Eskom’s woes deepen as execs hits the exits

South Africa is world renowned for its exceptional mineral wealth and vast underground mining complexes, but one of the weakest links in the critical sector is national, state-owned electrical utility Eskom, whose deep operational and management troubles over the past few years have culminated in the last month with major turnover at the top of the organization.

It’s hard to understate the importance of Eskom to the South African economy, let alone its mining sector: Founded in 1923 and ranking as one of the world’s top-20 power utilities, Eskom generates 95% of the electricity used in South Africa and 45% of the electricity used in Africa. Most of this electricity comes from coal, with small contributions from nuclear and hydro.

And so comes the news that Eskom chairperson Zola Tsotsi has just resigned his post as well as his directorship, after a three-hour board meeting where he made a presentation to ward off a planned non-confidence motion against him. Ben Ngubane is now acting chairperson.

Tsotsi’s former colleagues had accused him of interfering with the executive and signing off certain documents on behalf of Eskom, thereby undermining the chief executive and other executive directors — charges Tsotsi refuted. 

South African President Jacob Zuma had already distanced himself from Tsotsi’s remarks that he had Zuma’s support when Tsotsi set up an inquiry to probe what he called the “rot” at the ailing power giant. The country’s large mining unions were also lined up against Tsotsi.

Tsotsi had been Eskom’s chairperson since 2011, overseeing a period of decline characterized by frequent rolling blackouts, large maintenance backlogs, labour strikes, unplanned delays in much-needed capacity expansion and a downgrading of its credit status to a “junk” rating — the latter being quite the feat for a national, government-owned utility!

A month ago the Eskom board suspended CEO Tshediso Matona, finance director Tsholofelo Molefe, commercial and technical head Matshela Koko and chief of capital projects Dan Marokane. The board said it had done so to pave the way for an independent probe into Eskom’s poor state of operational and financial affairs. 

Immediately after these suspensions, the South African rand plunged to its lowest level since 2002, the yield on Eskom’s dollar bonds due in January 2021 jumped to a record 6.76% and S&P cut Eskom’s credit rating to “junk” 10 days later.

Adding to the chaos are South African media reports that Eskom must decrease the number of skilled white employees by 3,389 (1,081 white engineers and managers, and 2,179 white tradespeople) to comply with South Africa’s strict new provisions of the Equity Act, with the Department of Labour insisting that Eskom make the changes to ensure its employee demographics reflect South Africa’s “national and regional demography.” 

Worsening skill shortages and worker competency are widely singled out as the leading cause of Eskom’s chronic inability to maintain and grow its power-generating capacity.

Eskom hasn’t built a major power plants since the 1980s, and its centrepice expansion project — the 4,764-megawatt Medupi plant — now is three years behind schedule.

With the large leadership vacuum at Eskom, South African Deputy President Cyril Ramaphosa is leading a group of ministers, government officials and industry specialists to address the country’s energy crisis, even as Eskom’s board remains in place.