The ANC should get out of Eskom. This is the message from analysts, former employees, and current managers who have the best interests of the company at heart.
The ruling party’s insistence on employing politically-connected people instead of skilled and experienced technocrats has seen mismanagement and corruption skyrocket at the company.
Its obsession with Black Economic Empowerment (BEE) and Affirmative Action (AA) – especially when implemented without putting skills first – has further damaged the company.
To fix Eskom the government should address the problems of poor management, corruption, skills shortages, a bloated workforce, and securing affordable and good quality coal.
Unless these problems are solved, not even the best strategy developed by the best-paid consultants will be of any value.
To better explain the problems at Eskom, here are prominent issues highlighted by commentators.
Poor quality coal
Energy and mining expert Ted Blom said new long-term coal procurement contracts to secure more affordable and better quality coal for Eskom are critical for the company’s survival.
This view is echoed by other commentators, who said Eskom is currently overpaying for sub-standard coal.
The coal problems are caused by a few factors, which include:
- No long-term procurement contracts, independent coal producers are charging Eskom high prices for coal.
- Coal producers export high quality coal instead of providing it to Eskom, as they get much higher prices from the export market.
- Pre-certification is done at the coal mines instead of at Eskom’s power plants, which means many providers deliver pool quality coal and even rocks to power plants.
- There is no strong action against independent providers who provide poor quality coals or rocks to power plants.
These problems are solvable if Eskom procures quality coal at reasonable prices on long-term contracts.
However, there may be a lack of political will to do this as connected individuals, including Eskom chairman Jabu Mabuza, profit from the current regime.
The photos below show rocks which were delivered to the Hendrina power station as “coal” by an independent supplier.
ANC’s poorly-implemented BEE and AA policies
The ANC’s poorly-implemented BEE and AA policies have cost the power utility dearly.
Eskom also held aggressive employment drives in the past where the main focus was on meeting its AA targets.
Instead of employing people with the right skills, Eskom managers were pressured to fill all vacant positions in a very short period.
These drives saw thousands of additional employees joining the company where their gender and skin colour were far more important than the skills they brought to the company.
Eskom also started to discontinue its long-term coal procurement and maintenance contracts with international companies as part of its strong BEE drive.
Apart from opening the door to wide-scale corruption, the empowered South African companies did not have the same skills or expertise as the international companies they replaced.
The results were disastrous. Eskom now pays more for coal and maintenance, with lower quality products and longer waiting periods for new parts and repairs.
Inexperienced top management
Blom recently stated that he has never seen a “bunch of amateurs” running a company as is the case with Eskom, calling for the board and top management to be sacked.
Blom said the ANC government employed people who do not know what is going on because it refuses to look outside of the party for people with the required skills to run Eskom.
Transform RSA President Adil Nchabeleng concurred with Blom, saying Eskom needs an experienced CEO with a strong engineering background and understanding of the energy sector.
Eskom CEO Phakamani Hadebe is a newcomer to electricity production and therefore lacks the experience to run such a complex organisation.
Some commentators told MyBroadband that Eskom should look outside of South Africa for an experienced executive to lead the company.