Andre de Ruyter warning

36ONE Asset Management co-founder Cy Jacobs warned that South Africa would suffer after Eskom announced that Andre de Ruyter would be its new chief executive.

Jacobs is one of South Africa’s most respected investment managers, consistently outperforming the market.

At the recent Biznews Investment Conference, Jacobs praised Eskom chairman Mteto Nyati for his work at Eskom.

He added that Nyati was politically correct by not commenting about former Eskom CEO Andre de Ruyter. However, Jacobs did not hold back.

De Ruyter was Nampak chief executive before leaving the packaging company to run South Africa’s power utility.

On 18 November 2019, the late Public Enterprises Minister Pravin Gordhan announced that De Ruyter would take the reins at Eskom on 15 January 2020.

“I am grateful to the Board of Nampak for agreeing to release Andre de Ruyter,” Gordhan said in a press statement.

“To us, this again shows a partnership approach between all stakeholders who are willing to contribute towards a successful and sustainable turnaround of Eskom,” he said.

While Gordhan sang De Ruyter’s praises, Jacobs was scathing towards the former Eskom chief executive and sent a warning to South Africa.

The day Eskom announced that De Ruyter would leave Nampak to lead the power utility, he said Nampak became investable again.

However, he also warned that South Africa was in for a tough time, hinting at a deterioration in the power utility. His words were prophetic.

Under De Ruyter, load-shedding increased from 1,352 GWh in 2019, before he took over, to 11,529 GWh in 2022, the last year he was in charge.

De Ruyter promised South Africa that load-shedding would improve from September 2021 – eighteen months after he took over.

This was because that is the period it takes for a maintenance program he implemented to start showing results.

However, this did not happen. Load-shedding worsened until he left the power utility in February 2023.

In March 2023, under Nyati’s guidance, Eskom implemented a new maintenance plan called the “Generation Recovery Plan”. Within thirteen months, load-shedding ended.

“The difference between Nyati and De Ruyter is so obvious to me, including their personalities, how they build a business, and how they confront staff,” Jacobs said.

He added that 36ONE Asset Management found it extremely frustrating that the government would allow De Ruyter to continue to run Eskom for that long.

“You can see the massive improvement Mteto Nyati made. People don’t give him enough credit because he is softly spoken, kind, and humble,” Jacobs said.

Nampak and Eskom under Andre de Ruyter

When De Ruyter was appointed as Eskom chief executive, many people highlighted that Nampak’s share price plummeted during De Ruyter’s tenure as CEO.

When De Ruyter was appointed as Nampak CEO in March 2014, the company traded at R37 a share and had a market cap of R29 billion.

When he left the company at the end of 2019, the share price had plummeted to well below R7 a share with a market cap of R5 billion.

Many commentators blamed De Ruyter for this tremendous wealth destruction. However, De Ruyter blamed things before he took the reins.

Curiously, when De Ruyter took over as Eskom’s chief executive, he also blamed his predecessors for the challenges at the power utility.

The worse things got, the more he blamed the past. Therefore, he did not take responsibility for Eskom’s poor performance.

Nyati, in comparison, did not blame the former Eskom leaders. Instead, he and his team focussed on fixing the power utility.

The charts below show the Nampak share price during De Ruyter’s tenure as CEO, and how load-shedding increased while he was Eskom chief executive.