Integrated Report 2019

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Integrated Report 2019 INTEGRATED REPORT 31 March 2019 www.eskom.co.za CONTENTS WHO WE ARE NAVIGATION ICONS THE YEAR AT A GLANCE IFC The following navigation icons are used to link ABOUT THIS REPORT 1 our strategy and resources to material matters, strategic risks, key performance indicators and OUR SUITE OF REPORTS 2 performance: LEADERSHIP AND ETHICS 3 VISION AND MISSION Our finances Chairman's statement 4 FC (financial capital) Our vision is to drive economic growth by being a financially Ethics and progress on governance clean-up 8 sustainable provider of energy solutions across Africa King IVTM application 15 MC Our infrastructure (manufactured capital) Our mission is threefold Composition of our top leadership 20 OUR BUSINESS AND STRATEGY 24 Our interaction with the environment NC (natural capital) What we do and our impact 25 How the macro environment affects us 34 Our people HC (human capital) Our strategy and outlook 41 Drive economic growth in Stakeholder engagement and material matters 44 South Africa in a profitable SRC Our role in communities manner, through the Risks and opportunities, assurance and controls 49 (social and relationship capital) Turn around the provision of reliable and Create a positive social existing business and efficient energy and energy impact on South Africa by OUR GOVERNANCE 61 ensure Eskom’s financial driving shared growth and Our know-how solutions and services IC sustainability leveraging our footprint Governance framework 62 (intellectual capital) for our customers, first in South Africa and then Feedback on Board activities 63 across Africa Exco update 70 Information block Additional information Executive remuneration and benefits 72 or case study in the integrated report FINANCIAL REVIEW 76 Our values underpin our vision and guide how we do business Supplementary Information Chief Financial Officer’s report 77 information provided available online in a fact sheet Condensed annual financial statements 81 Financial value added 84 A list of abbreviations and glossary of terms Zero Harm Integrity Our finances 85 are available on pages 157 to 159 OPERATING PERFORMANCE 102 Chief Executive’s review 103 Throughout this integrated report, performance Excellence OUR VALUES Innovation Our infrastructure 108 against target is indicated as follows: Our interaction with the environment 120 Actual performance met or exceeded target Our people 130 Customer Sinobuntu Actual performance almost met target satisfaction (caring) Our role in communities 140 (within a 5% threshold) Our know-how 145 Actual performance did not meet target SUPPLEMENTARY INFORMATION 156 SC Abbreviations and glossary of terms 157 Indicates that a key performance indicator is included in the shareholder compact Independent sustainability assurance report 160 Our leadership brand pillars Leadership qualifications and directorships 164 Board and Exco meeting attendance 167 Our leadership brand pillars support our vision, mission and values. Legitimate and authentic leadership REQUEST FOR FEEDBACK will not be achieved without leaders individually and collectively internalising, articulating, role modelling Statistical tables: technical and non-technical 168 We want to ensure that our report continues and actively living the leadership brand pillars to provide relevant information to stakeholders. Environmental implications of using electricity 176 We welcome your feedback on ways in which we Plant and customer information 177 could improve our report in future. Please send Heart of Learning Good Disciplined a servant organisation governance execution Contact details 184 your suggestions to [email protected] THE YEAR AT A GLANCE ABOUT THIS REPORT This integrated report reviews our financial, operational, environmental, social and governance performance for the year from 1 April 2018 to 31 March 2019, and follows our 2018 integrated report. It examines our use of and impact on the six capitals, and our performance in relation to our strategy. Strategy review Reporting boundary and frameworks Assurance approach culminated in The information in this report refers to the performance Our combined assurance model relies on several lines Chief Executive, Governance of the group, which includes the business of Eskom of defence, including supervisory oversight, review by turnaround plan Holdings SOC Ltd, operating in South Africa, and management, as well as internal and external assurance. CFO and COO clean-up its major operating subsidiaries, unless otherwise The Audit and Risk Committee and the Board rely on stated. For a comprehensive overview of our financial combined assurance in assessing the adequacy of our risk appointed progressing well performance, the integrated report should be read in management and internal