Eskom: The art of steering a sinking ship

ANALYSIS

There was no doubt that when he took the job as chief executive at Eskom, in January last year, Phakamani Hadebe was headed where angels feared to tread. There is little doubt too, that his resignation could not come at a worst time for the organisation as it battles immense and inextricably linked operational and financial challenges.

What is in doubt however is where Eskom’s board is going to find a replacement chief executive — with a near mythical blend of technical expertise, financial savvy and political nous — to prevent being chewed up and spat out by one of the state’s most infamous corporate behemoths.

The last chief executive to come remotely close to encapsulating these qualities was Brian Dames, though he had his own caucus of critics. Dames a long-time Eskom employee before he became CE in 2010, lasted four years before, it is said, he buckled under the weight of political interference at the organisation.

Hadebe was an outsider, whose finance background was seen as a major asset, when he joined the organisation whose problems were viewed, at the time, as predominantly financial. At the start of last year, just as Hadebe stepped in as acting chief executive, the company was facing a liquidity crisis, in large part because investors did not want to give Eskom – mired in corruption allegations and with a qualified audit – any more money. The cash crunch necessitated a R5-billion bridging loan from the Public Investment Corporation (which was repaid within 30 days) and a R20-billion short term credit facility from a consortium of local and international banks.

As it turned out — not only were its financials shoddy but it operations were not up to scratch either. The cumulative effect of deferring maintenance in order to spend money elsewhere – another legacy Hadebe inherited – caught up to Eskom, when earlier this year the country was thrust into stage four load-shedding.


At the same time, Hadebe and the new board under Jabu Mabuza, had the unenviable task of cleaning up Eskom. Its most recent results for 2017/18 outlined, among others, the launch of over 1000 disciplinary cases, 11 criminal cases, five of which involved 9 senior executives, investigations into almost 240 whistle-blower reports and the launch of lifestyle audits for management.

No doubt this irked many – and depending where you hear it from Hadebe is either arrogant and unwilling to listen, or a man who does not suffer fools, or those he does not trust to do the job right, lightly.

It was the style of the likes of Brian Molefe to keep Eskom employees sweet with increases, despite concerns over Eskom’s productivity and performance. Hadebe instead attempted, under the stewardship of the board, a 0% wage increase for employees last year (which failed after protests at power stations kicked off power cuts); culled his executive management team from 21 to 9 people and began a retrenchment process for top tier managers. While this may sound like music to taxpayers’ and electricity consumers’ ears – there is little doubt it got up some disgruntled noses.

“He came into a highly contaminated environment, with all the old people that worked with Brian Molefe, that worked with Anoj Singh,” said Deon Reyneke, the chief negotiator at Eskom for trade union Solidarity.

The strain of the job and its impact on Hadebe’s health has been cited as the reason for his departure. But given the complex nature of Eskom, it has also been said that Hadebe did not get to grips with the operational side of the business soon enough. Even Hadebe’s proponents believe he may have found himself out of his depth, arguing that the role requires someone, at the very least, with experience of running a large industrial operation, that is heavily unionised.

For all that the board and Hadebe’s efforts to rein in wage spend made business sense – the move has been called “somewhat naïve” ahead of an election year. But the botched wage talks are viewed as a key example of the lack of political support for Hadebe. And the lack of political cover was not just from the public enterprises minister Pravin Gordhan – who has been fighting several other battles – but stretched all the way to the presidency argued one observer.

This has been stoutly denied however by the board and the ministry. “He’s had unqualified support from the minister and the board to take the decisions at Eskom that were necessary,” said public enterprises spokesperson Adrian Lackay.

The board responded similarly saying: “The board supports and continues to support Phakamani and his executives in delivering on our strategy (which has been a result of management working with the board, over time, to arrive at) and the delegated mandate (both developmental and commercial).”

Whatever the reasons for Hadebe’s decision to leave – it stands Eskom must again hunt for a new chief executive.

Speculation has already begun that recalling the likes of Dames or Jacob Maroga, who quit in 2009, are a necessity. Names like Sipho Maseko – who turned Telkom around – are making the rounds, as has that of Thava Govender – Eskom’s former head of generation who quit last year.

But whoever it is must keep the lights on; manage the weight of over R420-billion in debt (likely more) and losses for this financial year expected in the region of R20-billion; negotiate Eskom’s planned restructuring while convincing labour of this necessity; and see Eskom through a profound change in the energy landscape that threatens its very business model. Where angels fear to tread, indeed.  

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

Related stories

Advertising
Advertising

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday