South Africa

JOBURG INDABA

Eskom must get its ducks in a row or else ‘organisational culture’ will sink the business, De Ruyter tells conference

Eskom's Group Chief Executive Officer André de Ruyter. (Photo: Waldo Swiegers/Bloomberg via Getty Images)
By Ed Stoddard
08 Oct 2020 11

André de Ruyter has been shaking up the lethargic culture at the state-owned power utility, and for good reason: if the status quo is maintained, we all might as well stock up on candles and braai wood now.

Eskom’s group chief executive officer, André de Ruyter, told the Joburg Indaba mining conference that the utility’s “organisational culture” would sink the business if things did not change. This includes the fight against corruption, and Eskom remains in pursuit of those who enriched themselves while running the SOE into the ground. Oh, and its debt needs to be cut by more than half to R200-billion. 

De Ruyter has been shaking up the lethargic culture at the state-owned power utility, and for good reason: if the status quo is maintained, we all might as well stock up on candles and braai wood now.

In a keynote address on Thursday to the online Joburg Indaba, organised by Resources 4 Africa, the CEO made it clear that a metamorphosis in culture was well underway at Megawatt Park.

“If we continue to leave Eskom’s organisational culture unattended, this has the potential to sink our business and severely compromise our value-add to the country,” he said.

Addressing this had included “the implementation of consequence management and disciplinary action for the failure to discharge critical duties in a quality manner”. In layperson’s terms, that means if you don’t perform, you will be shown the door. In September De Ruyter suspended two power station managers in the wake of Stage 4 load shedding for “apathetic behaviour”, so this is not just posturing. 

“Irrespective of the investment made to develop plans and strategies, none of these will amount to anything if we do not have the right business culture. Having said so, let us also appreciate that organisational culture is not something that we are going to transform overnight and that there is no single silver bullet that will bring about the desired changes,” De Ruyter, seated before impressive shelves of books, said into the camera.

Carrots are also being used alongside the sticks. De Ruyter said he spends 90 minutes every week talking “to employees who have distinguished themselves with their contributions to Eskom”.

Of course, one of the biggest threats to Eskom has been the culture of corruption which saw the utility looted during the era of State Capture.

“We have also made efforts to reverse the rot of corruption. The issuing of summonses against 12 defendants (in this case, former Eskom employees and board members) associated with State Capture is a critical step in this effort,” De Ruyter said. This was in reference to the civil suit launched in August to recoup R3.8-billion that was allegedly diverted to help the Guptas purchase Optimum Coal. Key defendants in the case include former CEO Brian Molefe and former CFO Anoj Singh.

And there is more to come on that front.

“We will continue to pursue those who have sought to enrich themselves at the expense of Eskom, and are about to step up our legal processes to deliver these outcomes,” De Ruyter said. So there may be more alleged Eskom agents of State Capture out there having sleepless nights. 

Changing the culture is also aimed at improving the company’s financial performance. Everything about Eskom is always mega, and not just watts. De Ruyter also said that, “Focused actions to address Eskom’s balance sheet are in progress. Our financial modelling illustrates that Eskom can only achieve independent financial sustainability if its debt balance is reduced to R200-billion, a closing cash balance of R30-billion, and an EBITDA [earnings before interest, taxes, depreciation, and amortisation] margin of 35%. Our debt was a staggering R488-billion as at end-March 2020; as you may imagine, the interest bill on this is unsustainable, and requires us to borrow money to pay interest.”

So, to be viable the company has to cut its debt by more than half from nose-bleed levels. That underscores the scale of mismanagement under the culture of impunity that is now in for a shock.  

De Ruyter noted that, “It is clear that a structural solution must be found.” It is not just apathetic managers on the chopping block. DM/BM

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All Comments 11

  • You have to admire André for taking on this assignment. I imagine the push back against his cultural adjustments has already begun. Where can the almost 300 billion come from? The only route I can see is if the Global green lobby is asked to pay for the pleasure of taking ESKOM coal stations out of commission and the energy supplied by outsourced renewables instead.

