High debt, old power plants: De Ruyter’s ‘unenviable’ new job at Eskom

2019-11-19 13:00

The packaging firm chief executive who was yesterday appointed as Eskom’s turnaround superhero has his work cut out for him.

Andre de Ruyter will take on his role as the new head of Eskom next year, and has been tasked with restructuring the heavily indebted state utility whose power plants are struggling to keep the nation’s lights on.

Investor worries about South Africa’s economy have been reignited after repeated power cuts in February and March dragged growth into negative territory in the first quarter.

Ministry of Public Enterprises Pravin Gordhan said De Ruyter, chief executive of Nampak, would start at Eskom on January 15 with the job of splitting the utility into three separate units, under a plan approved by President Cyril Ramaphosa.

De Ruyter spent more than 20 years with petrochemicals group Sasol in several senior roles, which the ministry said gave him global exposure in the energy and chemicals industries.

But some analysts questioned whether De Ruyter, who has been leading a firm that specialises in designing and making packaging, had enough experience in the power business.

“He is a surprise appointment ... It is unclear he has the requisite experience,” said Peter Attard Montalto, head of capital markets research at Intellidex.

“Nampak is a totally different kettle of fish and has not been clearly successful.”

The government has said it would split Eskom into generation, transmission and distribution businesses to boost efficiency, although it has not said how this would achieved without first resolving its huge debt and loss-making problems.

Robust economic growth in South Africa hinges on saving Eskom, which is buried under a R440-billion mountain of debts and providing the nation with enough electricity from its creaking fleet of coal-fired plants.

The government has pledged to give Eskom more than R100 billion over the next two fiscal years, with additional aid spread over the next decade.

READ: Everybody has to come to the party to fix Eskom, says Gordhan

Eskom’s previous chief executive, Phakamani Hadebe, resigned this year, citing health reasons. He was the 10th chief executive in a decade to quit a company which has seen a steady stream of departing senior executives and board members.

Chris Yelland, a Johannesburg-based energy expert, said De Ruyter had an “unenviable task”.

“I am not sure if this the right appointment. It’s wait-and-see at the moment, but I am filled with a kind of foreboding,” said Yelland.

Gordhan thanked De Ruyter “for not only accepting this position at a difficult time for Eskom, but, given Eskom’s current financial situation, also agreeing to a lower compensation package than the position currently pays”. – Reuters

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December 8 2019