New CEO misread the situation at Eskom

As the numbers keep rolling in — a contraction in economic growth, a slump in business confidence and a spike in the petrol price — we have had our fill (gatvol, actually), especially as we thought the country was turning the corner.

On Thursday, it got worse: Eskom began load-shedding a week after CEO Phakamani Hadebe told Business Times: “Unless something drastic happens, I don’t see us loadshedding.”

Well, something drastic did happen, and it’s surprising Eskom management didn’t see it coming. The disruption to coal deliveries by incensed workers as well as sabotage have been cited as the chief causes of load-shedding.

But Eskom has also had ongoing coalsupply problems. It is required to have a 20day stockpile as a minimum at its power stations, but earlier this month six power stations were below the required level.

Hadebe, who was recently appointed CEO, has a strong track record both in government institutions and the corporate sector.

But, for all his experience, he and his team seem to have misread the mood at Eskom, failing to consider what the result would be of such a hardline approach on wages.

Eskom had offered no wage increase — that is until industrial action sparked loadshedding and Public Enterprises Minister Pravin Gordhan weighed in.

Hadebe has never led an organisation where unions wield such power. Cutting costs when well-organised workers are involved is not going to be easy for the debt-laden utility.

Eskom staff are reportedly generously paid. Even so, in a country with such high unemployment, those who do have work are likely to be supporting many who don’t. And we all know just how fast administered prices (including electricity) have risen.

Eskom may find some relief from Nersa’s decision this week to allow the utility to claw back some of its expenditure. But it won’t be sufficient to get it out of the deep debt hole it has dug itself into.

And a further increase in electricity prices following Nersa’s decision may mean many customers will have no choice but to use less electricity. Pricing your only product beyond the reach of many of your customers is a disastrous way to do business.

Since load-shedding began in 2008, many big businesses started generating their own power or reduced their demand for electricity, and some residential customers have cut their reliance on Eskom by installing solar- and gas-powered appliances.

Hadebe has said the utility cannot keep relying on tariff increases, but it’s clear now that cutting costs is not going to be a quick win for Eskom.

And then to start load-shedding as the greatest show on earth kicks off, that really makes me gatvol.

Hadebe has never led an organisation where unions wield such power