National Transmission Company’s board will be independent from Eskom’s

Connie Queline

National Transmission Company’s board will be independent from Eskom’s

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JIMMY MOYAHA: There have been a couple of developments coming out of the Eskom stable that we’ve kept an eye on throughout the last couple of weeks and months. The latest among them was that announcement around the new board that’s been put in place to head up the transmission subsidiary. That subsidiary, that business, would be as a result of the unbundling that Eskom is undergoing at the moment to separate into three divisions. We’re going to be taking a look at that and a couple of other developments from Eskom.

To do that, I’m joined on the line by the Eskom chairman, Dr Mteto Nyati. Good evening, sir. Thanks so much for taking the time. Let’s perhaps start with the new board appointments and the structure that then puts in place for Eskom. What are your thoughts around the current board that sits within Eskom that you are the chairman of, and how will this new board integrate with your existing board?

MTETO NYATI: Thank you so much for having me, and I’m glad to also be talking to your listeners. The first thing you’re asking about the board, this board now is just over a year, the Eskom board, and I’ve been the chairman of this board for just over a month. So we are no longer the new board. We have been around now.

Read:
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We understand deeply what the issues are. We are fully driving the business and making sure that we get the country out of the challenges that it is currently facing. There are many pieces to address. It’s more like a puzzle.

You have to put together all of the bits and pieces, and not all of the challenges are in generation. Some of the challenges are in distribution and in transmission. And so we, as the board, are looking at the entirety of Eskom and making sure that we are moving all of the pieces and putting them in the right place.

I have a very capable board. I’m quite fortunate. I’ve got people that really, really have got a deep understanding of the industry and they are guiding me – and we are collectively guiding the leadership of Eskom. The appointment that we’ve just made recently of the CEO was conducted by this board, and we’re very comfortable with the appointment of Dan Marokane as our new CEO who is going to take the company forward.

Read: Dan Marokane ‘will hit the ground running’ as Eskom CEO [Dec 2023]

The next step though is to make sure that we execute the restructuring of Eskom into its three entities. This is critical in terms of changing the energy landscape within South Africa. We are moving into this new world, where all or most developed countries have already moved into this space, creating a transmission company that is open, that is able to interact with independent power producers and produce and procure electricity for the country.

Setting up that entity is important for us. It was important to identify a board [of] suitable individuals that can take the lead and guide this new entity to be able to fulfil its mandate, and we have done so. Yesterday we announced 12 names, and we are very, very happy with the people that we were able to find in all of these roles.

If nothing, you can have a great CEO, but the CEO can never do anything on his or her own. They need people around them. And to have this quality of people that we managed to secure for the National Transmission Company of South Africa, we are very excited about its future.

How it’s going to interact with us is [it’s] going to be an independent board. They’ve got their own chair. The chair of that board is Priscillah Mabelane. She is going to be leading that board together, of course, with the lead independent director, Brian Armstrong. They are independent. Our interface with them is one of being a shareholder. That’s the extent. In everything else, they have to run that business on their own. I hope I’ve answered your question.

JIMMY MOYAHA: Thank you, Dr Nyati. You have. With regard to the boards and the structure, the understanding is of course that the individual units, the transmission unit, the distribution unit, and the generation business will all be subsidiaries of the current Eskom business. First of all, is that likely to change? And, following from that, does this now not then create a bit of confusion around the role of your board and Eskom as the parent company; as a shareholder?

What we’ve seen in the past is, we’ve definitely seen where shareholder involvement has been within state-owned entities, there has been confusion as to how entities then are managed. If there are too many chefs in the kitchen, so to speak, it becomes very difficult to make decisions. Is this not something Eskom is concerned about?

MTETO NYATI: We are not really concerned. This is a structure that is common. I come from the private sector. Private-sector companies have got these subsidiaries all over, and they’ve got independent boards running the different subsidiaries. If you’ve got an operating company that has this board, you allow that board to do what it needs to do, and you interface with them. Of course they have to account back to you as the shareholder. But that’s the extent to which you get involved. Operationally and otherwise you allow that board to operate independently, and this is what we’re going to do here.

