Reading Standard bank CEO Sim Tshabalala’s comments on what qualities we should be looking for in Eskom’s new CEO — which implies a poisoned chalice — it’s clear that we are still misdiagnosing the root cause of the broader energy and electricity crisis.
We could parachute a combination of Elon Musk, Satya Nadella and Jeff Bezos, with Condoleezza Rice’s diplomatic nous, onto the board of Eskom, but given the present governance (mis)configuration being exploited by the (mis)governing ANC, they would be destined to fail.
It doesn’t take a corporate governance expert to observe that there is something deeply systemically broken in the way state-owned companies are perennially mismanaged. From Transnet to SAA, Denel and the Post Office, boards of executives are consistently undermined by a mixture of the ANC and the (ANC in) government, which makes it almost impossible for the type of professional executive team required by SOEs in our modern technological economy to operate. We see unresolved conflicts in the ANC play out in government policy implementation failure and SOE governance failure.
At its core are conflicting ideas from public enterprises minister Pravin Gordhan, who wants to establish a state-owned asset management company, and mineral resources & energy minister Gwede Mantashe, an unreconstructed centralist (a tenet of the ANC constitution, and he did chair the SACP) who truly believes in command and control and thinks he can wade into Eskom and “make” it fix its power stations, or (even if they go in a cabinet reshuffle) their successors. Such conflicting ideas in the ANC paralyse governance.
Blaming the SOE is the wrong analysis. No SOE can operate in the governance environment that has been created. Whether you believe in the promarket reforms of energy liberalisation (which I do) the prevailing governance structure will doom any attempt at strategic execution to failure.
If the ANC government tries to implement this whole new SOE scheme, an idea as fresh as an open bag of marshmallows two months after Christmas, the consequences will be disastrous
Mantashe’s legislated responsibility is to ensure sufficient energy capacity is procured to meet SA’s needs. It is a fact that since 2015, when former CEOs Matshela Koko and Brian Molefe refused to sign power purchase agreements when projects were ready to go, no new substantial generation has been contracted by the department of mineral resources & energy or Eskom. Yet that is the foremost cause of the current electricity shortage.
There are other reasons, but the fact is the department has failed in this, with independent coal power producers and the failure to move the gas determination to a bid process. We hear about determinations and bidding rounds, but we don’t see new contracts.
Conflicts in the ANC spilling over into government has prevented it from implementing its own policies, and one can only speculate that this is by political design to ensure the status quo tender feeding frenzy continues unabated. This is the cause of continued load-shedding, not the failures of Medupi and Kusile and the ageing Eskom coal fleet, which have been known about for years.
The department of mineral resources & energy should have updated the Integrated Resource Plan (now four years out of date) and should be developing a new IRP and implementing the 2019 one properly. That is the solution to load-shedding, not sticking their noses into Eskom governance.
Appoint board
If the ANC government tries to implement this whole new SOE scheme, an idea as fresh as an open bag of marshmallows two months after Christmas, the consequences will be disastrous. The cadre clown show can’t even implement what they are meant to because the president says one thing and a minister can resist it because of internal ANC conflicts.
The department of public enterprises is meant to represent the shareholder (taxpayers) and appoint the board. The board then appoints the CEO, with a performance contract, who must then be left, at arm’s length, to run the executive team (which requires years to build trust, not chopping and changing CEOs annually).
The board must make sure the CEO implements (legal) government policy. No modern company can operate if this kind of governance is undermined by government interfering by means of appointments in the company, and through that undermining the executive team.
It is a central design principle of SOE governance that the department of mineral resources & energy cannot be both a player (representing the shareholder) and the referee (appointing the regulator) in the same game. Yet that is precisely what Mantashe wants to do. He does not subscribe to the ideas of corporatisation enshrined in the Eskom Act and the department of public enterprises structure.
Trying to enforce his ways in our legislative and governance context he will be a wrecking ball, and even he does not understand that. In his mind he is doing what is right and good. If this is allowed to happen I doubt Eskom will ever be fully unbundled, and a power exchange and market will be stillborn, IPP procurements and private investment outside the meter projects will collapse, and corruption in Eskom will flourish again.
In this whole constructed mess of uncertainty one thing can be forecast with far greater accuracy then the welter of investment bank reports on the economic year ahead: load-shedding will be with us until 2024 at least, when hopefully the electorate will revolt in the best way possible — at the ballot box.
It is time for citizens to start putting the country first and consign the ANC’s myopic, parasitic, rent-seeking to yet another troubled chapter in our long and tortured history.
• Avery, a financial journalist and broadcaster, produces BDTV’s Business Watch. Contact him at badger@businesslive.co.za.
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