Replacing André de Ruyter: who dares apply?

 “Most other people in a job like mine would have a therapist. I have a toxicologist,” says outgoing Eskom CEO André de Ruyter. 

It’s an acerbic aside, referencing the fact that he was poisoned with cyanide at his office in Megawatt Park in December. But it also speaks to the realpolitik of survival in what might be the worst job in the country. 

De Ruyter, who is due to vacate his position at the end of March, has had any number of show-stopping disasters since he took charge in January 2020: he’s presided over South Africa’s worst year of blackouts, as well as a brutal campaign against him from even within his shareholder, the government. But the poisoning is the most visceral clue that it all got very real while heading the country’s most hated company. 

“It’s not a job to die for,” says De Ruyter. “I was pretty ill. It’s not to be recommended.” 

In early December, De Ruyter’s regular coffee cup was dosed with a mixture of cyanide and sodium arsenide. He soon became dizzy and disoriented, and started vomiting.

His doctor, unsure what was wrong, put him on a vitamin D drip while he sent the blood samples for testing. “I was lucky, because, as it turns out one of the first lines of attack for cyanide is vitamin D,” he says.

The police’s efforts to track down the culprit have proved hopeless. Two detectives visited De Ruyter, but it was soon clear that they “were nowhere”, he says. So De Ruyter then hired a private investigator. 

But, he concedes, there is no shortage of suspects. 

There are no fewer than four criminal syndicates working within the Eskom ecosystem, trying to ensure their proboscises remain firmly inserted into the R140bn spent on goods and services every year.

The schemes aren’t complicated. They largely involve shenanigans around coal, on which Eskom spends about R58bn. With the connivance of insiders, for example, syndicates gain access to power stations, where they load up quality coal and replace it with discarded coal, which is pretty much just rock. In other cases, plants are deliberately damaged to justify overtime callouts.

So the job doesn’t just require a certain degree of cyanide resistance, it’s also about being utterly ruthless in stamping out the patronage networks feeding off Eskom’s treasury.

Even then, De Ruyter probably would have stayed on, but for a conspiracy-laden broadside by mineral resources & energy minister Gwede Mantashe in December. 

At the time Mantashe said: “Eskom, by not attending to load-shedding, is actively agitating for the overthrow of the state.” It was a loopy statement, coming days after he’d accused De Ruyter of “acting like a policeman” in trying to stop the crooks bleeding Eskom dry.

De Ruyter tells the FM that Mantashe’s assault “was the final straw”.

“It was not only what he said, it was also the fact that there was no political support from elsewhere — no-one said: ‘Hey, this guy may not be perfect, but he’s certainly not trying to overthrow the state.’”

The sense that politicians didn’t exactly have his back was underscored when energy regulator Nersa gave Eskom the green light for an 18.6% tariff hike, but President Cyril Ramaphosa intervened, asking for it to be “halted”.

De Ruyter says Ramaphosa’s request, while intended to help consumers, muddied the waters. “Legally, once Nersa has made a decision, no-one can and should interfere, except through the courts, because this is an administrative decision made by an independent regulatory body. It left everyone in an awkward position,” he says.

Still, De Ruyter reveals certain officials — he won’t say who — have had private discussions with him, to test whether he could be convinced to stay. But, given the plan to shift Eskom from Pravin Gordhan’s public enterprises ministry to Mantashe’s department of mineral resources & energy (DMRE), he is adamant he couldn’t report to a minister who sees him as a saboteur.

“For me to stay, there’d have to be significant changes in the freedom to operate, starting with hiring and firing people. I fired only one person [former chief procurement officer Solly Tshitangano] and that cost me a year of parliamentary hearings and accusations of racism,” he says.

Equally, he found the numerous trips to parliament often pointless, as were many of the meetings with his political bosses. “Ways need to be found to do this far more efficiently — like locating parliamentary oversight in Scopa [the standing committee on public accounts]. Instead, we’re called by three different committees, who all ask the same questions,” he says.

While it’s clear De Ruyter would find reporting to Mantashe “untenable”, he believes it would also be wrong for Eskom to report to the DMRE.

“There’s an inherent conflict for someone to be both a shareholder and in charge of wider policy for the sector,” he says. “The DMRE would want Eskom to deliver profits wearing its hat as shareholder, but it’s also making policy around generation that, while good for the country, could cut those profits. The temptation to overstep would be irresistible.”

And the ANC isn’t renowned for resisting the urge to overstep.

Wanted: Naive patriots

De Ruyter spoke to the FM on the sidelines of the Mining Indaba where, in the course of a 10-minute walk across the convention centre, he was routinely stopped by everyone who wanted a slice of his time. All wanted to gab about whether they’d found the person who laced his coffee with cyanide, or implore him to stay and fix the power crisis.

