Nov 10 2009
Political meddling in resolving a power struggle at Eskom has raised questions about South Africa's ability to run state-owned firms and could backfire with investors hesitant to commit new funds.

Eskom chairperson Bobby Godsell resigned on Monday after he said the government failed to support the board's bid to oust the company's CEO, Jacob Maroga, after the two clashed over issues of how to run Eskom, the state-owned firm that is struggling to keep South Africa's lights on.

But rather than resolving the dispute within the board, Eskom and the government have left it to unions, the opposition and interest groups to dominate the debate in the public sphere.

Alistair Sparks, a political analyst at Standard Bank Securities, said the lack of government backing for the board will have serious implications for when Eskom needs to raise funds for its R385-billion expansion programme.

"Serious institutions will be much more reluctant to lend money to Eskom and if they do, it will be at a much higher interest rate because the risk seems to be higher," he said.

Eskom's leadership crisis is the latest in a series of disputes at South Africa's state-owned enterprises, raising doubts about the ability of President Jacob Zuma and Public Enterprises Minister Barbara Hogan to provide leadership.

"Government intervention may be the prime cause of current chaos in the company," investment bank Fairfax said in a research note, adding that Eskom's ability to supply South Africa's key mining industry could be jeopardised as a result.

Key roles at logistics group Transnet and South African Airways (SAA), which along with Eskom fall under Hogan's jurisdiction, have been left unfilled as the companies struggle to resolve internal battles.

The crisis could further strain the patience of investors already worried that Zuma's allies may be pressuring him to change policies to the left.

mg.co.za