The real reasons why Eskom is a total mess

South African households and businesses are once again suffering due to load-shedding, with Eskom unable to generate enough capacity to keep the lights on.

Apart from the inconvenience to South Africans, energy expert Chris Yelland said load-shedding costs the country around R2 billion per day.

With an already struggling economy the country cannot afford problems with its electricity supply, which is the backbone of any modern society.

President Cyril Ramaphosa described Eskom’s problems and the return to load-shedding as “quite a shock” and “most worrying, most disturbing”.

The troubles at Eskom should, however, not surprise anyone considering the corruption, lack of skills, incompetence, and vandalism which have gutted the once great company.

How Eskom was broken

South Africa has a history of being one of the world leaders in electricity adoption and production, and by the end of 1990 it was supplying more than half the electricity in Africa.

Eskom also became a highly efficient electricity producer and in its 1994 annual report it promoted the fact that it was the world’s lowest-cost producer of electricity.

However, this once stable, efficient and well-run power producer was broken by years of mismanagement and corruption, especially under the Jacob Zuma presidency.

With a debt burden which already exceeds R400 billion, the company is technically bankrupt and is seen as the single biggest risk to South Africa’s economy.

Eskom CFO Calib Cassim confirmed that Eskom is the biggest ever financial calamity faced by the government.

The damage done to Eskom

In 2008, Eskom was still functioning fairly well, with low electricity costs and a manageable and competent workforce.

This, however, changed quickly under Zuma and Eskom became – as Ramaphosa described state-owned enterprises – a “sewer of corruption”.

In recent years Eskom became known for gross mismanagement, which energy expert Ted Blom said has cost South Africa R1.4 trillion.

Blom said the ANC government employed people who do not know what is going on, and that the ANC is not prepared to look outside of the party for people with the required skills to run Eskom.

Although Ramaphosa has been trying to fix the broken state-owned enterprise, he has employed people without any experience in the energy field.

Eskom Chairman Jabu Mabuza and Eskom CEO Phakamani Hadebe are newcomers to electricity production and therefore lack the depth and experience to run such a complex organisation.

The graphic below provides a comparison of the leaders of two large international energy producers against Eskom’s CEO.

The difference in experience in the energy and power production fields are obvious, and it should not be a surprise that Eskom is struggling.

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Big increase in cost without any improvement

Apart from the lack of skills, Blom said the average employee at Eskom gets four-times more than what they should be earning.

Although Eskom’s employee bill nearly tripled over the last decade, the company is now selling less electricity than what it did in 2008.

The image below provides an overview of how Eskom has fallen over the past 10 years.

Now read: Why load-shedding is back

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The real reasons why Eskom is a total mess