(Bloomberg) -- South Africa appointed a new board at struggling utility Eskom Holdings SOC Ltd., with Jabu Mabuza becoming chairman, and ordered a new permanent chief executive officer to be named within three months.
As well as the appointment of Telkom SA SOC Ltd. Chairman Mabuza, the government recommended former Land Bank chief Phakamani Hadebe as the acting CEO, it said in a statement. The move, designed to strengthen governance and management, follows a meeting between President Jacob Zuma and other key ministers on Friday to address urgent challenges at the firm.
The utility, which is the biggest recipient of state guarantees, has been in talks with the government to improve its finances, with Finance Minister Malusi Gigaba describing it as his “biggest worry” as a collapse could potentially drag down the country. The utility’s woes have worsened as domestic power demand is the lowest in more than a decade and as South Africa’s finances buckle under lower tax revenue and rising debt.
“The company has been facing several challenges, including a weak financial position, declining revenues and governance failures, which are threatening the sustainability of the company going forward,” the government said in the statement.
S&P Global Ratings this week said there was a “clear danger” of Eskom defaulting on its debt. Governance is among the issues that lenders have said the company needs to resolve before they make additional funds available.
“It’s really important in the short term to win back the confidence of the financial community,” Chris Yelland, an energy analyst and managing director of EE Publishers, said by phone. Particularly “in order to release funds, to roll over debt, for new bond issues that have really been delayed because of these governance problems.”
In addition to the board appointments and acting CEO recommendation, which will be ratified by the cabinet at its next meeting, the government also asked that a new permanent chief financial officer be named within three months.
The ruling party said it expects the board to immediately remove all Eskom executives who are facing allegations of corruption and other acts of impropriety. That includes Matshela Koko, who faced disciplinary charges related to conflicts of interest for payments made to a company linked to friends of Zuma. It also includes Anoj Singh, who was suspended following allegations of corruption.
Eskom’s Zethembe Khoza confirmed that he resigned chairman on Friday, Fin24 reported.
The board appointments “will go a long way towards rebuilding confidence in the leadership in our country and in our economy,” Cas Coovadia, the Banking Association South Africa’s managing director, said in a statement.
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