/ 3 August 2008

Could he be Eskom’s godsend?

Eskom’s new chair Bobby Godsell says it is imperative to invest in the maintenance of key assets. Photograph: Lisa Skinner
Eskom’s new chair Bobby Godsell says it is imperative to invest in the maintenance of key assets. Photograph: Lisa Skinner

When Eskom dropped the ball in January, the mining industry had to make the costly catch. Five days of total shutdown cost South Africa billions of rands and threatened thousands of jobs as production shrank by 22%.

The mines have been working hard to meet energy reduction targets of 10%. So it is perhaps no surprise that a former mining boss is taking the reins at the energy utility.

Until two weeks ago Bobby Godsell, former AngloGold Ashanti chief executive, had been in retirement for a year. He now occupies one of the hottest leadership seats in the country.

Announcing Godsell’s appointment as Eskom chair, Public Enterprises Minister Alec Erwin argued that someone with ”experience in dealing with the various stakeholders and structures like Nedlac” was required.

Godsell, who has nurtured a relationship with big industry and government and served Business Leadership South Africa as chair, seemed a logical choice.

”The proposal was a surprise; it’s not how I saw myself spending my retirement,” he told the Mail & Guardian this week. ”But I saw it as an important chance to do a bit of national service.”

He was frank about Eskom’s January meltdown: ”It’s clear to all South Africans that the major error was in the failure to add to the South African generation capacity.”

He also acknowledges Eskom’s difficulties in persuading the government to invest in new power plants, adding that business also played a role by ignoring the impending crisis.

”Business leaders certainly were aware of an approaching energy crunch and could have and should have done more to focus the nation’s attention,” he said.

But he is reluctant to lay ultimate blame at anyone’s door. ”I’m not interested in allocating blame,” he said. ”What I am interested in is getting a better understanding of what went wrong and what we need to do going forward to prevent the same thing happening again.

”The challenge to government, as an owner, is to maintain the business in a state of readiness to meet the needs of the future.”

This included making up for its failure to invest in the power supplier. Eskom is gearing up for a capital expansion programme that will cost almost R350-billion and include building two new coal-fired stations, Medupi in Limpopo and Bravo in Mpumalanga.

The government’s agreement to fast-track its loan to the utility over three instead of five years has given Eskom breathing space.

”The recently agreed loan is a good example of what is needed,” Godsell said.

But the utility is not out of the woods. Godsell said that in any business which failed to invest in maintenance, ”the law of entropy” applies. ”We need to invest constantly and reinvest if South Africa is to meet its power needs,” he said.

But Eskom’s immediate challenge is ”keeping the lights on”.

”Eskom’s reserve margin is paper-thin; we saw that last week.”

The shutdown of a reactor at Koeberg last week, combined with technical failures at two other power stations, again threatened South Africa with load-shedding.

”To make it through the balance of winter, we need to manage our way through peak demand,” he said.

He described a pattern of ”load scheduling” rather than load-shedding, requiring customers to reduce power consumption during peak demand time, between 5pm to 8pm. ”This will require voluntary action from all consumers to manage their peak usage,” he said.

South Africa’s ailing distribution network could pose further problems. Last week’s Financial Mail reported that the stalled overhaul of the network could result in an even bigger power crisis.

Planned restructuring includes the establishment of six regional electricity distributors (REDs), which would take over the role of electricity distribution from the country’s 187 municipalities. As this is a major source of municipal income, local authorities are reluctant to give up providing the service.

Eskom is reportedly 95% ready to hand over its distribution network to the REDs. Godsell did not want to comment on the issue except to say that ”getting the distribution right” is ”important”.

In the long run, he said, South Africa had to become more energy-efficient and move away from its excessive reliance on coal.

”I suspect that South Africa will need to look at every source of energy,” he said. ”We can’t rely [solely] on coal, but this is not to say that coal will go away.”

But with ”green” power come questions of who the producers will be and what changes are needed in the market.

”The concepts are already there in terms of co-generation, IPPs [independent power producers], power buy-backs,” Godsell said.

”The regulatory environment is relatively new, but if South Africa wants to meet its millennium development goals, we need to grow power generation capacity.”

This is an ideal opportunity, he said, to allow state-owned enterprises such as Eskom, to engage in public-private partnerships which can begin addressing South Africa’s energy future.