  • I rate this man… The culture of lethargy and apathy at Eskom is visible throughout their power stations and has been for many years. Good on him for addressing it head on!
    Strange that since he suspended the 2 power station managers there has been no load shedding?? HMMM?? Keep it up Andre, I wish you luck and I hope you will be there long enough to REALLY fix the problem.

  • I just hope he can withstand the pushback from the vested interests. All SOEs have been used for socio-political purposes and enrichment, since the ANC took over. This will not be easy to change, but I wish him all the best. If he fails, we all fail.

  • All South Africans appreciate you and your love for this country. Without electricity we are well stuck. You make us proud.

  • I take note of de Ruyters positive approach but it is still very populist. Bad Management, corruption Gupta’s, Molefe (Missing Mr.de Koko though who signed the Mine deal), state capture. There are however many other issues in ESKOM which he avoids as they are so “Political Sensitive”. Bad management is a direct result of “Blind BEE enforcement”, while the BEE youth promoted to senior position is trying hard but they are totally out of their dept and make horrible and very costly management mistakes and we better start realizing that and bring back the “Old Guard” to help them. The ridiculous artificial culture of top management salaries of many millions in a “Virtual Bankrupt” company (And that goes for many state and para-statal companies). It will not save a lot but it is the principle that counts. (Low basic and RESULT related bonuses based on multiple years assessment not one years and the next years a massive loss but the previous bonus is in the bank – should be the rule). Then the collection of Municipal debts. The municipalities used the customers moneys to line their pockets and own ESKOM mega billions. It’s employment, ANC/tri-party alliance and election (Power to rule) sensitive so he is not touching that. The “Federal state to set budgets for municipalities annually and then straight deduct a portion which goes straight to the debt to ESKOM. (Needles to say that also the Municipal management is greatly suffering from the BEE debacle – which basically resulted in “Throwing the child away with the bath water”). De Ruyter must indeed go on but avoiding the sensitive political issues will not sort ESKOM out. He must place these issues at the feet of President Ramaphosa and his team of (Even there) questionably skilled Ministers as they must clear a path for de Ruyter to tackle these sensitive but crucial items without “Political reprisals”. It can be done and they are on the right path but if thing result in wishy-washy none effective decision like at SAA – WE WILL GO NOWHERE IN THE END

  • When will we accept that Eskom will never be fixed? The best that we can do is keep it limping along until privately funded and managed, renewable, decentralized energy sources come on stream. Then let it die!

    • Exactly ! Which is of serious concern . Then I thought you were talking about SAA 🙂
      With all due respect , the basic problems with ESCOM are pretty much in the public domain .
      Though more may surface through the cracks and turn ‘states evidence’ 🙂
      Apart from drowning in debt and no other source being the user/taxpayer .
      The same old spiral down , those that can seek alternatives .
      I have stocks of candles /wood etc . Gas water heaters , next is a small solar set up , with a wind generator for back up 🙂 A few batteries for night time .
      Moving on , wind farms do not erect themselves , or the earth spu coal .
      If set free , would still take 6-12 months for that to have any effect . Minimal at best .
      Coal ? Power plant ?
      LOL , even when the 2 big guys actually run at capacity , will still be at a loss ! Just running costs !
      It will die its own death 🙂

  • Changing culture in large, long established, multi divisional organisations is very, very difficult. It requires the establishment of a critical mass of executives and managers whose values align with the desired future culture. This requires decisive hiring, firing and promoting. The bureaucracy and politics surrounding these decision in SOE’s, severely undermines the authority of the CEO and therefore slows the pace of change.

    Wishing Andre every success with this extremely challenging task.

  • It is going to be a tough job to change the culture in Eskom but unless he has the full support of Government, it will not happen. Whilst the culture must change – not only at Eskom but at all SOEs – without competent and committed persons in management, Eskom will fail. At least we are beginning to hear the right pronouncements from de Ruyter so we can only hope it goes well. When we read of previous management behind bars I will be more optimistic.