It would arguably be easier for a novice cyclist to take on the Tour de France’s fabled Alpe d’Huez ascent than for the new leadership at Eskom to restore credibility. Besides load-shedding and extreme tariff hikes, the State-owned utility’s reputation has been all but decimated by allegations of corruption and maladministration. As Public Enterprises Minister Pravin Gordhan outlined recently, Eskom lay at the very heart of South Africa’s highly damaging ‘State capture’ era.
However, the current narrative of simply tarring the new leadership with the same brush as their immediate predecessors is neither helpful nor fair. True, the organisation has not yet been placed on a sound financial and operational footing and the immediate outlook is dire. True, the new leaders also feel that the utility’s case for cost-reflective tariffs has not been fairly adjudicated and will continue to seek further increases. True, the utility remains riddled with inefficiency and is, by its own admission, overstaffed. True, primary energy costs continue to rise, along with debt. True, not all those involved in the looting of the utility have been brought to book.
However, a decisive break from the past was undoubtedly made when then Deputy President Cyril Ramaphosa appointed the new board on January 20, after it had become clear that investors had lost faith in the incumbent board and executives. In fact, until the new leaders were introduced, there was a real risk that Eskom would run out of cash and would have its bonds suspended for having failed to produce interim results.
So, what has changed?
Firstly, there has been a dramatic shift in the mind-set around governance and corruption. Prior to the January intervention, Eskom’s default position was one of denial. Today, there have not only been some successes in recovering ill-gotten gains, but ten implicated executives have also left the organisation and 11 criminal charges have been laid. Investigations are ongoing and lifestyle audits are being carried out on executives and top-tier managers.
Secondly, and as importantly, Eskom is openly acknowledging that its business model is not likely to withstand the transition sweeping through the energy sector. This is a major shift from the previous argument that Eskom’s centralised, vertically integrated structure could be made “great again”. The new leadership accepts that it is Eskom that is going to have to adapt to the transition, rather than expecting the transition to adapt to it.
Lastly, despite seeking some further tariff recourse from the regu- lator, the new Eskom leadership has grasped that the consumer, the investor and the taxpayer can no longer been seen as bottomless pits of money. It’s going to be difficult, but the new Eskom accepts that further steep tariff hikes will simply accelerate its demise. That’s not to say there will be no further increases. However, a greater sensitivity will be shown, especially to those power-heavy firms that have either shut production, or are considering curtailments. Likewise, there is an acknowledgement that the previous journey to peak debt of R600-billion is simply unsustainable and that further reliance on a major taxpayer-funded bail-out cannot be discounted.
Things have undoubtedly changed. However, Eskom’s metaphorical ascent of Alpe d’Huez has only just begun.