“Heavy hand” of government may have pushed Eskom CFO

The troubled relationship between government and its state-owned enterprises results in a high turnover of senior management and this is probably why Eskom’s financial director Paul O’Flaherty also decided to step down, political analyst Daniel Silke says.

O’Flaherty’s surprise resignation was announced by Eskom CEO Brian Dames when he presented the power utility’s interim results for 2012 this morning.

At the end of September, SAA chairperson Cheryl Carolus and seven other board members resigned after Public Enterprises Minister Malusi Gigaba postponed its AGM and the release of its annual report.

“We have a broad structural problem where government insists on having a heavy hand in the affairs of state owned enterprises,” Silke said. “This causes a crisis in the financial management of our SOEs, such as Telkom, SAA and also Eskom.”

Silke believes Eskom’s application for such a steep tariff increases in the midst of tight economic conditions may have put additional pressure on the outgoing financial director. “He must have been worried about sufficient funding.”

O’Flaherty, former financial head at Group 5 Ltd., was appointed three years ago. He will remain in his post until Eskom’s has had its annual General Meeting (AGM) which is scheduled for July 2013.

“My job was to put in place the financial foundation for a new era of growth and improvement,” he said in a media statement. “Today Eskom is ready for that new era and it is an opportune and logical time for me to move on. To stay longer would require a commitment to a much longer time frame than I had envisaged. My job is done and my successor can take it further,” he added.

Eskom recently applied to the National Energy Regulator of South Africa (Nersa) for a 16% tariff increase per year for the next five years to help finance its building programme. It requires more than R1 trillion in revenue over the five year-period.

The tariff increase application was met with discontent from various sectors, including economists, the trade union federation Cosatu, the Free Market Foundation (FMF) and opposition parties.

Economists argued a double-digit tariff increase would stifle economic growth, while the DA’s David Ross complained that it comes down to nearly triple the current inflation rate.

Public enterprises minister Malusi Gigaba defended Eskom’s application, saying the double-digit tariff hike was necessary because of the current tough economic conditions.

Extended consultation with the public about the proposed tariff increases will be held throughout the country in January and Nersa’s decision will be announced in February next year.

Eskom’s Dames said the recruitment process for a new financial director has already started. “We regret losing [Paul's] talents but we remain friends.”

Liesl Peyper

 

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