The CEO of South Africa’s power utility is back. Why the move can’t be justified

To be sure, Molefe still had to ensure that Eskom continued to get the basics right. Theres little evidence that he did more than that. Instead, it seems that his predecessor, Tshediso Matona, was excessively negative in his outlook. This set up Molefe to appear as though he had pulled-off a dramatic success.

Molefes bailouts

What of the improvements in Eskoms financial situation?

The view that Molefe was behind Eskoms short-term financial turnaround was used to award him a R2.5 million performance bonus for the year ended 31 March 2016. (Molefe appears to have secured a R30 million retirement package when he tendered his resignation. Under the terms of his return to the job this will now no longer be paid.)

But a closer look suggests that Eskoms financial improvement cant be attributed to Molefe. In many respects it was the result of extraordinary support afforded to the power utility by the government in 2015.

This support, facilitated by two special appropriation bills passed by Parliament, had two main components. The first was an equity injection through which the National Treasury under which Eskom received R23 billion in exchange for shares. Since government is the sole Eskom shareholder, this translated into a straight cash gift.

The second component was even more significant. This involved government writing-off a R60 billion loan which had been approved in 2008 and disbursed in multiple tranches between 2008 and 2010.

If we treat Eskom as a genuinely independent entity, the full cost to national government and therefore the taxpayer of writing off the loan had two parts:

the remaining principle amount (around R30 billion), and

an additional R86 billion, the estimated cost of the state foregoing interest payments on the loan. According to the loan conditions, Eskom would have been required to pay this interest in the event that its financial situation improved.

Whether this financial support was desirable depends on your view of Eskoms recent history. Many analysts agree that additional government support was overdue. But in relation to Molefe it raises a simpler question: if many of the improvements in Eskoms financial ratios were due to massive transfers of cash and assets from taxpayers, did it make sense to pay its CEO a bonus that effectively also came from taxpayers?

Either way, closer analysis of Molefes supposed successes reveal that they are not what they have been made out to be. Combined with the failures of corporate governance with which he has been associated, the case for reappointing him as Eskom CEO appears to be paper thin.


DOD on track to start audits, but must grapple with resource constraints

The Pentagon is on track to start its full financial statement audits next fiscal year, but that milestone comes with challenges, such as resource constraints, that the Defense Department will have to grapple with, according to the most recent biannual financial improvement report released this week. The May 2017 Financial Improvement and Audit Readiness Plan Status Report states that although DOD components and the inspector generals office have programmed substantial resources to support audit readiness and conduct audits, the Pentagon…

Millennial Households Are Down but Not Out

Additional evidence leads us to believe this financial improvement is broad-based. Detailed personal income data have allowed us to construct a rough proxy for underemployment, which we define as those earning less than $20,000 a year, including those with no earnings. Since 2011, there has been a gradual decline in the underemployed among 25- to 34-year-olds, with the most notable improvement taking place in 2015.

New York Court Agrees to Protect Int’l Bank of Azerbaijan

New York Court Agrees to Protect Int’l Bank of Azerbaijan

Foreign creditors will not be able to make claims against the assets of the International Bank of Azerbaijan (IBA) during the process of voluntary restructuring of the bank’s foreign liabilities, the IBA said in a message May 13.

The corresponding decision was made by the New York court on May 12, 2017, based on the appeal of the International Bank of Azerbaijan.

The message said that the IBA appealed to the New York court in order to recognize the process of restructuring of the bank’s foreign obligations and to prevent lawsuits of foreign creditors regarding the IBA’s assets.

“Our appeal was granted by the court, and this shows that we are taking the right steps to successfully complete the restructuring process,” said Chairman of the IBA’s Board Khalid Akhadov, according to the message.

It was earlier reported that the IBA commenced a process of voluntary restructuring within the framework of its financial improvement.

The restructuring plan contemplates a restructuring process to be effected through an exchange of IBA’s senior and junior foreign currency obligations for direct sovereign obligations of Azerbaijan.

The process will lead to a meeting of all creditors affected by the restructuring plan. If approved by two-thirds of the affected creditors by value the plan will be accepted and become binding on all of them.

Pending the implementation of the planned restructuring process, and to ensure equal treatment of all affected creditors, IBA has suspended payments of principal and interest with respect to all obligations to be included in the operation (other than interest under trade finance facilities).

Depositors in IBA will not be impacted by the proposed restructuring, and that the Bank’s normal services and operations will continue to be conducted during the forthcoming process.

Source: Azernews