Things fall apart at Eskom

Power utility Eskom has suffered yet another blow with one of its most outspoken board members, Business Leadership South Africa chief executive Busi Mavuso, reportedly resigning from the board with immediate effect.

This comes as South Africa suffers the worst levels of load shedding on record, with only vague indications from the Department of Public Enterprises of what lies ahead for the board.

Mavuso had been a board member since November 2017, and was the sole chartered accountant present. She is also an outspoken critic of the ANC, who she said is to blame for the power crisis facing the country.

With Mavuso’s exit, the Eskom board is now down to just five members, when it has the capacity – and urgent need – for 13. Seven members resigned from 2018 onwards and have not been replaced.

Public enterprises minister Pravin Gordhan announced this week that his department would be ‘reconfiguring and reconstituting’ the board, but gave no timelines for the process or any details of what it entails. This means the board will be sitting with five members for an indeterminate amount of time.

In a statement on Tuesday, the Department of Public Enterprises said that the board had been informed that a review had been finalised and that “the board will soon be reconstituted and restructured.”

Gordhan “thanked the current board for their service during the most challenging period of the entity,” giving the impression that the current members would not be kept on after the changes.

The Eskom board has been sitting at only half its full capacity for several years, lacking the necessary engineering and accounting skills required.

Public and political backlash has been harsh, with many pinning the blame on the board. Unions, in particular, have called for the whole management structure of Eskom to be fired.

House of cards

Chief executive of the Black Business Council, Kganki Matabane, said that Mavuso may have heard that she will not be reappointed to the board following the restructuring and decided to leave.

However, he said that Eskom’s problems are not about individuals but about skills, adding that the current board – and management – are not equipped to deal with the problems they face.

“As the shareholder (government), you have to do an analysis, you have to look at management and see whether they are performing. When you look at the CEO of Eskom, he has been there for three years,” he said.

“Our expectations weren’t even high, we expected him to stabilise the system – not even improve the system – just to ensure that it could be stabilised so businesses can have certainty and plan. He has not delivered on this. We include the board in this because the board’s job is to hold management to account.”

Matabane said that when you run an electrical engineering company, you need engineers. When the board is called to report on the company or hold the executive to account, they need to be independent, strong and knowledgeable enough to do that. However, the current board and management have shown that they are unable to do this.

Chairperson of the Standing Committee on Pubilc Accounts (Scopa) Mkhuleko Hlengwa said that the board has simply failed to do its job.

“Quite frankly, the board is out of its depth to turn things around. Problems continue under their watch, and things have deteriorated,” he said.

During an oversight visit in 2019, Scopa made 23 recommendations for Eskom and its board to follow, he said. When the committee returned on April 2022, only nine of the recommendations were fulfilled.

“The board and the executives do not seem to be able to turn things around,” he said. “The list of problems at Eskom is long, and the urgent reconstitution of the board and its executives is needed. There’s no hope in sight that things will change for the better. Changes are needed.”

Too little, too late

Moving to appoint a new board has come too late and is unlikely to make much difference, according to Intellidex analyst Peter Attard Montalto.

Speaking to ENCA this week, Attard Montalto said that setting up a new board is a step in the right direction to getting the embattled power utility back on track – however, it is not a panacea for the group’s struggles.

“This does not magically solve problems like ageing plants or the maths done on the tariff increases. It’s just one step to getting Eskom on the right track,” he said.

He added that two boards are needed – one for the holding company, i.e. Eskom Group, and one for the transmission business that has been spun out in the group’s unbundling strategy.

Lists and names have been put forward to the government in the past to establish these boards but have been left unattended or ignored.

Eskom’s issues run deep, both financially and structurally. Its ageing fleet is nearing end-of-life, and new infrastructure is not performing as expected. As a result, the group needs to pull units offline to do required maintenance – but the units that remain are not reliable enough to keep the lights on.

Meanwhile, years of cost overruns, corruption, a bloated, over-paid workforce, and tariffs that are not cost-reflective have seen the group’s debt balloon beyond R400 billion, adding a financial burden that it is now attempting to address through massive tariff hikes.

Eskom said it needs R1.2 trillion by the end of the decade to resolve the power crisis.

According to Attard Montalto, there are no more options for the group. Load shedding will get worse, he said, likely reaching stage 6 and stage 8 before the end of the year before any new capacity comes online. Meanwhile, South Africans have no choice but to pay higher tariffs or have taxpayers fund multi-billion rand bailouts.

Read: South Africa needs R1.2 trillion to end the energy crisis: Eskom