Andre de Ruyter shares concerning news about Eskom

Eskom has no concept of value for money, with the utility preferring to see procurement as a means to drive transformation rather than a critical part of ensuring it can deliver services efficiently. 

This stems from the utility’s nature as a public company without a clear profit motive, leading to muddled priorities and objectives. 

As a result, not all parts of the utility are pulling in the same direction and towards the same goal, with some elements focusing on playing the political game while others want to deliver electricity to South Africans. 

The lack of clarity and desire to attain value for money or efficient operations result in Eskom having a bloated cost base, which it is passing on to consumers through electricity price hikes. 

This is feedback from former Eskom CEO Andre de Ruyter, who explained the jarring shift in focus and perspective he experienced when pivoting from the private sector to the public utility. 

De Ruyter explained to Oxford’s Saïd Business School that the move from running Nampak, Africa’s largest packaging company, to being the head of Eskom revealed the significant difference between private and public companies. 

“It was quite interesting to move from a profit-focused organisation to one that regarded itself as having a different mission,” De Ruyter said. 

“Of course, a public utility does have other things that occupy its time and resources other than merely profit, with its mandate to provide a service and not generate returns for shareholders.” 

However, in the case of Eskom and other public companies, this results in the dismissal of basic business concepts and the desire to run operations efficiently to provide value for money. 

“Basic business concepts, like calculating internal rates of return on projects and making sure that your capital is optimised or ‘scrubbed’ as McKinsey would say, and that you get value for money, were foreign to Eskom,” De Ruyter said. 

“These concepts were foreign within the Eskom environment because procurement was seen as a tool of transformation and not as a tool of ensuring that the best techno-economic solution was put in place to address the needs of the company.” 

Once this focus shifts, it creates a host of problems for the company that has resulted in the situation Eskom has found itself in over the past few years. 

During De Ruyter’s last year as CEO, the utility implemented record load-shedding and came under immense financial pressure. 

While Eskom has turned the corner with regard to generating electricity, with significant investment from the private sector helping it, the utility’s finances are still in extremely poor health. 

Muddled objectives create disaster

De Ruyter explained that Eskom suffered from conflicting objectives and a lack of clarity, which resulted in it delivering poor services and having a bloated cost base. 

The utility often had different elements pulling in separate directions, not towards a common goal, making it difficult to get anything done quickly and efficiently. 

“Once you start to shift the focus away from value for money, then of course, things become quite fluid and confused, priorities get confused. You lack the crystal clarity of a private sector organisation,” De Ruyter said. 

This was coupled with some individuals within and outside of Eskom having objectives directly opposed to supplying electricity to South Africans, never mind making a profit. 

These individuals engaged in widespread sabotage of Eskom’s infrastructure to disrupt the utility’s operations and force it to use particular procurement partners. 

De Ruyter repeatedly blamed sabotage and corruption at the utility for Eskom’s failure to turn things around and keep the lights on. 

“Eskom’s various power stations have experienced widespread sabotage, criminality, and destructive and unlawful industrial action,” De Ruyter said in an affidavit during a court case after he left the utility.

While he admitted that sabotage was not the only factor in the utility’s dismal performance, he said, “it is clear that damage to Eskom’s property and operations has been deliberate”.

De Ruyter claimed that sustained sabotage at Eskom’s power stations accounted for around two stages of load-shedding during his tenure. 

At times, Electricity Minister Kgosientsho Ramokgopa backed up De Ruyter’s claims regarding widespread corruption at the utility and warned it could undo any progress made in bringing load-shedding to an end. 

However, despite the severity of sabotage and corruption, it seemingly ended just after De Ruyter left the utility on 27 February 2023. 

“The word had clearly gone out that sabotage and corruption had gone too far and that it should stop,” De Ruyter claimed. 

Eskom chairman Mteto Nyati has countered De Ruyter, pointing to the utility’s own efforts to crack down on crime, fraud, and corruption as the main driving force behind this disappearance.

De Ruyter has also praised the police for their work in cracking down on sabotage of Eskom’s infrastructure, with SAPS setting up a dedicated unit to tackle the crime towards the end of his stint as CEO.