This celebrity status is somewhat surprising, given that De Ruyter is the face of load-shedding; you’d expect far more public opprobrium.

“You look so much better than when I last saw you. You’re far less pale, and seem to have much more energy,” said one person. To which De Ruyter joked: “Yes — since I’ve resigned, life’s looking up.”

So why would someone want a job so taxing — not to mention life-threatening? And what does this suggest about the kind of candidate who would replace him?

In De Ruyter’s case, he says he wanted the job because he wanted to “make a difference”.

“Call it naive patriotism, if you will. But maybe we need more of that in South Africa: the courage to do something. Of course I got stuff wrong and made mistakes, but at least I tried to make a difference,” he says.

Asked how he thinks he did, he gives a layered assessment.  

“Operationally, the energy availability factor has continued to decline [it is 58%, down from 66% in 2020]. This is because, internationally, once a plant is older than 50 years, it falls off an efficiency cliff. But some basics have also been restored — it’s taken an extraordinary effort to restore coal quality, for example,” he says.

Financially, he points to the fact that Eskom is now making an operating profit, even if it still has to find a plan to reduce its R400bn debt. And as far as splitting Eskom into three units — generation, transmission and distribution — goes, he says “we’ve brought it as far as we can, and now we’ve run into the bureaucracy in getting laws changed”.

When it comes to people, De Ruyter says he pushed through increases for managers for the first time in four years, which boosted morale. But he ranks his most critical pivot as putting Eskom on the road to decarbonisation and embracing renewables.

“Ultimately, though, many people will measure success by whether we kept the lights on or off. The fact is that since 1998, Eskom has been saying ‘we have a problem’ and policymakers ignored it ... [This] remains the problem,” he says.

His successor, obviously, will be judged according to that standard too.

So what would be the first question he’d ask a prospective candidate?

“I’d ask: why do you want the job? Is it because the ANC wants you there? Or the minister asked you to [do it]? Is it for the remuneration? Or is it because you really want to do something that’s meaningful?” he says.

De Ruyter himself had come highly recommended by then finance minister Tito Mboweni, who had served on the Nampak board when De Ruyter was CEO. This time, however, the Eskom board will drive the recruitment process.

A job advert that went out on February 5 stipulated that applicants must have at least 15 years’ experience as a senior manager at executive committee level, have “unquestionable integrity and ethics” and a postgraduate degree in engineering, business administration or economics, among other attributes.

Gordhan tells the FM that, besides placing adverts, the board has hired headhunters to “explore” potential candidates. He earlier said South Africans working at power companies abroad would also be considered.

The board will interview the candidates and submit proposals to the shareholder, being Gordhan (should he remain after the looming cabinet reshuffle). These will then be presented to the cabinet for sign-off.

The FM has canvassed senior government officials, and the consensus is that two skills are paramount: someone who is an engineer (or has worked with engineers), and who has a solid grasp of the local political economy.

“The person has to understand the culture of the organisation right down to plant level,” one official tells the FM. “To do this they have to pay attention to what is happening, what the mood is, and the morale levels right down at the plants. That is where the failure is taking place,” one official tells the FM.

Gordhan says it’s critical that the “most talented, visionary and ethical” people apply. “We need these types of leaders to seize the opportunity to lead the utility out of this crisis, but also beyond this crisis into a bold new future.”

This “bold new future” refers to Eskom’s unbundling into the three arms. But given that a decision to do this was taken in 2018, and government red tape is still clogging up the arteries, it seems it’s a case of future postponed.

Engineer, schmengineer 

Ask De Ruyter’s critics, and they’ll carp that he “is not an engineer”. Yet is this a non-negotiable skill for the role of Eskom CEO?

“I don’t think it’s that important at all,” says De Ruyter. “I’ve worked with engineers, for engineers, and had engineers reporting to me for 34 years. So I know how to manage engineers, and I also know how to challenge them. I worked at Sasol, and I was a coal salesman, so I know more about coal than many in Eskom.”

Others see it differently.

Lungile Mashele, an energy analyst who worked at Eskom between 2012 and 2014, believes the person “absolutely” must be an engineer.

“There’s a reason why, in the past, Eskom’s former CEOs had previously been the head of the generation arm. Today, generation is Eskom’s weakness. But the new CEO will need to have the respect of the staff, and this comes from your track record,” she says.

“When I joined, there was a distinct engineering culture, where you had to be clued up on what was happening. Every morning at 8am when I arrived at Megawatt Park, for example, I’d have to go to the GM’s office where, on a whiteboard, we’d run though the procedures for outages. It was all about the engineering.”

For this reason, she tips Titus Mathe — head of the South African National Energy Development Institute — as a potential replacement.

