South Africa embarks on Eskom overhaul

A month after Cyril Ramaphosa took the helm of South Africa’s ruling African National Congress (ANC) in December, he called an urgent meeting with then-President Jacob Zuma and senior ministers to save state power firm Eskom.
Ramaphosa understood sweeping changes were needed at the struggling utility company. He persuaded Zuma to replace Eskom’s board and name a new chief executive to appease investors such as the World Bank, according to an official at the meeting.
It was Ramaphosa’s first major policy intervention since becoming ANC leader and signalled a determination to reform Eskom, a company nearing breaking point after a string of corruption scandals during Zuma’s nine years in office.
Eskom is critical to South Africa. It supplies more than 90 per cent of the country’s power, has 220 billion rand ($17 billion) of state-guaranteed debt and is often cited as a threat to South Africa’s credit ratings, which are near junk status.
“If Eskom were to collapse, it would be a catastrophe for generations to come,” said the official, who declined to be named. “Ramaphosa explained to Zuma that it was time to act.”
Ramaphosa still faces a battle keeping Eskom afloat: new instances of fraud under the firm’s previous management are still being uncovered, a sluggish economy means demand for power is tepid and powerful labour unions are likely to resist change.
But what may help Ramaphosa is a realisation in the upper echelons of the ANC that Eskom is no longer untouchable, sources in the ruling party said.
Since replacing Zuma as president in February, Ramaphosa has pressed on with reform, surprising many with the speed at which he is addressing problems at Eskom that have festered for years.
Ramaphosa appointed respected former finance minister Pravin Gordhan to guide turnaround efforts, directed new executives to produce a plan to stabilise the company’s finances and halted a nuclear deal supported by Zuma that could have saddled Eskom with billions of dollars of additional debt.
Asked for comment about Ramaphosa’s role in efforts to reform Eskom, his spokeswoman Khusela Diko said the president met regularly with Gordhan to discuss Eskom and that revamping the company was a priority.
A spokesman for Zuma was not available for comment.
‘NO OTHER OPTION’: Eskom also employs 47,000 people and has powerful labour unions, some allied with the ANC and others more militant, that have said they will resist attempts to cut the workforce and fight moves to privatise the company.
However, ANC sources say Ramaphosa has secured the backing of senior figures in the ruling party for a radical overhaul of Eskom, one which will involve attracting greater private investment into the electricity supply industry. “From an ideological standpoint, Eskom presents a real challenge for the ANC,” said a source in the ANC executive close to Ramaphosa.
The official involved in the meeting with Zuma, who holds a senior position in the ANC, said there had been a discussion about which assets should be considered “non-core” and sold.
The idea that outside investors may be needed to save the company is a dramatic shift for a political party that has rejected any form of privatisation of Eskom for years.
The desire for change is partly driven by a realisation that Eskom is more fragile than many believed. The situation came to a head in November when the World Bank held a flurry of meetings with senior government officials. — Reuters

Alexander Winning