The good thing is that we’ve got people who have a huge amount of experience in the private sector leading these entities. We’ve got Priscillah Mabelane, who comes from Sasol. I come from industry myself. We fully understand governance. It’s very important that we give them the space to do what they need to do as that board. And that’s what we’re going to do. But at the same time, as a shareholder, we want to make sure that they deliver on what we want, so they have to account to us.

We won’t interfere, but we’ll hold them accountable. So that is the relationship between us and them.

JIMMY MOYAHA: Dr Nyati, speaking of deliverables and accountability, I’d like to take a look at the Integrated Resource Plan that was signed off by Minister [of Mineral Resources and Energy] Gwede Mantashe. The plan suggests a bit of a change in the setup that we have at the moment. We had an Integrated Resource Plan from 2019 that has now been amended, and it looks as though there’s been a shift away from the reliance on renewables, and a shift towards extending the life of coal, as we have it at the moment, as well as improving the electricity availability factor.

My question around the Integrated Resource Plan is, firstly, was Eskom involved in the preparation of this resource plan before it was finalised and signed off? And if that is the case, then how do we explain the base scenario having load shedding for another three years?

MTETO NYATI: Okay. I think there are a lot of things in one question there. Let me try and unpack them. The first one is that this resource plan that you are talking about, the 2023 resource plan, is not an approved plan. It’s a plan that’s sent out for the public to comment on.

So we still have a long way to go to get to a point where we can say we’ve got a plan for the country that has been approved. It has not been. It’s a plan that has been approved for the public to engage with.

And we as Eskom are part of the stakeholders that have an interest in this; we are currently looking at that plan and making sure that we provide the necessary input. When they have the public hearings, we will provide our input.

Read:
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I am not going to be sitting here and making a comment around that. I’m going to allow the team that has been tasked to look at this plan to do exactly that and formally present, in the right structures, our input as Eskom.

But what we can say is that overall our view is that in order for us to fulfil our mandate generally, our mandate is one of making sure that there’s electricity all the time, that electricity is sustainable, that electricity is affordable and is produced in a way that is not harming the environment. Those are the three things that are key for us.

So renewables is something that we cannot avoid. It has got to be a part of the agenda, and is something that we are embracing as Eskom. But at the same time, we need to know that we’re starting to enjoy the benefits of Kusile 1, 2 and 3 – up to 6. We will enjoy the benefits of Medupi, and those power stations will still be around for a very, very long time. They are coal-fired power stations, so we’ll continue to have that.

But as we move forward, any investment that we have has to be in the area of renewables because, not just because of the environment, but because it drives down the cost of producing electricity, which is something that many South Africans want us to do – to make sure that we deliver electricity that is affordable. You cannot do that if you are not embracing renewables.

Renewables substantially reduce the cost of producing electricity. In fact, wind is the cheapest, then solar. So if we can’t go in that direction, we are actually creating a huge problem for the economy because we’ll be delivering electricity that is not affordable, that is not helping the economy to grow. So those are the key things I just wanted to share with you around this particular point.

JIMMY MOYAHA: Dr Nyati, you touched on this, or you mentioned this quite clearly – the fact that affordable electricity is what is needed at this stage, and we cannot ignore the fact that, first of all, the electricity tariffs have been increasing year on year for quite a number of years while the electricity production itself has been decreasing – and effectively consumers have been paying more to receive less electricity.

How then does this Integrated Resource Plan that speaks to things like gas-to-power become affordable for consumers, because the only gas-to-power conversation that we’ve had has been the conversation with Karpowership – and [Electricity] Minister Kgosientsho Ramokgopa himself, in a conversation I had with him separately, said that that deal in its current form is not financially sustainable.

Read:
Eskom looks to buy electricity from Karpowership in controversial move [Dec 2023]
Eskom ends grid access for Karpowership [Jan 2024]

So, if the Integrated Resource Plan right now still makes mention of avenues that are not financially sustainable towards reducing the cost of electricity, how then do we hope to bridge this gap once the public does provide commentary? As you said, this is still a draft document, it hasn’t been implemented as a resource plan, but we need to think about these things before it is finalised.