Mathe ticks many boxes: he’s a chemical engineer with a PhD, he held a number of senior roles at Eskom during his 12 years at the utility, including as GM for generation and engineering, GM for research, GM for technology, and GM for project engineering.

When the FM contacts Mathe, he says applying for the CEO’s role would be “something to think about” — but it’s a job that requires immense personal sacrifice, he adds.

“I worked there and I know the challenges, but I’m an engineer. And the complexity of the Eskom business requires more than engineering skills — it needs someone who can balance the politics, the business requirements, the technical challenges and has labour skills,” he says.

He knows the problems at Medupi and Kusile intimately. Five years ago, he told Moneyweb it could take up to R8bn to fix these new plants. “They were designed in a hurry, and built in a hurry. So things weren’t done in a normal way,” he says. “But we clearly should have intervened earlier to fix these problems.”

Mathe believes De Ruyter began his tenure well, especially in pushing Eskom to renewables. But “he needed to be more aware of balancing the need to keep the lights on with redirecting Eskom to the future. There needed to be a greater focus on maintenance oversight”.

He may be a strong candidate, but the FM believes there are other potential candidates (see box): former Eskom executive Tshediso Matona; former Tshwane mayor and civil engineer Kgosientso Ramokgopa; and energy expert Alwie Lester. Equally, the highly rated Chris Griffith is at a loose end after leaving Gold Fields. 

Other CEOs canvassed for this story tell the FM that “technical expertise” is critical, even if not necessarily in the form of an engineering degree.

Andries van Heerden, CEO of diversified mining and construction materials group Afrimat, says: “We need a hands-on technical person. We cannot have wool being pulled over the CEO’s eyes.”

But Van Heerden also believes the CEO must have social credibility — or a strong team that can handle all constituencies and look to bring politicians, communities and unions on side. That would allow the CEO to “focus on fixing the business”.

The debt crisis

Arguably, the need for financial and turnaround skills is just as critical as engineering know-how, given that the real albatross is Eskom’s R400bn debt.

This is evident in its financial statements for the year to March 2022: while Eskom clocked up a R20.3bn operating profit, it tumbled to a bottom-line loss of R12.3bn, after repaying a mind-blowing R35.4bn in interest and finance costs.

In his budget speech next week, finance minister Enoch Godongwana is widely expected to announce a plan to shift between a third and two-thirds of Eskom’s debt onto the government’s own balance sheet. This will give the new Eskom CEO vital breathing room.

But De Ruyter says that’s only part of the problem. He still believes Eskom needs to radically hike its tariffs — it asked for a 32.7% tariff hike, but was  granted “only” 18.6% — to be competitive.

“The tariffs absolutely need to reflect your costs properly, otherwise Eskom will just be back at the Treasury’s door in a few years, saying ‘oops, sorry — we had to borrow again to pay expenses’. So you’ve got to address the debt and the top-line revenue,” he says.

That’s bad news for South Africans who already feel they’re being milked to pay for an inefficient state entity that can’t keep a lid on its costs. It’s a suspicion that is fuelled, especially, by a 2006 World Bank study that said Eskom was up to 66% overstaffed.

De Ruyter rejects that. “It’s grossly overstated to say we have a bloated workforce. That World Bank study is fatally flawed because it made significant assumptions, and ignored key parts of our business. We’ve comprehensively rebutted it.”

Even if Eskom fired all its staff members tomorrow, he says, the utility still wouldn’t be cost-effective. “Are there opportunities to extract further efficiencies? Absolutely. Do we need to manage our procurement much better? Absolutely. But there are still hard costs, like servicing debt, coal and diesel for which we’re simply not charging enough.”

Still, there’s no dispute that Eskom was paying far too much for basic services for years. Cracking down on this might, in fact, be De Ruyter’s defining legacy, alongside the shift to renewable energy.

Some of the things he found when he joined the utility were the stuff of legend: Eskom was paying R26 per roll of single-ply toilet paper (real price: R6), R51 per black refuse bag (real price: R2.99), and R21 per litre of milk (only double the price). A basic wooden mop had been approved for purchase at a cost of R200,000.

 “When we wanted to impose new controls, the resistance was incredible,” says De Ruyter. “We introduced electronic tenders, because then you can’t have instances of various certificates vanishing from the docket. But we faced a major pushback from our procurement staff.”

‘Stop the meddling’

The predominant message from the business sector is that political meddling must be halted if Eskom is to be saved.

Christo Wiese — whose interests span retail and industrial interests — says the government needs to accept that the utility mustn’t be managed by politicians. “We cannot have politicians running businesses,” he says.

