackle the cause of the haemorrhage.

A Band-Aid solution is likely to involve an accounting-based plan that addresses the immediate financial shortfalls and puts in place mechanisms for improving the financial and operational performance of the utility. It will possibly even include some noncore asset disposals and attempts at reducing the utility’s headcount. However, it will not involve fundamental restructuring.

Even under such a scenario, progress will not be possible without a clean-up of the leadership team. A new credible board will have to be appointed by a credible Public Enterprises Minister, with the concurrence of a credible Cabinet. These are minimum preconditions if any truly qualified board candidate is to sip from what has, in the past, proved to be a reputational poisoned chalice.

However, it’s arguably reached a point where Eskom needs surgery rather than a Band-Aid. The sustainability of the business is in serious doubt. Its current vertically integrated, near-monopoly structure is not only a risk to the future affordability of electricity, but is increasingly threatening the country’s fiscal balances.

Internally, the model has already resulted in the inefficient allocation of scarce resources, with over R305-billion (before pending claims and interest during construction) having been directed towards two inflexible coal megaprojects, at a time when flexibility is at a premium and when investing in incremental generation has become an economic proposition.

At the same time, too few resources are being directed the way of transmission and system operations, the very core of Eskom’s value proposition. An unencumbered transmission system operator would be in a far better position to make decisions based on the delivery of the lowest-cost electricity possible than is the case currently, where such decisions are heavily influenced by the politics of the day. As a result, trade-offs are made that sacrifice transmission investments in favour of generation projects.

Given this background, the warning of Energy Intensive Users Group of Southern Africa past chairperson Piet van Staden should not go unheeded.

In a recent opinion piece, he cautioned that cleaning up the company and improving efficiencies might not be sufficient to ensure the utility’s survival. “Eskom is facing a perfect storm with both the supply and demand sides of the electricity industry in South Africa changing, making twentieth century answers to today’s challenges irrelevant.”

Good surgeons always say a patient must earn his or her operation. Eskom has most certainly done just that.