Eskom CEO André de Ruyter at the MegaWatt Park in Sunninghill, Sandton. (Picture: Gallo Image/Freddy Mavunda © Financial Mail)
A culture of of impunity and entitlement has reigned supreme at Eskom for the better part of the 98 years the state-owned enterprise (SOE) has existed as a monopoly.
This, among many other reasons, is why turning Eskom’s bad fortunes around is such a challenge, group executive André de Ruyter explained during the Ahmed Kathrada Foundation and Wits School of Governance’s #FixIt series on Friday night.
Arrogance at the power utility has been brewing since it was founded in 1923, as it has remained a “monolithic monopoly” since then.
This, de Ruyter said, “creates a certain culture and attitude” that “breeds arrogance and excessive self-confidence”.
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It may have been rewarded in the past, but it has also led the SOE to where it is now – in need of “radical surgery” to change not only how it operates, but how it is structured.
Unlike in a private company, firing a staff member is a “torturous” process involving commissions of investigation, and grievances being filed.
“It’s as though people have the approach of ‘I’ve been here for 20 years, you don’t have the right to fire me’.
“And that lack of consequence management… Eskom has not been working the way it should be working for a long time. And staff have an important role to play”.
The external political interference is also a factor de Ruyter admitted to being a challenge. Eskom has since “tightened up” on a lot of basics, such as how to write meeting minutes and board papers, activities he said took a while to become routine.
The Eskom board is sitting without a chartered accountant, engineer and industrialist, which de Ruyter said detracted from “good governance”.
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But restoring the values of Eskom is integral at this point, he said, to rebuild trust within the organisation and with the country.
“We still have bad actors in the company, but at an executive level, we’re at the point where we’re being called out about respecting values and behaving appropriately.”
“Are we making progress? Yes we are. Can we declare victory? Not by a long stretch.”
Wits School of Governance associate professor William Gumede said turning an SOE around when it is corrupted takes about double the amount of time as it would at a private company.
Especially with a utility like Eskom, Gumede explained there was “vested interest in the SOE at high magnitude”.
Eskom will eventually need to cut salaries and reduce staff, but this will create a union-related and political backlash.
The cleaning up of overpriced, politically connected contracts will be criticised for “bringing in white monopoly capital”.
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And appointing a good board also comes with “quite a lot of political dynamics, undermined with reform”.
Reforming an SOE, he said, was “close to impossible, but not impossible”, and that it was only possible with “real political support”.
De Ruyter said many years of maintenance neglect resulted in power plant upkeep becoming an extremely expensive task.
“Load shedding is a legacy that started years ago.”
The lack of understanding, partly due to Eskom’s “poor communication skills”, has resulted in people becoming more critical of the controlled blackouts.
The utility has a plan, that involves ditching about 22 gigawatts – or 45% – of their total electricity capacity.
“If we want to keep our current fleet environmentally complaint, we need to spend about R300 billion, on which we will earn no return, and which we do not have”.
But de Router wants to turn the challenge of an ageing, heavily polluting fleet into an opportunity to embrace a “greener electricity industry”.
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International trends, he said, dictate Eskom split itself into three different entities – namely generation, transmission and distribution.
Creating an independent transmission entity with an independent market operator gives investors the confidence to invest in the country’s new generation capacity, without fear their commerciality will be compromised by Eskom’s monopolistic tendencies.
The future of South Africa’s energy mix, de Ruyter said, would balance out if 60% was renewable energy, mixed in with some nuclear, gas and coal.
He said the strategy can also create 300,000 new jobs, ramp up foreign investment, and result in new manufacturing plants being built.
“But we have to get our policy ducks in a row to get that first.”