South Africa\u2019s debt-ridden state power utility is recruiting its 14th chief executive officer in a decade, but finding someone who can do the job and actually wants it will be a tall ask.<\/p>\n
Eskom Holdings SOC Ltd. supplies more than 90% of the nation\u2019s electricity, has more than 42,000 employees and doesn\u2019t earn enough to cover its operating costs and service its mountain of debt. The utility\u2019s old and poorly maintained plants can\u2019t meet the demand for power and have forced it to institute rolling blackouts since 2008.<\/p>\n
The energy crisis has hamstrung the economy and raised the ire of the government, the ruling party, labour unions and the public.<\/p>\n
Andre de Ruyter, who\u2019s served as CEO for almost three years, announced on Wednesday he\u2019ll quit at the end of March. He told News24, a Cape Town-based website, that it was untenable for him to stay on given that senior government officials had repeatedly attacked him and Eskom\u2019s strategy.<\/p>\n
Mineral Resources and Energy Minister Gwede Mantashe has said that De Ruyter is unsuitable for the CEO position and accused Eskom of \u201cagitating to overthrow the state.\u201d<\/p>\n
Phakamani Hadebe, the previous permanent appointee, resigned after less than two years because the \u201cunimaginable demands\u201d of the job took a toll on his health.<\/p>\n
\u201cA replacement seems so difficult to find, never mind to attract,\u201d Citibank South Africa analysts Gina Schoeman and Alexander Rozhetskin said in a note to clients.<\/p>\n
There\u2019s also been an exodus of other senior staff: Two heads of the company\u2019s flailing generation division and its energy transition manager have quit this year alone, while Chief Operating Officer Jan Oberholzer is set to retire in April.<\/p>\n
Investors are concerned about management stability at Eskom and the knock-on effect it will have on Africa\u2019s most-industrialized economy. The yield on Eskom\u2019s 2028 dollar bonds that don\u2019t carry a government guarantee climbed two basis points on Thursday to 11.25%, after rising nine basis points on Wednesday, while the rand weakened as much as 1.2% against the dollar.<\/p>\n
Eskom\u2019s problems date back to the 2000s when the government failed to heed warnings that generation capacity was running out. Two giant new coal-fired power plants were eventually approved in 2007, which were expected to cost R163 billion and be completed within eight years.<\/p>\n
But those projects have been plagued by mismanagement and cost overruns that have crippled Eskom\u2019s finances, with the likely final price tag having ballooned to more than R460 billion.<\/p>\n
A judicial commission of inquiry also found Eskom was at the epicentre of a looting spree of taxpayer funds during former President Jacob Zuma\u2019s nine-year tenure.<\/p>\n
De Ruyter has made some headway in getting rid of compromised officials and tackling graft, but he\u2019s fallen short on a pledge to end blackouts within two years of taking office. Outages, known locally as load-shedding, have been instituted on a record 189 days this year.<\/p>\n
The CEO\u2019s plans to accelerate the retirement of coal-fired generation capacity and produce more green energy also ran into opposition from Mantashe and labour groups who fear job losses at plants and coal mines. The National Union of Mineworkers described his exit as \u201clong overdue\u201d because he\u2019d failed to find a viable strategy to address the blackouts.<\/p>\n
\u201cWe must face the reality that Eskom is simply unmanageable within the political context,\u201d said Peter Attard Montalto, head of capital markets at Intellidex. De Ruyter \u201cdid everything he possibly could within that context, but ultimately was not enough given non-nonsensical demands of political principals,\u201d he said.<\/p>\n
The National Treasury said in October that the government may shift between one-third and two-thirds of the utility\u2019s debt of about R400 billion onto the government\u2019s balance sheet, with details to be announced in the February budget.<\/p>\n
While that may help put Eskom\u2019s finances on a more sustainable footing, it won\u2019t address a more immediate crisis: the utility needs R19.5 billion to buy diesel to run turbines that are used to bolster generation during peak-demand periods and mitigate blackouts. Finance Minister Enoch Godongwana said last month the government simply doesn\u2019t have the money.<\/p>\n
Longer term, De Ruyter\u2019s successor will have to navigate a political minefield when replacing almost half of Eskom’s current installed capacity that\u2019s due to be lost by 2035 as old plants are shut and boosting output to cater for even more demand.<\/p>\n
\u201cDe Ruyter needed more time to turn things around at Eskom,\u201d said Raymond Parsons, a professor at North-West University\u2019s Business School in Potchefstroom, west of Johannesburg \u201cThere are no quick solutions to the complex energy crisis and load-shedding situation.\u201d<\/p>\n