Business Maverick

POWER CRISIS

Reuel Khoza: Appoint bold people to Eskom board who’ll resist government interference

Reuel Khoza: Appoint bold people to Eskom board who’ll resist government interference
Former Eskom chair Reuel Khoza. (Photo: Gallo Images / Sunday Times / James Oatway)

Reuel Khoza chaired the Eskom board from 1997 to 2002, a golden period for the power utility. Eskom had minimal to no debt on its balance sheet. Power cuts were not part of daily life.

Former Eskom board chair Reuel Khoza says the power utility’s new and restructured board should be composed of “solid and bold” individuals who can push back against the government’s interference in Eskom’s operations.

Part of Eskom’s downfall over the past decade can arguably be attributed to the interference by the power utility’s shareholder, the government (more specifically, the Department of Public Enterprises), which has, in some instances, overridden decisions by the board and executive team. In state-owned enterprises, the government’s role involves overseeing their financial sustainability and governance structures — not being involved in their day-to-day business.

“The shareholder should behave like a shareholder and not be part of management,” said Khoza, who was speaking on Wednesday, 28 September at a virtual leadership seminar organised by the Centre for Development and Enterprise.

“There should be a solid board [at Eskom] that can tell the government to not come in at all and get it to stay out. The government should be able to hold the board accountable at annual general meetings.”

Khoza, a respected businessman who doesn’t mince words when opining about governance failures in the public and private sector, chaired the Eskom board from 1997 to 2002. It was a golden period for Eskom. The power utility had minimal to no debt on its balance sheet. It was revered around the world for its engineering excellence. Eskom was rated favourably by credit rating agencies and could stand on its own without government bailouts. And at one point, Eskom paid out dividends to the government amounting to about R1.6-billion, providing income to the fiscus.

Efficiency

The efficiency of Eskom improved as its energy availability factor (EAF), which is a measure of its plants that are available to dispatch energy, reached 92.7%. A high EAF indicates that plants are well operated and maintained, helping the utility to produce electricity cheaper. And even with a staff complement of about 32,000 between the late 1990s and early 2000s (compared to a bloated head-count of 44,772 in 2021), productivity levels were high, says Khoza.

“Blackouts didn’t exist even with fewer resources at Eskom,” he recalls.

But today, power cuts are part of everyday life. Eskom is buckling under the weight of debt of nearly R400-billion that it cannot pay back through the revenue it generates from electricity sales. Eskom’s EAF has been on a downward trend for a decade, reaching 84.5% in 2011, falling further to 66.6% by 2020, and now languishing at 56.6%.

As South Africa suffers from nearly three consecutive weeks of power outages, the government is planning to restructure Eskom’s board, which has been criticised for its lack of engineering and power delivery experience. It is still unclear if the plan by Public Enterprises Minister Pravin Gordhan involves the entire Eskom board being replaced or some individuals being retained for continuity.

But the Eskom board, which was composed of six individuals for nearly two years, but requires 13, suffered a blow when Busisiwe Mavuso resigned from it on Tuesday, 27 September. This reduces the number of directors on Eskom’s board to five:

  • Professor Malegapuru Makgoba, the board chair, who is a qualified and experienced immunologist and physician;
  • Dr Pulane Molokwane, a nuclear physicist and an environmental specialist;
  • Dr Banothile Makhubela, a celebrated chemist and academic;
  • Tshepo Mongalo, a commercial law professor; and
  • Dr Rod Crompton, an expert in policy on energy.

Mavuso, a chartered accountant and the CEO of Business Leadership South Africa (a business lobby group), confirmed her exit from the Eskom board in a text message to Business Maverick which read: “I’m not an Eskom board member”.

Mavuso is outspoken and isn’t afraid to voice her displeasure over the government’s mismanagement of public finances, the economy and state-owned enterprises. She’s capable of challenging the government’s interference in the day-to-day operations of state-owned enterprises — a trait Khoza regards as important for individuals who will make the cut in Eskom’s new board.

Fixing Eskom 

Asked how he would fix Eskom, Khoza says beefing up the power utility with engineering, electricity generation and delivery skills at a board and executive level is a good starting point. He says the focus should be on recalling engineers and artisans who spent their ​​entire working lives at Eskom and managed to find employment opportunities around the world. But skilled professionals should be left to do what they know best: run power stations without interference from the government.

“South Africa has engineers that would be happy to be of assistance only if the government invited them to have their hands on deck. But often, engineers have been brushed aside.”

Khoza recalls that in 2018, he collaborated with other respected businesspeople to approach ex-Eskom workers, who are now working for power utilities around the world, and convince them to return to Eskom. The former workers were instrumental in maintaining Eskom’s power stations decades ago and could help stem the downward trend in the performance of generating units.

“They were willing to come back home to help. This was a substantial group of six people that are active, knowledgeable and experienced in an area of electrical engineering. We asked the government to recall these people. But we were brushed aside with gusto.”

The exodus of senior executives and directors at Eskom has contributed to its woes of not being able to keep the lights on over the past 15 years, also dragging down the economy and any potential to grow it.

Business Maverick’s count points to Eskom having 13 CEOs over the past 15 years. Over the same period, Eskom had eight board chairs, more than 60 directors on the board, and about 40 executives in charge of the power utility’s day-to-day operations. The count of Eskom board chairs and directors on the board will swell, given Gordhan’s review process of the current board. DM/BM

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