Eskom CEO Andre De Ruyter has shed light on the uphill battle he faces in cutting down on corruption at the state-owned power utility.
Speaking in an interview with the Sunday Times following the company’s financial results for the year ended 31 March 2020, De Ruyter said enforcing disciplined procurement processes at Eskom was a slow process.
Initiatives to enforce disciplined procurement processes often elicited allegations of corruption and wrongdoing from affected employees, he said, which was a common result of exposing their incompetence.
“It is the favourite card to play when you expose people for being incompetent or not doing their job,” De Ruyter said.
Sources at Eskom told the Sunday Times that procurement processes at Eskom have been highly irregular, and gave an example of the power utility having once paid R200,000 for a wooden-handled mop.
De Ruyter has said he is committed to fixing the company’s flawed procurement processes, both in terms of coal and fuel oil contracts and minor items.
Eskom released its year-end financial results on Friday 30 October, where it stressed the importance of increased electricity prices.
Higher electricity prices or bailouts needed
Eskom said it had experienced “significant operational and financial challenges” over the past year, which resulted in Stage 6 load-shedding during December 2019 and further financial assistance from the government.
Chief Financial Officer Calib Cassim unpacked Eskom’s financial position, which he said had improved owing to government equity support of R49 billion during the year and R56 billion allocated to the 2021 financial year.
But the company cannot rely on government support for survival, Cassim said.
“In order to address our unsustainable legacy debt, we either have to rely on bail-outs funded by the tax-payer, or improve our financial situation by NERSA allowing Eskom to charge cost-reflective tariffs.”
The latter option is the preferable one, De Ruyter said, considering the objectives of the Finance Minister’s recent mid-term budget.
De Ruyter said that management had made significant changes to arrest its operational and financial decline, including cracking down on money owed to it by municipalities.
“We have implemented assertive collection strategies against the largest municipal defaulters, which has resulted in a 17% increase in payment levels from these customers during FY21,” De Ruyter noted.
“This is one of the key areas that require a concerted effort if Eskom is to embark on a sustainable course. Every consumer of electricity needs to pay for what they consume,” said De Ruyter.
Eskom recently outlined its expectations for load-shedding going forward, stating that the implementation of long=term maintenance would lead to a continued risk of load-shedding over the next year.
He said that long-overdue major maintenance is being conducted, design flaws at Medupi and Kusile are being fixed, and the results of this are promising.
“All of this will contribute to a step-change in the availability of our generation system by April of next year,” De Ruyter said. “But this is not yet enough to eliminate the risk entirely of load-shedding.”
“There is more work that needs to be done but we anticipate that by September of next year, we will have been able to significantly reduce but not eliminate the risk of load-shedding going forward.”
This means that load-shedding will remain a threat throughout most of 2021, with any major disruption to the national power grid likely resulting in the need to impose rolling blackouts on the country.
Eskom COO Oberholzer echoed De Ruyter’s assessment of the importance of resolving the design defects at the Medupi and Kusile power plants.
“Moving forward, when we solve all the design issues that we do have at the new power stations, we will move quite a way towards getting out of this phase and reducing the risk of load-shedding,” Oberholzer said.
He also said the risk of load-shedding will remain until after the winter season next year.