Why the new man at Eskom needs a backbone of steel and the eye of a hawk

.By Chris Bishop, Head of Programming at CNBC Africa

The new man charged with the devilish job of turning around South Africa’s state owned power generator Eskom may enjoy a merry Christmas next month, but can’t be sure of a happy new year.

Outsider Andre de Ruyter will take up his post on January 15 in a rudderless organisation, without a permanent CEO for eight months, struggling to keep the lights on and wallowing in debt ahead of what threatens to be a complex unbundling of Eskom this year.

“He will need a backbone of steel,” says James-Brent Styan, a journalist and author of a book on Eskom’s woes called Blackout. Many have questioned the appointment of a CEO from the struggling packaging outfit Nampak, but energy analysts agreed the new man could make a fair fist of the job in difficult circumstances.

“He will need the full support of cabinet and the full support of the ANC,”Styan adds.

In many ways de Ruyter has credentials for the job: at 50, he has youth on his side for a CEO job; he has 20 years international experience with coal-to-liquid giants and recent experience of cutting down debt at Nampak where he was CEO for five years. Yet, Eskom, with around 46,000 workers, may prove a very different package to Nampak with 5,600.

“He will have to deal with the faceless, nameless, politicians who will want to tell him what to do. In many ways his hands will be tied. He will be charged with the difficult job of running Eskom as a business while dealing with the politicians,” says Chris Yelland, an Eskom expert with EE Publishers.

“He has to find a way of providing sustainable electricity at a cost that the economy can afford.”

The new CEO’s biggest task will be to cut down Eskom’s debt estimated at about R450 billion and proving a hazard to the power generator securing new credit lines in the world money markets. Yelland says the power generator is servicing a mere 47% of this debt. Any attempts to cut jobs at Eskom are likely to be opposed by powerful unions.

“The problems are going to be massive and immediate,” says Yelland.

“Ït is going to take de Ruyter at least six months to come to terms with the bureaucracy at Eskom and the very complex paperwork that goes with the procurement system,” says Styan.

Styan also says the cutting of coal, staff and interest costs will loom large on de Ruyter’s desk when he starts work in January, but all of this will be dwarfed by the difficult task of unbundling Eskom into transmission, generation and distribution units. This has been promised by the politicians as the first step towards curing lumbering Eskom’s ills, but is long overdue.

“Ï think it is going to take the new man at least six to eight months to get to grips with this,”says Yelland.

All agree de Ruyter needs the eye of a hawk for his new job. Eskom has seen a dozen CEOs in the last decade – all have struggled to deal with Eskom’s complex issues. It is unlikely to be a happy new year for anyone at the national power generator.               

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