Throwing out the rule book to save Eskom

Mteto Nyati, member of the new Eskom board, says empowerment rules that hamper Eskom’s performance will have to go if there’s to be any chance of ending South Africa’s deepening electricity crisis.

“It’s our responsibility as the board to remove any blockages or challenges in the way of the management team so they can focus on doing what they know best,” says Nyati, who established a formidable reputation as a CEO and turnaround strategist at technology group Altron, which he left in June after five years at the helm.

He is in charge of the board’s new business operations performance committee, which has been working closely with management so he and his team can focus on the areas holding the utility back.

One of the areas they will be “getting involved in” is procurement, he says.

“Procurement rules are not as agile as they should be, including rules which say you cannot use suppliers that are not local.

“When the supplier of equipment is an international company ... you have to use middlemen to satisfy the localisation rule.

“There’s no place for those kinds of practices now. We need to remove costs from the equation. We need to make sure we are connecting directly with the people who have the knowledge that will get us out of this crisis as soon as possible.”

There are many rules around procurement that explain why Eskom's power stations keep breaking down, he says.

“If you’re going to do proper maintenance, you need to procure spares. If you end up using spares that are pirated, you shouldn’t be surprised when things break down.

“Internal corruption is largely at the back of empowerment policies that promote local small businesses”, he says. 

“These policies will need to be reviewed and changed where appropriate.

“The other area where we can help is around skills, and having rigid rules in place around who to employ in terms of equity targets.

“Right now we need to be focusing on who is the best person for the job, because those are the ones who should be fixing what needs to be fixed, regardless of how they look.”

These are all the challenges that his committee can help management to sort out, he says.

“We need to discuss these things with the relevant people and clear the way for management so they can go and execute.”

Another area his committee will address is funding. Eskom’s approach is to spread its budget across all areas and projects, he says.

“There is a need to be more selective and more focused on spending the limited budget Eskom has.

“If you rechannel some of the existing budget to a few projects and get those done properly, you don’t have to look for new funding. It is a case of using the funding you’ve got much more smartly.”

Through his committee the board will be more closely and supportively engaged with the management of the utility than any Eskom board has been before.

The “whole point” of the committee is to be a vehicle for better, closer engagement with management, and this has already begun, he says.

“We’ll be spending time with management deciding where we need to be focused, spending time in those power stations where we review whatever plan we may have agreed on so it is executed (in) the way we want it to be.”

As someone who spent years in senior leadership positions at IBM and Microsoft before being headhunted as CEO to turn around MTN SA and then Altron, Nyati says he is aware there are lines that must not be crossed.

“We’re going to be very hands on, very on-the-ground, but not doing management’s work. We’ll be doing the work of review, removing blockages and holding people accountable.”

Public enterprises minister Pravin Gordhan has mandated the board to achieve 75% energy availability. Most experts and, it is believed, CEO André de Ruyter believe this to be impossible given that energy availability has been in free fall for 17 years and is now below 50%.

What kind of pressure will he be under to deliver what the minister has ordered?

“We’re under pressure to fix Eskom for South Africa. That’s the pressure we feel under. The purpose of this committee is to get us out of the crisis.”

He won’t say if he believes the minister’s target is realistic, and adds he has not asked De Ruyter, with whom he meets regularly, whether he believes it is attainable.

“I don’t think this is something I should be occupying myself with. My interest is to understand operationally what the issues are. Our approach is one of continual improvement.”

For him this means improving maintenance standards at Eskom’s power stations so they don’t keep breaking down.

Nyati, a mechanical engineer, doesn’t support the argument that most of the power stations are so old and decrepit that it is a losing battle and the only realistic way to end the crisis is through the quickest possible development of renewables.

“I don’t see any way of us getting out of this crisis without paying attention to our coal fleet, and we’ll be focusing on that.

“The age of a power station is material but in many respects irrelevant if proper maintenance is done and the equipment is looked after.”

With these measures, “power stations will be stable for the next five to 10 years, unlike now where you fix something and it is fixed for a week or two and then it breaks again. We need to get out of that hole.”

Is he on the same page as De Ruyter, who believes the quickest and most realistic way out of the hole is through renewables?

“We need to drive both. Fix the coal fleet for us to have the lights on as we bring in new capacity with renewables.”

He says the board will not be influenced by the cacophony of calls for De Ruyter to be fired because of his failure to end load-shedding.

“We’re guided by the data, and right now the data is pointing us in the areas we’ll be focusing on, such as the rules around procurement, localisation, skills and funding.”

De Ruyter will be held accountable for his performance, as will others.

“We’ll be examining the performance of all employees, where necessary provide training and, where they’re in the wrong role, move them.”

* The headline used in the earlier version did not accurately reflect Mr Nyati’s views. We regret the error. We stand by our story.