Andre de Ruyter was appointed CEO of Nampak in April 2014 and inherited a ‘dogs breakfast’ of a company that had expanded into Nigeria and Angola, incurring massive dollar-based debt ahead of a collapse in the price of oil, on which these countries relied. This left Nampak with a net debt ratio of 73% in 2014.
Under his watch the diversified packaging company has not shot the lights out. The share price has slumped 84% over the past five years to R7.35, well off the R42 it was when De Ruyter took the reins.
To be fair, he could not have joined the company at a worse time. Aside from the fact that Nampak’s home market of South Africa has experienced flat growth for the past 10 years, a year after he joined Nampak the oil price went into free-fall, which all but collapsed the economies of Angola and Nigeria – where Nampak had just built two big manufacturing plants.
These countries then imposed dollar rationing, preventing Nampak from repatriating profits and loan repayments for investment elsewhere. This starved the company of much-needed funds to service debt and put paid to further expansion, with predictably dire results for the group. Zimbabwe has also been rationing foreign currency for years, making it impossible for Nampak to service loans and to repatriate any funds out of that country.
As a result Nampak suspended dividends in 2016, which have not resumed. These efforts resulted in the net debt ratio dropping to 37% at the end of the financial year in September, before climbing back to 52% at the interim period in March.
The recent sale of the company’s poorly performing glass business will help to shore up the balance sheet and possibly return some cash to long-suffering shareholders.
After weeks of government spin that President Cyril Ramaphosa himself would announce the new Eskom group chief executive officer, in the end the news broke in a statement from Public Enterprises Minister Pravin Gordhan.
De Ruyter, a surprise appointment since not many people outside the formal process even knew he had applied for the job, will move from packaging company Nampak to the power utility from 15 January 2020, the department of public enterprises said on Monday, in a long-awaited announcement.
Widely expected to get the nod for the job was Krugersdorp-born Andy Calitz, who had started his career at Eskom before joining Shell in 1996. He was most recently was CEO of LNG Canada, a liquefied natural gas joint venture between Shell, PetroChina, Mitsubishi of Japan and the Korean Gas Corporation.
Among the 142 candidates that had applied for the job were former Eskom group capital executive Dan Marokane, who has been working for Tongaat Hulett for the past two years.
Daily Maverick understands Marokane will this week be added as an executive director on the board of the sugar producer, where he may be groomed for a future senior role.
Marokane left Eskom in July 2015, after being mysteriously suspended with three other executives in March 2015 by the board then led by Zola Tsotsi, who later told parliament he had acted on the instructions of former president Jacob Zuma. They were all later cleared without being charged.
Politically, there had been pushback against Calitz from certain circles within the ANC, with some factions said to prefer a black CEO.
Daily Maverick reliably learnt the De Ruyter’s selection, and Monday’s announcement was linked to a last minute change of mind in senior government circles.
The 142 candidates who either applied or were headhunted, included eight current Eskom employees. Seventeen were short-listed, but eight withdrew from the race, leaving nine. Of the nine, the Eskom board interviewed six and shortlisted four candidates to undergo four competency tests.
“The final interview process was undertaken, after which the panel ranked three candidates… After further interviews, a list of three candidates, with the indication of a preferred candidate was submitted to the shareholder [government]… The president appointed a team of Cabinet ministers to consider the board’s recommendations. The ministers concurred with the board’s recommendation,” said the department of public enterprises in the statement.
Daily Maverick has been reliably informed that the cabinet committee comprised four ministers. Those were Gordhan, under whose political responsibility Eskom falls, mineral resources and energy minister Gwede Mantashe, trade and industry minister Ebrahim Patel and Thoko Didiza, the agriculture, land reform and rural development minister.
Mantashe’s department is responsible for setting the country’s energy policy that Eskom must implement while reporting to the public enterprises department.
Finance minister Tito Mboweni, who chaired the Nampak board that hired De Ruyter in 2014, was not part of the committee.
The ministers met two of the short-listed candidates in person, while London-based Calitz was interviewed electronically, said sources close to the process.
De Ruyter takes over from Eskom board chairman Jabu Mabuza, who has doubled up as CEO since August 2019 following the departure of the previous CEO, Phakamani Hadebe. Officially, ill-health was cited as the reason for his departure.
When the 50-year old De Ruyter resumes South Africa’s worst CEO job in January, he will hope to stay on the job much longer than all 12 of his predecessors who have occupied the position since 2007.
None of them have lasted more than three years, with Brian Dames having had the longest tenure between 2010 and 2013.