MTETO NYATI: Absolutely. This is why it is wise for the DMRE [Department of Mineral Resources and Energy] to engage the public and also the institutions like ours, which are going to be providing the input to make sure that all of the interests are taken into consideration.

And from where we’re sitting as Eskom our interest is one of affordability. We cannot continue to be increasing tariffs year in and year out. We need to find a way of reducing them. And one of those ways is to embrace renewables.

Of course, we also need to be looking at our own costs and becoming even more productive, and that’s another way. The quickest way is to make sure that we come up with technologies that are costing us less.

So I think this point for us – we should not be debating it right now because this is not a final thing. We still have a long way to get to that point. No, we should not be worried about anything. Let people have the engagements and I know for sure that people are going to do what is right for South Africa.

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JIMMY MOYAHA: Dr Nyati, let’s stick with the cost-containment conversation that we’ve been having. We spoke about the unbundling of Eskom that’s taking place, and I want to look at two costs in particular – the costs of development that we’re now going to go through under these new structures in the form of the R200 billion that is going towards transmission or that is needed for transmission. Minister Ramokgopa has come out to say that private sector investment and private investment is desperately needed if we are to get towards this outcome. The importance of being able to successfully finance the transmission for electricity generation in future – let’s start with that.

MTETO NYATI: Yes, it is so important, First, we should never put Eskom in a situation where we have to now go and beg for us because we’ve got this huge amount of debt. We should never go into that situation any more.

So we need to find alternative ways of financing this. We can learn a lot from what has happened around the toll roads, where we have asked the private sector to come and do certain things.

Over a period of time then you hand over that asset back to the public sector, to government. It’s called ‘build, operate, and transfer’.

There are models like that that have been done elsewhere. We need to be looking in depth into alternative sources of funding without burdening the fiscus, sir, with this development that needs to happen.

Listen/read:
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But at the same time, as a country, we need to be thinking how we can use this opportunity. This is a great opportunity over the next 10 years. This is a huge amount of money that this country is going to be investing. How can we use that to develop specific industries and make sure that we’ve got local capability that we can then use and take those capabilities into the rest of the continent, take those capabilities into other emerging markets on the back of the investment that we did for transmission in South Africa?

If you look back in terms of our own history in South Africa, if you look at the Afrikaner, the Afrikaner did this very well, and we need to learn some of those lessons and make sure that we bring some of that thinking here.

The other thing that we need to make sure that we do is that we have to appoint people of integrity in roles.

Let’s not have this huge amount of money going to waste because of corruption. That is why we took some time to find men and women of integrity to be in charge of our transmission and become part and parcel of the board of transmission.

We need people who have the courage, people who have the integrity, people who are able to speak up, people who will be able to challenge.

These are the things over and above just their technical competencies that we need, because we have learned a lot and seen what happened when we were building Kusile, what happened when we were building Medupi. It cannot happen at this moment. We need to use this opportunity to uplift South Africa and set it up so that we can do something beyond just transmission, take those capabilities that we have built and offer them to other countries. So that is the big thing.

So at the end of the day, it all relies on us working together. It all relies on all of the institutions paying attention to what is happening in Eskom and holding Eskom and both national transmission and Eskom accountable to make sure that we use the funds that we get in the right way to develop the country.

JIMMY MOYAHA: Dr Nyati, speaking of accountability and building a better Eskom, the other cost I wanted to look at was the current situation within Eskom. At the moment, 80% of Eskom’s diesel budget has been used, and we are only nine months into the year. What is the plan if we need to finance this? Is there enough available to ensure that electricity is provided? Because if we look at, first of all, the Integrated Resource Plan as it currently stands, it does not speak to a reduction in the load shedding that we are seeing. We’ve addressed that to say that load shedding needs to be something that is dealt with sustainably.

But from an operational standpoint, the day-to-day operations suggest that right now R26 billion out of the R30 billion that’s been budgeted for diesel has already been spent. How do we plan to get through the rest of the year, and how do we plan to finance this sort of cost going forward?

MTETO NYATI: I don’t know where you got this R26 billion that has already been spent; I don’t know where you got that. But what we are seeing internally here is that yes, we continue to have setbacks here and there but we’re seeing some improvement in terms of the reliability of our plants. And that reliability of the plant comes from the huge planned maintenance that we have been doing over the while.

