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South Africa: Fallout over power utility CEO's graft claims


Fri, February 24, 2023



JOHANNESBURG (AP) — South Africa’s troubled state-owned power utility Eskom appointed an interim chief executive Friday after a fallout with its outgoing head over a media interview he gave.

Andre de Ruyter alleged ongoing corruption at the company linked to the ruling party, and said there was a lack of will from government to stop the graft and solve the country's electricity crisis.

Africa's most developed economy is experiencing its worst rolling power blackouts in 30 years due to frequent breakdowns at Eskom's aging coal-fired power stations. Those problems are largely blamed on years of corruption and mismanagement at the utility under the ruling African National Congress party.

De Ruyter resigned last year and was scheduled to leave at the end of March. But he was removed from his position immediately after the interview with a private TV station aired on Tuesday night in which he accused the ANC and unnamed government ministers of covering up corruption at Eskom and only being interested in their re-election hopes in 2024.

“They want what will win them the next election, not what will keep the country going for the next two decades,” de Ruyter said of the ANC.

De Ruyter said Eskom, which is deep in debt, was losing $50 million a month to corruption. When asked by his interviewer if Eskom is a “feeding trough” for the ANC, de Ruyter replied: “I would say the evidence suggests that it is.”

The interview led to him being asked to leave immediately and his notice period scrapped. The board appointed its current chief financial officer, Caleb Cassim, to act in the position until a permanent CEO is appointed.

Allegations of corruption and mismanagement have dogged Eskom for years and were recently laid bare during a judicial commission of inquiry, which implicated senior ANC ministers and former President Jacob Zuma.

De Ruyter’s allegations come as South Africa's 60 million people have electricity switched off at their homes and businesses for up to eight hours a day in rolling blackouts. There are warnings the power cuts could be increased to 12 hours a day. Eskom has historically supplied more than 80% of the country's electricity.

Earlier this month, President Cyril Ramaphosa declared a state of disaster to deal with the energy crisis, describing it as an existential threat to the country’s slumping economy.

The measure allows the government to cut red tape in procuring additional electricity capacity on an emergency basis and exempt certain essential services like hospitals from power cuts,. Ramaphosa also announced that he would appoint a minister of electricity.

In his budget speech this week, the country’s finance minister announced the government would guarantee about $13 billion of Eskom’s total debt of $23 billion.

The Democratic Alliance, the largest opposition party, described de Ruyter as a “national hero” for speaking out about corruption at Eskom, which has lost billions to graft over the years.

ANC Secretary General Fikile Mbalula criticized de Ruyter and challenged him to produce proof of his corruption allegations against the party and report it to law enforcement authorities.

De Ruyter claimed last year that he had survived an attempt on his life when someone slipped cyanide into his coffee a day after he had submitted his resignation as Eskom CEO. He has said that Eskom has become a target for organized crime syndicates as well as corrupt politicians because of the massive amounts of money it receives from government and other sources.

Mogomotsi Magome, The Associated Press

South African Minister Gordhan Labels Ex-Eskom CEO a Green Globetrotter

Paul Vecchiatto and Paul Burkhardt
Fri, February 24, 2023




(Bloomberg) -- The South African minister who oversees state power utility Eskom Holdings SOC Ltd. accused its former Chief Executive Officer Andre de Ruyter of spending too much time promoting a transition to green energy and paying inadequate attention to fixing its broken coal-burning plants.

De Ruyter spent three turbulent years at the helm of Eskom, during which he struggled to end rolling blackouts that have crippled the economy or get its shaky finances back on track. He abruptly left the company this week after giving a television interview in which he accused unidentified members of the governing African National Congress of stealing from the utility.

Public Enterprises Minister Pravin Gordhan, who has political oversight of Eskom, stood by De Ruyter’s campaign to fight graft and thanked him for his “sacrifice and resilience” after he first announced in December that he would resign after serving three-months’ notice. But De Ruyter’s disparaging remarks struck a nerve within the ANC, which has called on him to provide proof, and alienated his main political advocate.

“What Mr. De Ruyter effectively said was that all of us in government are idiots and that stirred the backlash,” Gordhan said in an interview. “He did not pay the attention to Eskom’s generation that he should have, and instead swanned around the world looking at renewables.”

De Ruyter attended United Nations climate change conferences and played a key role in helping South Africa secure $8.5 billion in funding from rich nations to help reduce it reliance coal, the dirtiest fossil fuel, which is used to generate more than 80% of South Africa’s electricity.

With outages hitting unprecedented levels, De Ruyter failed to prioritize correctly and “did not sweat Eskom’s assets as he should have,” Gordhan said. “The main focus by government will now be to do just that.”

