Energy

Eskom goes from hero to zero – and back to hero

Eskom went from one of the world’s best power suppliers to implementing rolling blackouts for years. Now, the utility is working its way back to the top.

Eskom was founded in March 1923 by Hendrik van der Bijl to provide affordable electricity in the public interest.

For most of its history, Eskom delivered reliable electricity, producing over half of Africa’s electricity and earning international accolades such as the 2001 Global Energy Awards’ “Power Company of the Year”.

However, the utility’s decline began in the early 1990s as South Africa transitioned to democracy and shifted its electrification priorities.

By 1994, the government focused on increasing electricity access in rural areas, causing a rapid rise in demand that strained Eskom’s infrastructure. 

A 1998 White Paper warned that Eskom’s generation capacity would be fully utilised by 2007, but the government rejected the company’s request for additional funding to expand capacity. 

As predicted, Eskom faced a severe shortfall in 2007, leading to South Africa’s first nationwide power outages and the introduction of load-shedding in 2008.

In a recent interview with the Centre for Development and Enterprise (CDE), Eskom chairman Mteto Nyati identified the factors behind Eskom’s decline.

“The decision not to invest in new generation capacity in the early 2000s was the main cause of the trouble we ran into beginning in 2006,” he said. 

“Then, this miscalculation was compounded by the hasty decision to construct Medupi and Kusile. Building large-scale infrastructure like that requires skilled professionals and planning, and it takes time.” 

However, during the time that construction began on these two power stations, the country was experiencing a ‘brain drain’ as skilled engineers left the country. 

“So, we did not have the capacity nor the technical expertise to pull off Medupi and Kusile because the technical people who would ordinarily be putting together the plans and testing those plans were not here,” Nyati explained. 

“All of this led to incorrect technical specifications, and then, of course, there were massive delays and cost overruns as corrupt individuals and unqualified companies siphoned off money.”

Eskom’s collapse came to a head in 2023 when South Africa experienced the worst load-shedding on record. The country experienced outages for 335 days of the year, and stage 6 load-shedding became commonplace.

Many believed this would continue into 2024, as load-shedding continued unabated in the first three months of the year.

Eskom chairman Mteto Nyati

Eskom, in the hands of a new management team and with the guidance of a turnaround plan, surprised the nation by doing what many considered impossible – ending load-shedding.

While load-shedding may still return in the case of unexpected outages, South Africa was load-shedding-free for most of 2024, and 2025 is expected to be the same.

Nyati explained in his conversation with the CDE that once Eskom’s new board was appointed, they identified nine systemic issues to tackle if they wanted to turn Eskom around, and load-shedding was just one of them. 

“We also focussed on managing the utility’s debt, improving maintenance, eradicating corruption, changing the dysfunctional organisational culture, and linking rewards to a proper performance management system,” he said.

“The big shift regarding this board is the strong emphasis placed on the technical competencies of the directors to tackle the problems plaguing Eskom.”

“The board has six engineers, seven or eight chartered accountants, and specialists in organisational culture and labour relations.”

He said the second difference is how the board engaged management to ensure that recommended changes were implemented. 

“Ordinarily, boards convene once a quarter, but in a time of crisis, a hands-on approach is needed: one, to hold management accountable, and two, to ensure efficient resource allocation.”

“We also held workshops with the power station managers and realised that the previous approach was based on a misdiagnosis of the problem.”

He explained that Eskom’s real challenge was not ageing power stations but rather a lack

of proper maintenance, flouting of standard operating procedures, and contracting substandard companies to service power stations.

“Once the board, management and staff had co-created our two-year recovery plan, we hired an independent company to oversee the execution of the plan in collaboration with management,” he said. 

“Finally, we received extensive support from our shareholder ministers, the late Pravin Gordhan and Dr Kgosientsho Ramokgopa. Both contributed immensely by unlocking funding and exemptions from the National Treasury.”

The proof of Eskom’s turnaround lies in its performance over the past year.

The utility achieved a higher electricity availability factor (EAF), which rose from just over 51% in January 2024 to over 63.6% in November 2024. 

Energy analyst Chris Yelland, managing director of EE Business Intelligence, said this sustained improvement is nothing short of exceptional. 

He said the utility had improved markedly across all metrics, with its EAF improving while its unplanned breakdowns declined and planned maintenance levels were maintained. 

Eskom has also seen an improvement from a financial perspective. The utility expects to break even in the 2025 financial year and post a huge R12 billion profit the year after. 

While Eskom still faces many challenges, its turnaround over the past year is undeniable.

“Because of Eskom’s poor performance in the past, South Africans expect the utility to fail, or they want it to be dismantled,” Nyati said. 

“In fact, Eskom is turning around and will continue to play a significant role in South Africa.

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