Jannie Durand, CEO of investment behemoth Remgro, concurs. “Will the new CEO be able to do more than André de Ruyter has done ... with one hand tied behind his back?” he asks.

Chris Schutte, CEO of Africa’s largest poultry producer, Astral Foods, says it’s critical that the new Eskom boss isn’t a cadre of the ruling party.

“The CEO should have substantial business and operational experience with a clear strategy and understanding of stopping the bleeding and developing a decisive turnaround plan,” he says. “They must have real executive decision-making authority and be protected from any political interference.”

Schutte says it’s vital that De Ruyter’s replacement has a clear understanding of his role, given that it could get messy with many political masters sticking their oars in. “The CEO should not take shortcuts for short-term gains, but rather ensure a sustainable baseload of electricity supply.”

However, Hosken Consolidated Investments CEO Johnny Copelyn warns that the new appointee ought to seek certain assurances from the government first.

“Will the state guarantee payment for electricity sold to municipalities that fail to pay? What is the commitment to funding the creation of infrastructure that will facilitate transmission of electricity from areas suitable for solar and wind generation to the national grid? What peaking capacity will be introduced to balance the grid against shortages of daily production if we go down the green generating route?”

Copelyn says it’s also worth establishing the state’s view on selling existing power stations to the private sector, with long-term contracts to supply coal-fired electricity.

“Unless these sorts of issues are made clear to the public and the CEO applicants, I don’t see how any CEO will be able to vigorously change the direction of Eskom nor provide relief from load-shedding in the foreseeable future,” he says.               

Political astuteness

What’s clear is that any new CEO will have to know how to manage the politics. On this point, Mashele reckons De Ruyter fell short.

“You need a strong CEO who is able to navigate, and deflect, the politics,” she says. “They will need to vocalise a vision like: ‘I want to see the energy availability factor above 70%, I want to maintain a reserve margin above 50%, and I want to sell excess capacity in the regional power pool by 2026.’”

Political savvy will be even more important after Ramaphosa last week announced a new “minister of electricity” in the presidency. Unfortunately, this only increases the number of potential political masters the CEO must serve. It’s a list that includes Mantashe, Gordhan and Nkosazana Dlamini Zuma, who gazetted new rules last week declaring South Africa’s electricity crisis a “state of disaster”.

Ramaphosa’s decision has rightly attracted scorn, because there is already a minister of minerals & energy in Mantashe. If he’s not right for the job, why is he still there?

But as Wits University associate professor William Gumede wrote in the Sunday Times, rather than upsetting the patronage network, Ramaphosa has “often created new structures, posts and policies to work parallel with existing corrupt or incompetent government structures, vested interests, party barons and ideologues”.

What inevitably happens, he said, is that “untouchable” ANC “barons” such as Mantashe marginalise these new structures. His point was  prescient: Mantashe immediately dismissed the new minister as a temporary “project manager” to deal with load-shedding.

But Gordhan tells the FM the new position doesn’t complicate things, as the solution to the energy crisis “isn’t one-dimensional” — it involves about six or seven ministries.

“Once we have clarity [from Ramaphosa] on the precise role of the ministry, it will become clearer. But the key is that we should not work in silos,” he says.

Still, there’s a lingering feeling that Ramaphosa’s announcement has only muddied things further. This is hardly helpful, considering that politics destroyed Eskom in the first place, from former president Jacob Zuma’s strong-arming the board to appoint Brian Molefe, to appointing boards of political lackeys.

Prof Susan Booysen, director of research at the Mapungubwe Institute for Strategic Reflection, says Eskom will only be saved by a resolute decision by politicians to hire a CEO, and then not interfere in Eskom’s turnaround.

Though this seems unlikely, Booysen believes there may be a shift on the horizon. “We have not had an energy crisis of this magnitude in the history of South Africa, nor has the ANC faced such an enormous looming electoral crisis,” she says. “These two crises are converging for the party and they have to show voters they can put the party aside and act in the national interest.”

This would mean sticking cadre deployment, and ideology, in the drawer. But some analysts have vanishingly little faith that will happen.

Political analyst Prince Mashele, for example, says he feels sorry for De Ruyter’s successor.

“De Ruyter was appointed by an ANC government, but it’s clear they never gave him the complete support he needed ... This isn’t going to change. Whoever steps into the role, if he or she is competent, will be subject to exactly the same thing,” he says.

He believes the ANC is characterised, first, by its corruption, and, second, its incompetence as a governing party. “Anyone who expects any appointment that comes from the ANC to defy those two ills is being hopelessly naive,” he says.

But then, as De Ruyter says, perhaps you need to be a little bit naive, and a little bit of an optimist, to believe you can reshape this system. Perhaps Eskom’s fate needs to rest in the hands of somebody who doesn’t know it can’t be done.