Alternative Business Decision for Eskom Assignment 2022

Running head: ALTERNATIVE BUSINESS DECISIONS FOR ESKOM
Alternative business decisions for Eskom
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ALTERNATIVE BUSINESS DECISIONS FOR ESKOM
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Introduction
Business organizations established within an economy have a significantly important role
to play for that concerned economy. However, often times it is observed that a business can run
in to several vital problems which greatly negate their profit margin (Maize, 2016). This paper
seeks to analyze the problem which was faced by the Eskom. In this analysis, an alternative
solution is also recommended which otherwise would have helped the management of Eskom to
avert the crisis in hand. As such, the main purpose of this paper is to provide a different set of
business decisions to solve the issue as faced by Eskom of South Africa.
Problem faced by Eskom
Eskom is the biggest supplier of public utility within the region of South Africa. In was
founded in the year of 1923 and had the objective of supplying electricity to all the citizens of the
country (Baker & Phillips, 2019). However, a major problem has been plaguing this organization
for several years. The biggest problem is the inability of the firm to meet the rising demands of
electricity among the concerned population. As a result of this, in their attempt to meet the
growing demand, Eskom took large loans from different organizations (Sadiki & Pauw, 2017).
However, now it can be observed that Eskom is unable to pay back such huge debts and is
therefore, on the verge of collapse.
Alternative business decisions to avert the crisis
The main problem faced by Eskom is their lack to meet the rising power demands of the
current population. Eskom is the largest public utility on South Africa and it is this size of the
organization which poses the main challenge (Pollet, Staffell & Adamson, 2015). The lack of the

ALTERNATIVE BUSINESS DECISIONS FOR ESKOM
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firm to clearly divide its responsibilities among its different smaller units has led to the high
mismanagement of their reserve of electricity.
One of the decisions which could have been taken is to divide the enterprise of Eskom in
to several smaller distribution units (Larson, 2015). In this sense, the production sector of the
firm should have been divided from the distribution sector. Furthermore, a reserve unit should
have been established by the management of the firm which ensured that around fifty percent of
the electric power produced by the organization is kept as a back up within the firm. This would
have ensured the lesser frequency of lead shedding that is currently experienced throughout the
country of South Africa.
Another problem faced by the firm of Eskom is the high amount of debt loans that it
owes to the other sectors of the world. This mainly arose as a result of the efforts of the
management to meet the growing requirement of the population. In this attempt, they took a loan
in the hopes that they would be able to pay it back with interest after receiving payment from the
general public for the usage of such electricity. However, when the general public started to
default on their payments, the firm consequently also started to default.
An alternative business decision which could have been implemented in order to avert
this crisis is that of taking lesser amount of loan (Acharya & Xu, 2017). A major bane of any
business is when they are compelled to take financial help from outside sources. This means that
they are liable to pay this loan back with a high rate of interest. Eskom should have instead tried
to raise the money from its own share holders. This would have meant that the profits generated
or the losses suffered would have been proportionally divided among such share holders who are
liable to the firm itself (Miller & Yang, 2016). Furthermore, the company should have generated
only that much amount of electricity that it can produce with their current level of financial