Former chairman reveals reasons for Eskom’s decline

Former Eskom chairman Reuel Khoza said not expanding generation capacity, the growing skills deficit, and being blinded by ideology are behind load-shedding and other problems at the power utility.

Khoza spoke to Daily Investor on Eskom’s 100-year anniversary and looked back to when he chaired the board.

In 1999, then Eskom CEO Allen Morgan and chairman Khoza left messages to the South Africans of 2023 – to be opened on the utility’s 100th birthday.

Khoza served as Eskom’s chairman from 1997 to 2005, which is widely seen as the power utility’s golden years.

Under Khoza’s tenure, Eskom was voted as having the best corporate governance in the country and recognised as the best power company in the world by the Financial Times.

Morgan and Khoza’s letters were filled with hope and promise about Eskom’s future and South Africa’s prospects.

Morgan said Eskom was a proud and well-respected organisation. He emphasised Eskom’s contribution to the economy by providing electricity at one of the cheapest rates in the world. 

“Despite being an effective monopoly electricity provider, we have managed our costs down to a point where foreign suppliers are reluctant to compete with us,” said Morgan.

Khoza said Eskom had enabled commerce and industry to progress and enhance efficiencies.

Khoza added that he trusted that the South Africans of 2023 “carried on the glorious task of illuminating and energising the continent”.

There were also a few warnings from Morgan, including the non-payment of accounts by a few of Eskom’s clients.

“Some people feel they should be given electricity for nothing, regarding it as a right,” the former Eskom CEO said.  

He flagged generation capacity as Eskom’s second biggest issue. At the time, Eskom had a surplus of generation capacity, and Morgan predicted that the surplus would run out by 2007.

“You know whether this prediction was right or not,” he said, referencing that the letter would be revisited 24 years later.

Khoza shares his views on Eskom’s current situation

Khoza told Daily Investor that the decision not to expand generation capacity was made largely to enable competition with Eskom. 

A 1998 white paper advised additional generation capacity be added to the grid as, by 2006, Eskom’s fleet of power stations “would be beginning to crumble because some of it was old”, said Khoza.

“The shareholder, in its wisdom, said no – we are not going to do this – because we want to create scope for competitors to enter the market,” he said. 

Khoza flagged this decision as one of the key reasons for the dramatic decline of the utility since he was chairman.

He also identified skill deficiencies as a cause of a reversal in the performance of the utility – particularly in the appointment of his successor.

“I pleaded with the shareholder that someone with a business background should succeed me,” he said.

He wanted somebody to be appointed as chairman who used a “business approach to solving problems, rather than the shouting of slogans”.

Khoza said if he had to write a time capsule note to be opened in 25 years, he would aim for the same goals the utility aimed for when he was the chairman.

“You want to be a global player of unassailable stature as a utility – that should be what is beckoning you,” he said.

He would insist that Eskom shareholders do not interfere with the board’s operations and that a culture of diligence and dedication is created through merit-based employment.

He said the entire pool of able South Africans needed to be considered for executive positions “because deployment does not necessarily go for the best talent”.

“It’s not rocket science. It’s so basic. If you can’t see that, you are either deliberately blind, blinded by ideology, or blinded by something else,” said Khoza.

Former Eskom chairman Reuel Khoza’s 1999 letter