The one thing Eskom’s new boss needs to tackle urgently

The South African Chamber of Commerce and Industry (Sacci) has welcomed the appointment of Andre de Ruyter as part of the Eskom board’s attempt to stabilise the executive team at the embattled power utility.

President Cyril Ramaphosa said on Thursday (21 November) that the appointment of a new permanent group chief executive at Eskom is an important step towards restoring stability and forging a sustainable path at the strategic entity.

“The Eskom board, working with government, continues to pursue a turnaround plan to address its huge debt, its liquidity problems and its operational challenges…. We are undertaking these measures in support of the overriding effort to address the unemployment crisis,” said the president.

The Ministry of Public Enterprises earlier this week announced de Ruyter as Eskom’s new group chief executive. De Ruyter is currently the CEO at Nampak, the continent’s largest packaging company.

He will commence his duties at Eskom on 15 January 2020.

Sacci said in a statement on Thursday, that Eskom poses the biggest risk to South Africa’s economy and every effort should be made to fix the problems faced by the power utility.

Eskom has amassed R450 billion of debt that it can’t afford to service, is reliant on government bailouts to remain solvent and is battling to produce enough power to meet demand.

“Whilst Mr De Ruyter’s appointment signals a good intent by the Eskom board, we should not delude ourselves into believing that the mammoth task facing Eskom can be handled by one man,” it said.

Eskom faces significant problems in managing change, the large capital debt on its balance sheet, ageing fleet of power stations and other plant and equipment, backlogs in deferred maintenance, and cash flows that are restricted from a revenue generation side.

The problem of what happens to labour efficiency at Eskom is going to be one of the major decisions that needs to be taken urgently, as Eskom is Human Resources top heavy. Eskom needs to operate within an optimum structure for its size and mandate. A major decision on this significant item is unavoidable.

“The shareholder needs to show serious intent in creating the necessary enabling environment for the board and executive team of Eskom to succeed. This should start with maintaining a high level of corporate governance where the separation of powers exists between the Eskom board and the shareholders,” Sacci said.

“What has historically bedevilled many SOE’s is the blurring of these lines on operational responsibility and accountability, between the board and executives on one hand, and the board/executives and ministerial oversight on the other,” the business chamber said.

“We hope that corporate governance will prevail at Eskom to allow an independent non-executive board, operating with the highest level of integrity, to execute its mandate through competent, and experienced executive management, to turn Eskom around.

“Without this supportive and necessary governance environment, it will be difficult for any executive team to succeed.”

Bloomberg reported that the National Union of Mineworkers and the National Union of Metalworkers of South Africa, the two largest unions at Eskom, criticised De Ruyter’s appointment as a setback to the country’s racial-transformation agenda.

And the radical Economic Freedom Fighters, the second-largest opposition party, said the decision was racist and a deliberate attempt to diminish the role Africans play in the economy.

The Public Enterprises Ministry, which oversees Eskom, said it employed a recruitment company that identified 142 potential candidates to fill the CEO post and it drew up a shortlist of 17 people. The utility’s board interviewed six of them, and submitted three names to the cabinet, which made the final decision.

Lobby groups Business Unity South Africa and the Black Business Council both said De Ruyter was appointed after a thorough process and they were committed to working with him.

“Inasmuch as the country’s transformational agenda should be supported, critical positions should be filled based on merit,” said Sethulego Matebesi, a political analyst at the University of the Free State.

“We should avoid turning every issue into a political hot potato. Does the new Eskom CEO has the requisite experience and skills? If so, let us support him irrespective of his colour.”

Read: Eskom appoints new chief executive officer

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The one thing Eskom’s new boss needs to tackle urgently