The Organisation Undoing Tax Abuse (Outa) on Monday called on the public to “rally” for a full forensic audit of State-owned electricity generator Eskom, following “yet another vote of no-confidence on Eskom’s financials and governance manifesting in a Standard & Poor’s (S&P’s) downgrade”.
S&P’s on Friday cut Eskom’s credit rating to BB from BB+, two steps below the investment threshold.
Outa believes a forensic investigation into Eskom will provide clarity and insights to many questions which, if they remain unanswered, “will not do the nation or Eskom any favours”, as it grapples with its economic survival and ability to meet the nation’s future energy needs.
“Further to several institutions having signalled their concerns with Eskom’s improprieties, it is clear that years of financial mismanagement have led to the need for unacceptably high and economy damaging electricity tariff hikes, combined with government (taxpayer’s) financial guarantees – almost R358-billion – to support its balance sheet and keep the beleaguered institution on its feet,” the organisation said in a statement.
It added that under normal circumstances, the need for suretyships by lenders would immediately signal that borrowings have exhausted their own balance sheet, and that extreme caution is required with forward financial lending.
“Yet, in Eskom’s case the result was the extreme opposite as this State-owned entity has gone on a spending spree that will require another R500-billion over the next five years, and a further R1-trillion-plus thereafter, if they are allowed to proceed with the nuclear power project,” it stated.
Eskom’s rising debt levels are likely to drive the electricity price beyond what most consumers can afford, said Outa, adding that this, in turn, was a serious risk which could lead to Eskom’s demise, as more people and businesses switch to cheaper domestic energy alternatives and improved energy efficiency.