Over the last now almost six months, we have been doing heavy planned maintenance, and the benefits that we’re going to get out of that – yes, we’re having load shedding in the short term because we’re doing planned maintenance – but coming out of that, when we bring back these units, they will be much more reliable and require less support from OCGTs [open-cycle gas turbines] that are very, very costly.

If it were up to us, we would not be using those OCGTs.

So [of] the investment that we’re putting now into making sure that, as we move forward [in] the rest of this financial year and into the new financial year, we will be using a minimum of OCGTs possible because we have done the investment around plant maintenance. It’s a pain right now, but it’s a necessary pain to get us out of relying on diesel, which is very expensive, and which will be driving up the cost to consumers. And it’s also not sustainable.

JIMMY MOYAHA: Thank you for that. Dr Nyati, just for reference, that R26 billion figure was pulled from the Eskom interim results published around these results up to September 30, that suggested that there was a budget of R19.7 billion rand that was being worked within. So the numbers came from the statements that were pulled through by Eskom.

Read/listen:
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But let’s move back to the outlook for the power utility going forward. We’ve spoken about the need for building a sustainable entity and ensuring that this entity lives better than the Eskom that we currently have. To do that, you’ve alluded to the fact that we need to all be working together and ensuring that there is accountability, first of all, and that there’s a reduction in corruption. How do we ensure that we achieve this from an accountability standpoint? Have there been measures that have been put in place by the current board that will hold members within Eskom subsidiaries accountable for their performance?

In the past, we’ve seen that – obviously this was prior to yourself and the current board joining – regardless of the performance of Eskom, executives have been remunerated accordingly. There haven’t been any conversations around performance-related bonuses tied to the performance of the entity. Is that something that we can expect to see from the new subsidiaries in an effort to hold everybody accountable for their performance?

MTETO NYATI: What has been done in the past was the removal of all of the bonuses within Eskom. I personally think that is a wrong move because we are actually treating everybody the same now. You are saying to the good people who are performing you are performing in the same way as everybody else, so we’ll just treat you the same.

No, we need to differentiate. Differentiation is something that is key. Those people who are doing well need to be given bonuses, and they are the ones who are going to be helping us to get out of the challenges that we have here.

Those who are not performing must be helped to perform. If they cannot, then we must help them to leave the company.

That is the culture that we are building, a culture which is a high-performance culture. But at the core of that, you need to have the tools of having incentives, incentives that help people to drive the right kind of behaviour – both short-term incentives and long-term incentives – and this is absolutely key, otherwise we will not be able to attract the best talent that we need to get us out of the challenges that we have.

So for me having performance incentives is absolutely critical. But what you need to do is to set up targets in such a way that if people are not performing, they get nothing. And when people are performing, yes, they must get something. So that is the kind of thinking that we’re bringing back into the organisation. We’ve set the targets. If we see people being paid anything, it’s because you would have felt, as the citizens of South Africa, that we’ve moved forward – and that is the drive.

Read: Power stations can’t keep up? Not at Lethabo

Otherwise, if we’re punishing – this collective punishment, everybody being punished – we will never get the many people that are doing great work. They will simply decide not to help, and we are going to be in a bigger problem than we currently are at. So absolutely, we’re bringing this. We’re making sure that we incentivise, but we’re holding people accountable.

Then the other piece which you have highlighted is this one around corruption. This is something that we as this board are paying a lot of attention to. We are not necessarily going to be standing on rooftops and shouting around the work that we do here. But we’re going to be seeing the pain, feeling the consequences of what we do, because we just cannot continue to be allowing an environment where people are using the resources of the company in the wrong way.

That will be hitting people in many, many different ways, and they will be feeling it. It’s not just a commitment. It’s something that we are passionate about. It’s something that we have to root out of Eskom – corruption.

JIMMY MOYAHA: Well, thank you very much for that, Dr Nyati.

That was Dr Mteto Nyati, who is the chairman of Eskom, giving us his thoughts on the latest board appointments as well as the Integrated Resource Plan and Eskom’s operations going forward.

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