Eskom CEO André de Ruyter has a philosophical – but not naive – approach to the SOE’s challenges and is seeing beyond South Africa’s coal addiction to new, appropriate technologies and smarter investment strategies
First published in the Daily Maverick 168 weekly newspaper.
André de Ruyter is the most important businessman in South Africa today. If the Eskom CEO can’t deal with its debt, its notorious inefficiency and the load shedding problems, the whole country will suffer. It wasn’t helped by an explosion in Medupi this month, which caused an estimated R2-billion in damages and will take two years to repair.
De Ruyter is planning to evolve Eskom into a modern power utility, lessening its dependence on coal and embracing cheaper technologies in renewables, while keeping an eye on the upcoming EU carbon border tax.
Faced with an enormous R400-billion debt from State Capture and 66% overstaffed, according to a 2016 World Bank policy research working paper, Eskom is in a deep financial hole – one that threatens to pull the country down with it.
De Ruyter, according to The Sunday Times, said yes to the most poisoned chalice of a job in the country – even more so than the Bafana or Springbok coach – after 27 black executives were asked to apply for the job but declined. He must have known he would be vilified and his reputation could be damaged, but he took the job anyway.
But De Ruyter is strangely optimistic about what can be achieved with Eskom.
“I think we are in a fortunate position that we are faced with an array of power stations that are rapidly approaching their end of life. They’ve had a very hard life, they’ve been run far harder than norms would dictate, and they haven’t been maintained properly,” he told me in a wide-ranging podcast about Eskom’s future.
The “incredibly expensive” estimate to bring them into full compliance from an environmental point of view is about R300-billion. “And of course, you earn no return on that money. You don’t get any new-generation capacity.”
Even more concerning, the costs of coal are now going to become more expensive because of the environmental abatement costs and increasing costs of carbon emissions. Meanwhile, competing technologies are becoming increasingly affordable.
“And if you’re a businessperson, which I think I am, you look at this, and you say: well, do we invest R300-billion in environmental compliance costs? Do we spend more time on extending the life of our existing fleet? Or do we see this as an ironic opportunity to pivot the industry away from carbon to a cleaner, greener future?
“And, by the way, in the process attracts significant concessional funding – from international lenders who are very concerned about climate change.”
Even more disastrous is that insurance firms are increasingly less willing to insure fossil fuel polluters, even if Eskom could secure funding.
Meanwhile, the cost of renewable energy and battery storage plunged 60% from 2015 to 2020 and is expected to decrease another 30% by 2025.
International funding opportunities abound. De Ruyter quotes figures of $40.5-trillion in total global so-called environmental, social and governance assets under management in 2020. This is part of Eskom’s Just Energy Transition Plans proposal presented to the Presidential Climate Commission in July.
De Ruyter may seem philosophical about Eskom’s seemingly insurmountable challenges, but he is clearly not naive.
“Great challenges in human history have often given rise to great opportunities and great developments. If you look at the Second World War, it gave rise to a whole bunch of technological innovations that we still benefit from today. The same with Covid. The same with the energy crisis in South Africa.
“If we had built the power stations that Eskom had suggested 15 years ago, we would still be bound to coal for an extended period of time, because we would probably operate those power stations until the end of their lives,” he said.
“But now, because ironically we didn’t invest, we have load shedding, and we have a shortage of generation capacity that coincides with this opportunity of ‘let’s see what we can do to turn this challenge into an opportunity’.”
He added: “And that’s the great thing about the challenge that we currently face.”
If there is one person in South Africa who should be this optimistic, it should be the CEO of Eskom.
South Africa needs the vision and commitment to move past coal and into a greener, more sustainable future. Thankfully, André de Ruyter gets it. DM168
Toby Shapshak is the publisher of Stuff.co.za and Scrolla.Africa