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In conversation with Eskom's André de Ruyter

South Africa

BUSINESS MAVERICK INTERVIEW

In conversation with Eskom’s André de Ruyter

Chief Executive Officer (CEO) of Eskom, AndrÈ de Ruyter, speaks during an interview on November 15, 2021 in Johannesburg, South Africa. It is reported that civil and social activists have questioned AndrÈ de Ruyterís capacity to rescue the energy supplier from its current crisis, which has seen the country plunged into rolling blackouts. (Photo by Gallo Images/Rapport/Deon Raath)

Reforming a state-owned enterprise that had become bloated, complacent and in some instances corrupt is no easy task. What have been the major successes and milestones of 2021?

André de Ruyter: Managing an organisation that has been hollowed out by capture and corruption, with a high cost base and numerous operational inefficiencies, was always going to be a tough challenge. This challenge has been made even more daunting [because of] the fact that Eskom, as a state-owned enterprise, operates in an ecosystem where many of the levers normally open to private sector companies simply are not available. As an example, based on a shareholder directive, we have not implemented any forced retrenchments. Within these constraints, workforce optimisation is only one of the mechanisms available to management. In this regard, over the past two years, Eskom has reduced its staff complement from 46,665 in March 2020 to the current 42,749. That is a reduction of 3,916 employees – all through voluntary separation packages and natural attrition. A substantial number of these departures have been management-level employees, whose cost to company is multiples of shop-floor workers. This has resulted in improved efficiency, and an organisation significantly less bloated at the top. In addition to this, management-level employees have received neither bonuses nor salary increases for more than three years.

The single biggest achievement, however, has to be Eskom reducing its outstanding debt by R81.9-billion during the financial year ended March 2021 to R402-billion.

 DM168: And on the other side, what are the biggest setbacks you have faced in 2021?

AdeR: The biggest setback is the increase in load shedding, particularly after the high-demand winter period, where increased boiler tube leaks hampered production. Very concerning, though, was an increase in suspicious breakdowns.

We have also been unable to find a solution to ballooning municipal debt, in spite of efforts made by the Political Task Team led by the Deputy President. The culture of nonpayment has resulted in municipal debt now amounting to R42.5-billion, equal to 10% of our total debt. This is an unsustainable situation that needs to be resolved urgently, as Eskom cannot continue to fund delinquent municipalities.

 DM168: The discovery that insiders are deliberately sabotaging Eskom infrastructure to either earn kickbacks or simply to prevent Eskom from carrying out its work must count as one of the lows of the year. It’s cancer destroying the organism from within. How extensive is this problem and how difficult will it be to extricate?

AdeR: I must say that the overwhelming majority of our colleagues are honest, patriotic and hard-working people. But there seems to be a small but influential group of people who are intent on achieving their own selfish ends at the expense of South Africans. A firm and swift response by the law enforcement agencies, and our ability to see perpetrators of crime behind bars, will go a long way to counter the culture of impunity that has been created.

To counter acts of criminality and sabotage, we have stepped up our overt and covert surveillance, deployed drones that fly at night with infrared cameras, bolstered access control and security, and improved our intelligence-gathering capability. This has had some impact, but criminal acts continue – this week, 1,500m of cable was stolen from inside Hendrina Power Station. It is difficult to see how this can be done without significant internal collusion.

Of course, I am trying to run an electricity utility, not a law enforcement agency. To bring an end to these venal acts we require a united assault on criminal actors, where all role-players are equally committed to halting these acts of sabotage.

 DM168: You have been CEO of Eskom for almost two years. In that time we have seen repeated salvos fired at you by your detractors. It would appear that once again, the heat is rising. Is your personal safety under threat? And why are you once again in the hot seat?

AdeR: Closing the taps on people taking money out of Eskom is never going to make me popular. That is one of those things that come with the job. I was never under any illusion the job would not be tough, and that it would not require intestinal fortitude. As I have said on numerous occasions, my team and I have a job to do to turn around Eskom. And for as long as the Board has confidence in me, I intend to do exactly that.

 DM168: You have spoken in the past of turning an ageing, heavily polluting fleet into an opportunity to embrace a “greener electricity industry”. What is your vision for Eskom? What will it look like a decade from now?

AdeR: Eskom and South Africa have a unique opportunity to embrace the world’s readiness and ambition to significantly reduce global warming by increasing investments in renewable energy sources, and the significant concessional funding available to facilitate the Just Energy Transition. This is not only an Eskom plan, it is also in line with the Department of Mineral Resources and Energy’s Integrated Resource Plan 2019, which calls for a significant increase in investments into renewable energy sources.

