Business Maverick


After the Bell: Shock findings (not) — Eskom’s management structure is a mess

After the Bell: Shock findings (not) — Eskom’s management structure is a mess
From left: Adobe Stock | Unsplash | Eskom’s Arnot coal-fired power station in Mpumalanga. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

The basic finding of a 600-page report into Eskom by a team of German experts is that Eskom’s management structure is a complete and utter disaster.

A report on Eskom submitted last year by the German VGBE consortium to the Treasury was released on Friday. The 600-page report was commissioned as a condition for Eskom to receive its R254-billion bailout by the Treasury. It was done by representatives from Dornier Power and Heat, KWS Energy Knowledge, RWE Technology International and Steag, which somehow results in the abbreviation VGBE. Don’t ask me how.

After reading the report, I can’t understand the Treasury’s reluctance to publish it — it’s an excellent piece of work, as you might expect from industry leaders. More than that, its conclusions are a little surprising. But it’s valuable because it provides a very unusual, external and independent view of Eskom’s problems. Its basic finding is that Eskom’s management structure is a complete and utter disaster.

But before we get there, allow me to quickly indulge in a little national stereotyping. Can you imagine what a group of German experts with, how should we describe it, a slightly Teutonic predisposition, marching through SA coal power stations would think when they looked under their bonnets? I suspect that they were rather gobsmacked at the piles of ash, the water flowing freely from the ceilings, the mist from broken valves and the general lack of housekeeping.

Now and again it slips out of the report. Below, for example, is a photograph taken at Camden Power Station in Mpumalanga, showing a valve spouting water.

after the bell eskom

(Photo: Supplied)

And below is the boiler room at Arnot Power Station in Mpumalanga showing a huge build-up of ash.

after the bell eskom

(Photo: Supplied)

The report says, with an obvious attempt to not splutter a string of German expletives, “Based on what we saw during the site visit, housekeeping at Arnot is very poor. Clearly, the de-ashing of the plant has not been undertaken for a long time, resulting in massive amounts of ash everywhere on 0m level. During the visit, no effort was made to improve the situation by cleaning”. Ergo, not even the presence of a team of international inspectors could motivate the staff to bring in a vacuum cleaner, although the report says some cleaning work was done later.

‘Power to the plant managers’

Given the parlous state of SA’s coal power plants, the overall recommendation of the group was something of a surprise; that much more power must be handed over to the managers of the power plants themselves and removed from the restricting, frustrating and claustrophobic oversight of Megawatt Park.

The problem, the report says, is that the working atmosphere has been “characterised by indifference, ignorance and blame-shifting has been fostered in many areas”.

The main objective of the coal fleet investigation was to find reasons for the low Energy Availability Factor (EAF) of the coal fleet — 50.83% as of April 2023 — and to develop measures to improve the situation. The EAF of Eskom’s coal fleet is currently at about 51%, whereas international benchmarks are in the range of 78%.

And here is the crucial finding: “The main root cause for the low EAF is the dysfunctional management system of Eskom. It is characterised by inefficient processes — especially in procurement — a lack of authority and an opaque decision-making structure. The plant management, with its limited authority and high level of interference from the headquarters, is unable to focus its attention on its primary responsibility: reliable plant O&M (operation and maintenance). Currently, even a mediocre level of performance (eg, EAF) is accepted as sufficient.”

What the report points to is a huge decline in the operational efficiency of almost every single one of Eskom’s plants. It’s not that the plants are not operating; it’s that they are operating at around 40-50% of their technical capacity, and, as it happens, their historical performance. 

“The quality of operations has suffered from a lack of ownership and leadership, as well as a lack of training and high staff turnover. The planning and execution of maintenance work need to be more stringent, more goal-oriented and more carefully executed.” Gotta love German values.

‘Dump EAF focus’

The report says the intense focus on EAF should be dumped because it’s forcing plant managers to keep the plants going despite the need for maintenance. Many of these plants are 50 years or older, so they need careful and frequent maintenance. Obvs. But that isn’t happening, the report finds.

“The fixation on the EAF must come to an end. The focus should be rather on partial load losses (PLL) reduction as this would address a key technical source for the low EAF,” the report says. Just by reducing PLL, Eskom could find an extra 6GW, it finds. What causes partial load losses? The list is long and could be anything from the generator to the cooling plant, to the turbine, and so on. Complex business running a power plant… 

One of the big problems here is procurement. The report mentions that it takes six months to get permission to buy something. The fact-finding team obviously thinks this is completely nuts. Even during the procurement process, they discover lots of weird things take place. There is, for example, no prequalification process, so each tender has to go through a lengthy evaluation process.

The pay-off process

All I can say to this is: Germany, welcome to South Africa. I suspect that what happened here was the mandarins of Megawatt Park didn’t want the provincial louts buying things they might need, even the things they needed desperately because they wanted to be the ones being paid off by tenderpreneurs. They also didn’t want the acknowledged and internationally reputable suppliers to be prequalified, because that would mess up the whole pay-off process. I’m willing to bet that former Eskom boss Matshela Koko wasn’t the only one to allegedly pocket billions in tenderpreneur payoffs. 

Whatever the case, it’s very hard to argue with the general point that plant managers are closest to the problems and therefore should be closest to the solutions. If they are responsible and honest, they should have the power to order quickly what they need from a genuine supplier and not some bogus fly-by-night operator.

Skills assessments

One other issue surprised me. The team tested plant managers. They did that. Kudos to them because this is what we want to know: are these plant managers up to the job? The answer is a bit yes and a bit no. The managers who took the tests all passed easily. It just shows that there are real skills out there.

The problem is that about a third of managers refused to take the test. I mean, WTF? Shouldn’t that be an instantly fireable offence? Is that not gross insubordination? How can you be a manager and unilaterally decide you are not taking part in a skills assessment? If you are not prepared to take the test, you are obviously going to fail, so you shouldn’t be part of the organisation, let alone the management layer.

And on this subject, there is another thing. The unions, of course, refused to allow shop floor staff to be tested. Once again, Germany, welcome to SA. Accountability is not taken seriously enough here to require people to do what they are paid to do. 

Inflated maintenance budgets

There is one other very important point: this is not a money issue. The group found that the maintenance budgets for the period 2013 to 2027 were well above the international benchmark; in some cases, hugely above international benchmarks, 50% and more.

The findings also support private-sector involvement. This is partly drawn on experience at Kusile Unit 4, which is operated by the boiler’s original equipment manufacturer (OEM). It has an EAF of above 90%. I am not making this up.

The report also makes important findings on coal procurement and recommends an interim team of external experts be hired for a couple of years to report directly to the Treasury. Good luck with that idea is all I can say. 

Sadly, the report does not deal with one issue that still worries me: the overall staffing levels at Eskom, which seem massively too high. I guess this is one of the reasons for Megawatt Park being such an impediment to any real action being taken quickly on the ground. There are just too many people trying to look busy and spending their days in endless meetings that achieve very little while conveniently living in Sunninghill. I think the report could have addressed that issue a bit more head-on.

But overall, I think SA owes these German experts a debt for their honesty, practicality and professionalism. SA can repay that debt by putting the recommendations into action quickly. DM


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