Eskom delivered a consistent electricity supply 96% of the time during the financial year that ended in March. The year before the figure was just 9% and international credit rating agencies have recognised Eskom’s operational and financial recovery.
Since May 15 there has been no load-shedding, and just 26 hours since April 1, and with 23 days of our winter period remaining, we are cautiously optimistic that our load-shedding estimate will be below our projections. These are facts that today still surprise many stakeholders.
The more progress Eskom makes in its return to delivering on its fundamental mandate — providing electricity — the more references we hear about the complex period in the group’s history that became the crisis the board inherited when it was appointed just over two years ago.
The board members were followed by myself and the additional new executive committee members, who chose — just like the board — to join Eskom because we could not sit back when we knew we had the skills to do something meaningful. We could augment the skills of existing executive committee members, and Eskom’s thousands of employees, to refocus and drive SA’s growth and prospects.
Eskom is a skills-based engineering organisation, and what drives us is delivering certainty. While we focus on delivering certainty in the provision of electricity, now and into the future, we are also focused on obtaining certainty in the policy environment so that Eskom, along with all players, can deliver the benefits of competition that the Electricity Reform Act (ERA) now provides for.
Skills play a key role
The skills of our employees, spanning engineering, operations and maintenance, have been crucial in Eskom’s ability to structurally reduce the severity and frequency of load-shedding over the past two years.
We have been focused on recovering from the devastating effects of a 2016 World Bank report, which mistakenly concluded that Eskom, along with virtually all its sub-Saharan African peers, was overstaffed. Many utilities worldwide would not meet the benchmarks the World Bank deemed suitable for sub-Saharan African utilities. The bank underestimated the employee requirements to operate a power company.
The report findings laid the foundation for a devastating deskilling and became part of a public discourse at the time that placed immense pressure on Eskom to reduce its employee levels.
In the immediate years thereafter — between 2017 and 2022 — the number of engineers employed across Eskom’s divisions decreased by about 30%. Over the same period our customers increased by 1-million and more than 40,000 power transformers were added to our network. The World Bank report claimed Eskom was overstaffed across its generation, transmission and distribution divisions. But in reaching this conclusion the bank failed to include the employees required to maintain and operate Eskom’s 350,000km of distribution lines used to deliver power to municipalities, businesses and homes, and provide support to nearly 7-million customers.
The subsequent impact of fewer employees and skills depletion not only affected Eskom’s generation fleet but also the response times to electricity interruptions, connection times for new customers, and embedded generation and network maintenance. All of these factors affected system reliability, with a direct impact on businesses and households.
Since then interventions have been implemented to arrest the decline in key technical skills, with a net increase of 301 engineers over the past three years. That includes experienced professional engineers and specialists.
In the discourse around Eskom, it is important to separate the areas of performance and policy. Many of the actions we are working on require policy changes, so we cannot do this without the government, and in particular the ministries with oversight over our operations, who have been supportive on this journey.
Policy certainty at all levels
We regularly hear calls for policy certainty, to attract the investment this country needs to attract finance at fair, affordable rates. The same ' “policy certainty” approach must apply to enact a reformed electricity supply industry.
Having no rules would lead to an unregulated electricity supply industry, which would seriously damage efforts to attract new forms of investment. We need also to consider our specific country context. SA is a highly unequal country and great care must be taken to ensure the reforms do not worsen this situation.
The hard-fought reforms to our industry that were passed in the ERA will not be lost if all players in the industry work together to create the rules as quickly as possible. The real success and hard part of reform is codifying the new rules that all players will operate by. This is especially important when there is a “monopoly” player involved. Yet until the new rules are in place, incumbent and new players are legally required to operate by today’s rules.
Just last week we witnessed a significant success in terms of policy certainty to realise the delivery of new transmission infrastructure that will deliver greater competition and facilitate the transition from high-carbon to low-carbon sources of energy. It will drive economic growth to the benefit of all citizens. This was a result of the tireless work by the leadership of the department of energy & electricity and the National Treasury. A clear, transparent policy framework was announced that is designed to crowd in large-scale private sector funding through providing the safeguards required, including predictability and governance that enables developers to seamlessly start due diligence and to bid competitively.
When all stakeholders become involved, the true range of policy mechanisms can be tested and explored to mitigate the impact of the cost of producing electricity, and in turn the tariffs paid by consumers. We should see the same level of vigour and pace applied to the co-ordination of the programmes tackling load-shedding now applied to fulfilling the regulatory environment.
Eskom is working tirelessly and with pace within the National Energy Crisis Committee structures and with the National Energy Regulator of SA to ensure a competitive market is developed through the new legislation required. We would all like the creation of the rules to be finalised as soon as possible, and we continue to provide all our resources to ensure this can be the case.
Dealing with debt
There are further policy challenges ahead that are receiving intense focus. The growing municipal debt owed to Eskom — recorded at R96.7bn by June this year — poses a serious threat to our long-term financial sustainability. If left unaddressed this escalating burden risks eroding the intended benefits of the R230bn debt relief granted under the Eskom Debt Relief Act.
As we focus on providing certainty to electricity supply and policy interventions, our operational improvements have yielded tangible financial benefits so we may provide investor confidence and reduce our burden on the state.
As a result, we have already indicated in our previous interim results that Eskom anticipates reporting a profit for the first time in seven years, marking a major milestone in its recovery. The utility remains resolved to sustain this profitability — which can be reinvested into the business — throughout the current corporate plan, which runs until March 2029.
Importantly, Eskom has not undertaken any new borrowing in the past two financial years, in compliance with conditions set out in the Eskom Debt Relief Programme by the National Treasury. Future borrowing will be carefully managed and limited, with no new borrowing planned until March 2027 and a targeted R75bn allowed for financial years 2028 to 2030 for investments aligned to our corporate plan.
As we work on improving and strengthening our governance, we are encouraged that many of the lending institutions we are working with are eagerly awaiting to engage with Eskom at the right time for new and future financing.
The combating of corruption, recovering public funds and strengthening systems is an area of ongoing and intense focus. As part of its ongoing anticorruption efforts, Eskom — working in partnership with the Special Investigating Unit — has recovered more than R2bn in unlawfully paid funds. We work in full co-operation with the National Prosecuting Authority and other law enforcement agencies to support the prosecution of state capture cases and other serious crimes affecting our operations. Internally, we have introduced changes to processes and systems to close some of the gaps that left us vulnerable; more will be done in this regard.
Making Eskom competitive
When a team becomes stronger, everyone sits up and notices. Eskom has demonstrably taken a turn for the better thanks to to the competence of its employees and the support from government processes. We have restructured and stabilised the leadership team, mitigated the chronic load-shedding, improved our financial sustainability and balance sheet, unbundled all three divisions functionally, and unbundled the National Transmission Company SA legally. We have improved governance to root out fraud and corruption.
We are now shifting our priorities to positioning Eskom into a sustainable and competitive company, through the unbundling programme, supporting electricity distribution reforms and with a clean energy pipeline, all coupled to a high-performance ethical culture.
Ultimately, we can only deliver the best for our customers when we have the right skills, matched to servant leadership that enables our employees to believe in themselves and realise success. We’re seeing improved morale that can only take us from strength to strength. We are getting ready to compete and deliver through a skilled workforce.
We need an acceleration in the creation of the rules to realise the ERA based on factual debate. The pressures we face are unique and the growth and success of this country will remain dependent on a highly functioning Eskom. We take our responsibilities seriously and are proud to work at Eskom, for SA.
• Marokane is group CEO of Eskom.
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