CEO of South African Power Utility Eskom to Step Down
CEO of South African Power Utility Eskom to Step Down
(Bloomberg) -- Eskom Holdings SOC Ltd. said Phakamani Hadebe will step down as chief executive officer of the debt-laden South African state power utility at the end of July, deepening a crisis that Goldman Sachs Group Inc. has described as the biggest threat to the country’s economy.
Hadebe is leaving due to health reasons, the Johannesburg-based company said in a statement published on Twitter. “It is no secret that this role comes with unimaginable demands which have unfortunately had a negative impact on my health,” the outgoing CEO said in the statement. The company is yet to name a replacement.
Eskom’s debt stood at 440 billion rand ($30.5 billion) at the end of March, according to the company, and it isn’t selling enough electricity to cover its interest payments and operational costs. The utility was at the center of an alleged looting spree that mainly targeted state companies during the scandal-marred tenure of former President Jacob Zuma.
Eskom’s board was replaced and Hadebe was named its CEO shortly after President Cyril Ramaphosa took charge of the ruling party in late 2017. While the new leadership made significant headway in improving financial controls, they fell short on averting rolling power blackouts as the utility’s aging fleet of poorly maintained coal-fired plants battled to keep pace with demand for power.
“It’s clear Hadebe was too slow in dealing with the critical problems at Eskom," Darias Jonker, a London-based director at Eurasia Group, said. “I don’t think he can be blamed. Essentially he was handed a poisoned chalice.”
Yields on Eskom’s dollar bonds due in 2021 increased by two basis points following the announcement to 5.44% after falling to a one-year low earlier in the day. The rand was little changed at 14.4228 per dollar at 7:35 p.m. in Johannesburg.
Ramaphosa, who will be sworn in for a five-year term on Saturday following the African National Congress’s victory in the May 8 elections, insists that Eskom is “too big to fail.” The government gave the company a three-year 69 billion rand bailout in the February budget, but with nation’s finances stretched to the limit, the Treasury has limited scope to fund additional support.
Public Enterprises Minister Pravin Gordhan, who oversees Eskom, wouldn’t comment on Hadebe’s departure. It is a matter for the board to deal with, according to Gordhan’s spokesman, Adrian Lackay.
“Hadebe’s resignation is negative in the short-term as it will, once again, destabilize Eskom’s leadership while a new permanent CEO is appointed,” said Mike Davies, the founder of political-advisory company Kigoda Consulting. Still, “it provides the incoming Ramaphosa government and Eskom board with an opportunity to appoint a CEO who can address Eskom’s massive operational and financial challenges.”
Hadebe’s background is mainly in capital markets. He was director of domestic debt management at the National Treasury and later headed the Land Bank, a state company that finances agriculture.
--With assistance from Alastair Reed, Paul Vecchiatto, Robert Brand and Gordon Bell.
To contact the reporters on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net;Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net
To contact the editors responsible for this story: John McCorry at jmccorry@bloomberg.net, Antony Sguazzin, Andre Janse van Vuuren
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