This transition will have to be achieved in a just and sustainable manner. We have to address the very legitimate concerns of those who have invested in the coal value chain by aligning our energy, industrial, fiscal and environmental policies to ensure that we can use this crisis to pivot to a sustainable electricity industry, reliant on locally manufactured components where we have competitive advantages. As a utility approaching its centenary, we have a moral obligation to ensure that the communities that have been the backbone of Eskom for so many years do not become ghost towns.

 DM168: Do you have the necessary political and trade union support to achieve this vision?

AdeR: We have no doubt about the support of key government departments, ministers and the presidency for Eskom’s Just Energy Transition. Of course, there will be debates about the nuances of policy implementation, but directionally, there is general alignment across the Board.

 DM168: Coming to the immediate future. What are your top three priorities for 2022?

AdeR: For 2022, Eskom needs to do much better in Generation. As we catch up on the backlog of maintenance, we still score own goals, which we have to prevent through better management. I would also like to see a resolution to the perennial issue of municipal debt. We cannot continue to pay interest on money that we can’t recover from our municipal customers, and a structural solution is now required. Lastly, I would like to see substantial progress regarding the Just Energy Transition. We have good opportunities to connect new capacity to our existing transmission grid, particularly in Mpumalanga, and I am keen to see our first projects getting off the ground.

 DM168: What can we expect in terms of load shedding in 2022? Will Eskom be able to stabilise the performance of its generation fleet and halt the decline in its energy availability factors?

AdeR: As we work to overcome the backlog in maintenance, and improve our own performance by avoiding own goals, we want to reduce the risk of load shedding. However, we will have both Koeberg units out on consecutive 150-day outages for most of the year, and the 920MW reduction will have an impact on overall energy availability. To reduce the risk of load shedding, we look forward to 2022, when the first investors take advantage of the 100MW licensing dispensation announced by the President, which will add capacity to the national grid. DM168

Zapiro-2021
Gallery

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All Comments 8

  • It’s clear Andre’ De Ruyter sees his job as calling. There’s never a bemoaning of difficulties (ala-Fikile Mbalula, etc), just a consistently clear & dispassionate outline of objectives to get the job done. Whatever the outcome (26 years of ANC misrule, greed & incompetence may yet prevail) Andre’ De Ruyter stands head and shoulders above the very best of SA leadership, if not the world.

    • There are many leaders of his caliber in the private sector. If all SOE’s are forced to only employ people with an exceptional private sector track records in executive positions things might just be turned around in a decade. But the ANC prefers to deploy cadres.

    • Well said Andrew. I have huge admiration for this man doing a thankless job with little or no support from the government.
      As a supplier to Eskom we have seen a small change in how they operate but still a long way to go. The legacy of state capture can be seen at every power station. I for one would support a cash injection from the state (actually us tax payers) to speed up the transition and allow him to at least have some chance of righting the stricken ship. If we don’t do that, we are all sunk.

    • Andrew:

      You have fallen for the total nonsense Eskom and by extension it’s CEO put out.

      By 2024 it will be cheaper and more reliable for factories in SA to run permanently on diesel. Basically same as Zambia and a few more countries.

      DeRuyter is clueless on what users actually pay. He thinks we pay 105c/kWh.

      Clown

  • Best CEO Eskom has had for along time.
    To solve the municipal debt issue, the MFMA needs to be amended to ring-fence utility revenues so that the money can’t be misappropriated. Only once the debts have been paid and the infrastructure maintained, should any surplus be available to the council for other purposes. It can be done if there is the political will to do it.

  • Reading through the latest tariff application it is clear that DeRuyter is completely clueless about the lived experience of consumers.

    He devotes pages to claims that Eskom is so much cheaper than everywhere else. They use a figure of about 105c/kWh.

    My electricity cost after availability and energy fees is 379c/kWh. I am not unique, come and ask ten other factories and ten wine farms and ten fruit packets.

    Don’t tell me it is the council’s fault. My electricity cost is among the highest in the world already so it offends when ten glossy pages of his document harps about how cheap Eskom is.

    After his 20% increase and the next two increases my electricity cost will be just shy R6/kWh. Little consumer can run permanently on almost 1MW diesel generators for cheaper than Eskom can run its 40GW coal stations. Never mind cheapest in the world, Eskom is the biggest joke in the world.

    circus with a new clown.

    • Eskom would be an even bigger joke without de Ruyter. Increased electricity tariffs are a necessary evil. I am one of those consumers with a ‘lived experience’ of such increases and I have every confidence that the CEO is doing the best job he can under very trying circumstances. If de Ruyter is a clown then I for one am very happy to join the ‘clown club’.

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