Over the past 12 years Eskom has been the place where executive reputations go to die.
A combination of undue political interference from the government and maladministration by the board (appointed by the public enterprises minister), or the incumbents making themselves guilty of corruption and State Capture, has prematurely ended the careers of those who came before De Ruyter.
Many of the executives stand accused of facilitating the corruption that enabled the Gupta family and their associates, including global management consultancy McKinsey and Trillian Capital, to milk the utility of billions in bogus contracts that added no value.
As the largest single entity in terms of revenue generated in the country, with the inherent huge procurement expenditure, Eskom has always been vulnerable to external interference with the aim of influencing the procurement decisions. It was the last frontier of State Capture perpetrated by allies of former president Zuma during the years from 2010.
But at least two people who previously worked with De Ruyter at Sasol, and spoke on condition of anonymity, say he is the kind of person who does not take nonsense from anybody. De Ruyter spent 20 years at Sasol, ending up as head of the chemicals business.
“He’s not a pushover by any stretch, he’s tough. Very fair and rationale,” said a current Sasol employee. “He oversaw global chemicals portfolio, and he was involved from the very beginning with the cracker plant in the US.”
The person says De Ruyter’s “capabilities as a leader are on the high end of the spectrum. He had a massive portfolio by the time he left, and he was selling the product all over the world. He has an eye for nuance.”
A former Sasol senior manager says the group’s former CEO, Pat Davies, wanted De Ruyter to succeed him when he stepped down in July 2011, but that he was overruled by the board led by Hixonia Nyasulu at the time.
“He’s probably one of the most impressive leaders I have worked for. There’s not a hint of scandal about him, and he will not stomach the faintest scandal and interference,” said the former senior Sasol manager. “Andre’s very strong. He was very well regarded at Sasol, and is an incredibly bright businessman.”
In his last years at Sasol, De Ruyter was head of the petrochemicals side of the business and was responsible for the group’s operations in the US, where Sasol is building a massive ethane cracker and gas-to-liquids complex. He was involved in the conception of the plant, but left for the CEO of Nampak before construction commenced. “He’s an astute businessman, with a very strong moral centre,” said the source. “Of course he had a very tough time at Nampak, with all those issues in Nigeria.”
One of the representatives of the trade unions organising employees at Eskom, however, is lukewarm and prefers to adopt a wait-and-see attitude.
“We don’t know him that well. What worries us is the perception that black executives are being ignored and that transformation is being reversed at present,” said Zwelinzima Vavi, secretary general of the South African Federation of Trade Unions (Saftu), whose affiliate Numsa is one of the two largest labour representatives at Eskom.
Vavi said, ideally, Saftu would have preferred an internal candidate from within Eskom, “but we are aware of the ravages of corruption at Eskom and therefore there might not be suitable internal candidates due to the corruption. We want a capable candidate to run Eskom.”
Vavi is one of the many stakeholders who have an urgent to-do list. The federation wants De Ruyter to lead an open discussion about Eskom’s outstanding R450 billion debt that will include all trade unions and all stakeholders.
“There must be an open discussion about what must be done about the debt, and we feel that the R59 billion (bailout) over the next three years might not be a sustainable solution,” said Vavi, adding that Eskom must take the lead position on investing in renewable energy. “We want Eskom to remain in the government hands.”
Business Leadership SA (BLSA) also “cautiously” congratulated De Ruyter on the appointment and added its own to-do list for him to tackle urgently.
“As organised business, we see your appointment as a vital step towards stabilising the outlook for energy availability in Africa’s largest electricity company after more than a decade of instability in the institution,” said the leadership of the organisation. “You walk into the job with the first order of business being to empower the good men and women in Eskom to stabilise the energy grid.”
While Eskom focuses on stabilising the energy grid, “there’s the pressing matter of dealing with the company’s debt as it nears the half a trillion-rand mark…Financial stability is as urgent a crisis as the operational challenges.
BLSA said through De Ruyter’s experience and expertise, it anticipates that he will quickly grasp the operational and financial issues facing Eskom and gain the respect and trust of the most important people within Eskom.
Like Saftu’s Vavi, BLSA advised that Eskom’s operational and debt restructuring must “not be shrouded in secrecy as this serves to raise the anxieties of stakeholders about the long-term future of one of the country’s most important institutions. These anxieties have provided rich fodder for political contestation.”
Honest conversations about the timelines in which load shedding will be dealt are needed, said BLSA. This must “be understood as some of the pain we have to endure because of past failings.”
With contributions by Marianne Merten and Sasha Planting