DANIEL MALAN: Eskom needs an emphatic dose of business rescue
Governance and management of the power utility should be handed to an independent panel with credibility
The woes of Eskom are well known, well documented and experienced daily by SA citizens and businesses. The anger of stakeholders is fuelled by frustration about load-shedding, concern about the economic impact of an unstable power utility, and outrage over the way in which the state capture nightmare and criminal behaviour continue to have a direct and immediate impact on the national electricity grid. Public spats between the CEO and responsible minister create additional uncertainty.
Given Eskom’s inability to perform its most basic functions the time has come for the business rescue principle to be applied in the most emphatic way possible. Both governance and management of the company should be handed over — on a temporary basis — to an independent panel with international scientific credibility and investigative ability. Such a panel would need to have the support of all big political parties, organised business and civil society. Though the stakes are not as high, it could be compared to the multiparty Transitional Executive Council that was created in 1993 to oversee SA’s transition to democracy.
The economy bleeds and citizens are suffering as a result of Eskom’s blunders. Bland statements that use language such as “regret to inform” or “pleased to announce” play into our short-term expectations but do not address the root of the problem. Measuring the number of days since the last instance of load-shedding is the worst possible metric to use.
There are certain things that seem so obvious that you don’t need global experts to confirm them. Burning more diesel or buying capacity from floating power plants can provide short-term relief. Fixing capacity through preventive maintenance and addressing breakdowns is not sufficient, and we have not seen the effect of these activities though it has been part of the Eskom narrative since the start of the crisis.
In February 2008 the SA government issued a statement that it was “satisfied that Eskom and the departments of minerals & energy, and of public enterprises, are implementing plans to address the emergency situation”. Since then the situation has become worse. That is why promises about long-term prospects of a national grid that is healthy and powered by renewable energy are neither convincing nor appropriate as a response to the current crisis. Yet we read in Eskom’s 2021 sustainability report that it is committed to achieve net zero carbon emissions by 2050.
The Companies Act requires a company to commence business rescue proceedings “at the first signs of it being financially distressed”. In its latest annual results Eskom casually announced the following: “Financial results challenging, net loss after tax of R18.9bn”. And then it goes on to discuss the impact of the Covid-19 pandemic and the reduction of headcount, and presents the “exco team driving the turnaround”.
It should be clear by now that the Eskom executive committee team cannot drive the turnaround, through no fault of its own. Clearly this is a wicked problem, one with many interdependent factors and seemingly almost impossible to solve. As owner of Eskom, the government is compromised by infighting between factions. As an entity Eskom is compromised by power struggles and pockets of resistance fuelled by allegiances to the previous corrupt political leadership.
That is why we need an emphatic business rescue exercise that involves concrete steps and is based on independent judgment, a core requirement for corporate governance. First, a commitment is needed from all big political parties, organised business and civil society to appoint an independent panel with international credibility. Second, the panel should be formalised and given the necessary statutory powers to engage in business rescue.
There should be a global search for a combination of the most advanced technical, business and forensic skills. The financial costs of acquiring the best people should be compared against the ongoing and daily losses incurred by the SA economy as a result of the current situation.
Initially, the panel should conduct a speedy investigation into the status quo, provide an objective statement to the SA public about the true nature of the problem, and be clear about realistic expectations and solutions. Key global anti-corruption bodies should be given unrestricted access to Eskom systems and operations to investigate criminal behaviour and bring perpetrators to justice.
And finally, as a symbolic act Eskom should immediately step back from its position as a signatory to the UN Global Compact, the world’s largest voluntary corporate responsibility initiative, until it can state with conviction that it has implemented effective measures to turn the situation around. The crisis is too big to linger on the irony of Eskom’s pretences of being a responsible company committed to corporate citizenship, but it should not be ignored.
Eskom was the first SA company to sign up to the global compact more than 20 years ago, and that the UN has not suspended Eskom’s continued membership of the initiative, or that Eskom has not voluntarily withdrawn from the initiative (at least on a temporary basis), should be viewed as an indictment against both parties.
It should be possible to make rapid progress within the next 12 months if the situation is treated with a sense of urgency and supported by all stakeholders. This might seem a long time, but not if we consider that the lights went out for the first time almost 14 years ago.
• Malan is an assistant professor in business ethics at Trinity College Dublin and associate professor extraordinaire at the University of Stellenbosch Business School. He is a former co-chair of the B20 Task Force on Integrity & Compliance, and a member of the World Economic Forum’s Global Future Council on Transparency & Anti-Corruption.
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