Eskom Mulls Cutting Management Units to Trim Costs

(Bloomberg) -- Eskom Holdings SOC Ltd. is considering reducing its executive committee and having fewer divisions, thinning out top management as the South African state-owned power utility aims to cut costs.

The electricity provider earlier this month said executives were being consulted over job cuts as it struggles with high debt levels and declining demand.

One proposal would see the 10-member executive committee reduced to six -- operations, finance and services, human resources, legal and compliance, information technology, and procurement -- according to a document seen by Bloomberg. These would report directly to the chief executive officer, it shows. IT and procurement offices would no longer be at the most senior executive level known as F-Band, it indicated.

Eskom “confirms that in proceeding with the Section 189 process for F-Band employees, it has proposed a new executive structure to the executive team,” the company said in a emailed response to questions. Section 189 is a process South African companies must complete before dismissing workers for operational reasons., “The structure is not yet final and Eskom will communicate any changes to its executive structure when it is finalized.”

Key Risk

Reporting to operations would be seven units including distribution and transmission, which are currently at the higher level. New divisions would be group technology and Africa strategy, according to the document.

Eskom is also considering a new operating model, according to a separate document. While the initial focus of the project would be to move the power company toward long-term sustainability, it’s eventually aiming to become a “pan-African” utility, that document says.

Responsibility should also be increased lower down the company hierarchy, Eskom Chief Executive Officer Phakamani Hadebe said at a briefing on Friday. Power station managers should run their own profit and loss, he said.

The utility’s payroll, which has grown by more than a third in a decade, has come under scrutiny as executives and government officials consider options to revive the struggling company. Eskom has been identified as a key risk to South Africa’s economy by ratings companies.

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Ana Monteiro, Gordon Bell

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