controls. conjunction with our full set of consolidated annual financial statements. The results of the internal and external assurance of our suite of reports is set out on page 60 Our consolidated annual financial statements are available at Industrial action www.eskom.co.za/IR2019 Our Assurance and Forensic Department provided reasonable assurance on certain aspects of the report. impacted operations Environmental Material events up to the date of approval have been The sustainability KPIs contained in the shareholder included. Unless otherwise indicated, the information compact were subject to external assurance; eight did and finance performance presented is comparable to that of prior years, with no not receive reasonable assurance. deteriorated significant restatements. The independent sustainability assurance report is included from page 160 Basis of preparation Our integrated report is based on the principles The consolidated annual financial statements have contained in the International <IR> Framework, been audited by the group’s independent auditors, Plant availability dropped Rotational loadshedding published by the International Integrated Reporting SizweNtsalubaGobodo Grant Thornton Inc, who issued implemented on Council (IIRC). The report seeks to provide a balanced a modified opinion relating to the completeness of below 70% and transparent account of how we create value through amounts disclosed in terms of the PFMA. Except for this 30 days our use of and impact on the various capitals. modification, the consolidated annual financial statements are fairly presented in terms of IFRS. Our value creation process is depicted in our business model on pages 28 to 29 Refer to the annual financial statements for the independent audit opinion Total OCGT expenditure of Generation nine-point This is our primary report to stakeholders, and provides Board responsibility and approval information of interest to all stakeholders. As far as The Board is accountable for the integrity and R6.5 billion to minimise recovery programme possible, we aim to address material matters, both completeness of the integrated report and any positive and negative, by considering qualitative and loadshedding supplementary information, and is assisted by the introduced quantitative matters material to our operations and Audit and Risk Committee and the Social, Ethics and strategic objectives, which may influence stakeholders’ Sustainability Committee. decision-making. Our strategic risks are considered as part of this process. The Board has applied its collective mind to the preparation and presentation of the integrated report Net loss after tax of The determination of material matters is set out on pages 46 to 48, while and has concluded that it is presented in accordance our strategic risks are discussed on pages 52 to 54 with the International <IR> Framework. Considering R20.7 billion Government the completeness of the material items dealt with and Building on issues covered in the 2018 report, we the reliability of information presented, based on the have endeavoured to provide a comprehensive update financial support combined assurance process followed, the Board approved on governance-related concerns; we always strive to the 2019 integrated report, annual financial statements and announced improve the conciseness of the report. However, there Municipal arrear debt supplementary information on 18 July 2019. were a number of significant issues which had to be rose to R19.9 billion addressed, which have negatively impacted conciseness. The content is guided by legal and regulatory requirements, such as the Companies Act, 2008 and the Mr Jabu Ms Sindi Prof. Malegapuru King IV Report on Corporate Governance for South Mabuza Mabaso-Koyana Makgoba Africa, 2016 (King IVTM), as well as global best practice. Chairman Audit and Risk Social, Ethics and Committee Sustainability Committee ESKOM HOLDINGS SOC LTD | 1 OUR SUITE OF REPORTS LEADERSHIP AND ETHICS Our 2019 suite of reports consists of the following: INTEGRATED REPORT Integrated report and supplementary information 31 March 2019 The integrated report is prepared in accordance with the IIRC’s International <IR> Framework, and As ethical leadership forms the foundation of effective corporate governance, we continue provides an overview of our governance, strategy and performance. The report has been subject to to re-establish a culture of ethical behaviour and ethical leadership at Eskom to address the combined assurance, with verification by our internal audit function and reasonable assurance on some KPIs provided by our external auditors. Supplementary information, which may be of interest to some governance issues we have faced in the recent past. Integrating sustainability with decision- stakeholders,
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