De Ruyter declined to comment.

Eskom Chairman Mpho Makwana meanwhile also accused De Ruyter of behaving “reprehensibly” by going public with his allegations against the ANC, saying he never raised most of them with the utility”s board.

But lobby groups Business Unity South Africa and Business Leadership South Africa came to the former CEO’s defense, saying his accusations “require an urgent response from our government and appropriate agencies of state to ensure that the truth is uncovered and appropriate action taken.”

Eskom appointed Chief Financial Officer Calib Cassim as interim CEO on Friday. De Ruyter’s comments may make it difficult to attract the caliber of person needed to replace him on a permanent basis, “but that search is continuing,” Gordhan said.

A $14 Billion Bailout For Eskom Leaves South African Power Crisis Unresolved

Paul Burkhardt and S'thembile Cele
Thu, February 23, 2023 

A $14 Billion Bailout For Eskom Leaves South African Power Crisis Unresolved

(Bloomberg) -- A 254 billion-rand ($14 billion) state bailout for South Africa’s cash-strapped power utility will help steady its finances, but won’t immediately improve its operations or alleviate an electricity shortfall that’s crippling the economy.

The three-year debt-relief plan for Eskom Holdings SOC Ltd., announced in Finance Minister Enoch Godongwana’s budget speech on Wednesday, is contingent on the company bringing in private operators to help run its plants and transmission network and meeting other performance criteria. Those measures will take months or even years to bear fruit, with the National Treasury warning that rolling blackouts that began in 2008 will persist until at least the end of 2024.

The extent of the energy crisis was on stark display on Tuesday, with Eskom cutting a record 7,000 megawatts of capacity from the national grid to prevent its collapse — the 115th straight day it has instituted outages. The following evening, the utility said Chief Executive Officer Andre de Ruyter would leave his post immediately, rather than at the end of next month as previously planned. The announcement came shortly after he criticized the government and the ruling African National Congress over corruption.

Power shortages will only gradually ease as Eskom’s near-monopoly dwindles and companies and households install more of their own generation capacity, said Lumkile Mondi, an economics lecturer at Johannesburg’s University of the Witwatersrand.

“South Africa as an investor destination, forget it,” he said. “We’re in this period of slow growth for many, many years to come.”

There are manifold reasons for Eskom’s decline, including delays in securing government go-ahead to add new capacity, massive cost overruns at two new coal-fired plants, continuous management upheaval and political interference in its operations.

A lack of funds and spare capacity also forced the utility to scale back on maintenance, which has exacerbated plant breakdowns and outages. And it has fallen victim to theft and graft, with De Ruyter estimating that 1 billion rand is being stolen from its coffers each month, often by people affiliated with the ANC.

Responding to De Ruyter’s allegations, ANC Secretary-General Fikile Mbalula said the party’s lawyers would write to the former CEO demanding that he prove or retract his allegations. He also accused De Ruyter of failing to get a handle on the nation’s energy crisis.

On Feb. 9, President Cyril Ramaphosa announced plans to name an electricity minister to spearhead the response to the blackouts, but an appointment has yet to be made. The government also hasn’t clarified whether Eskom will continue to answer to the public enterprises ministry or be shifted to the energy ministry — a move the ANC has approved but which Godongwana says will complicate the disbursement of debt relief.

Ramaphosa is still considering those matters, along with making changes to his cabinet, said Mbalula.

“He is not a fanatic of doing things just for the sake of doing it and for populist stances,” Mbalula said. “He doesn’t take quick decisions, he applies his mind and when he takes decisions you can be confident in those decisions.”

While cabinet appointments are the president’s prerogative, Eskom’s board should have moved with greater haste to find a replacement for De Ruyter, who announced his intention to quit in mid-December after three years on the job, according to Godongwana. The board will meanwhile have to ensure the utility meets all its obligations to qualify for the debt relief, and if it doesn’t “heads will have to roll,” he said.

Public Enterprises Minister Pravin Gordhan on Thursday said the appointment of an acting CEO is being finalized, and an announcement will be made in due course to ensure there isn’t a leadership vacuum.

Some Eskom investors are giving the government the benefit of the doubt for now, with the yield on the utility unsecured 2028 notes dropping 90 basis points since Tuesday.

“While there is some execution risk, we believe it seems to be a credible plan that — if executed with ruthless focus and urgency — can provide Eskom with a path to return to financial and operational sustainability,” said Olga Constantatos, head of credit at Cape Town-based Futuregrowth Asset Management, which oversees about $11.3 billion in fixed-income investments. The budget documents indicate there is government recognition that “a different approach is needed, which we view as positive,” she said.

--With assistance from Colleen Goko.