Home Business and Technology This is how Eskom’s new CEO wants to fix South Africa’s troubled...

This is how Eskom’s new CEO wants to fix South Africa’s troubled utility

Andre de Ruyter

Andre de Ruyter knew well the adversity he faced at South Africa’s power monopoly a state-owned wreck hollowed out by corruption that struggles to keep the lights on, pay its bills and play ball with a unionized workforce.

“I don’t think I was under any illusion that this wasn’t going to be a very challenging job,” De Ruyter said in an interview nine months into his tenure as chief executive officer of Eskom Holdings SOC Ltd.

So when De Ruyter got to work as the 13th Eskom CEO in the past decade, he went after one foolproof success. He ordered up a new paint job for the main board room at Megawatt Park, the utility’s brutalist-style headquarters in suburban Johannesburg. “It was dirty and it looked shoddy,” he says. “I’m meticulous. I want to do things right.”

The 52-year-old private-sector veteran is confident his corporate approach, like a merit-based system for managers and an intolerance for theft, are making headway. The aim is to turn the flailing coal-burning giant into a green-power business with a manageable debt load that sustains Africa’s most-advanced economy.

“De Ruyter has surprised critics due to his tenacity,” said Darias Jonker, a director at the Eurasia Group in London. “He has stayed the path despite the frustrations and gridlock that many observers thought would make him leave Eskom by this time.”

Even before Covid deepened South Africa’s recession, De Ruyter made waves taking on key constituencies, including his board of directors. He sued the regulator to raise power prices, cut off towns with long-overdue bills and moved to cancel bloated supply contracts. He’s even begun to hold managers accountable in the 44,000-employee company.

Eskom

De Ruyter’s tactics have yet to visibly alter Eskom’s downward trajectory. The company, once called South Africa’s biggest economic risk by Goldman Sachs Group Inc. analysts, needs taxpayer handouts to pay the interest on its rising 488 billion rand ($29 billion) of largely government-guaranteed debt. It will report a third consecutive loss this year.

Operations are a mess too. Blackouts are rampant, with Eskom limiting supply to keep a decaying grid from collapsing. Loadshedding, as it’s called locally, cost South Africa as much as $7 billion in 2019 and the utility this year has already cut the most power on record.

President Cyril Ramaphosa’s solution is to split Eskom into generation, transmission and distribution businesses, without cutting jobs. De Ruyter’s task is to carry that out.

“We can’t carry on doing things like we’ve always done,” he said. “You’d have to be oblivious to what’s going on in the economy and the negative impact that loadshedding has on the economy.”

The traditional CEO track at Eskom is to rise through the ranks of the utility or shift from a government position. De Ruyter was an outlier for the job, having made his name as a manager at Sasol Ltd., the chemical and fuel producer, heading businesses in China and Germany. Passed over as Sasol CEO, De Ruyter moved on, accepting the top job at packaging company Nampak Ltd.

After five years there, he was tapped by the government in a surprise appointment that angered labor unions calling for a Black CEO. Leading candidates declined to take on the challenge, withdrawing from consideration.

Eskom’s troubles reflect South Africa’s decline over the past decade. Ambitious plans to build new generation capacity also failed, resulting in massive cost overruns and equipment that doesn’t work properly.

Ramaphosa has invited private power producers to meet demand and reverse an economic downturn with unemployment at 30% and rising.

Eskom became synonymous with graft and corruption during the nine-year presidency of Jacob Zuma that preceded Ramaphosa’s. The company was at the heart of a scam by the locally notorious Guptas, an Indian family that has now fled to Dubai to avoid prosecution. They parlayed political ties into a range of Eskom contracts, from coal supply to consulting. They have denied wrongdoing.

Among others tagged were Deloitte LLP, which admitted to irregularities in the procurement process, and McKinsey & Co., which agreed to return money to the utility after a dispute over its contract.

That helps explain why De Ruyter is getting into the weeds. He responds to customer complaints personally by email. “People are frustrated,” he said.

Touring the warehouse of one coal-fired station, he noticed three stories of shelving crowded with actuators, a component for its plants, and asked how many are actually used in a year. “It turns out that we’ve been buying these things without regard to the real need,” he said.

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Source: IOL