1922 - 2019: The rise and fall of Eskom | Fin24
 
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1922 - 2019: The rise and fall of Eskom

Feb 13 2019 19:28
Pieter du Toit

Pravin Gordhan, minister of public enterprises, has painted a dire picture of Eskom, a company that seems to be in terminal decline.

He has told MPs that the crisis is the cumulative effect of years of mismanagement and corruption. If the power utility continues on its present trajectory, it will cease to exist in less than three months’ time.

It is saddled with enormous debt, a bloated organisational structure and imploding infrastructure.

Mission: 1922

But the company, up until the first decade of the 21st century, used to be the crown jewel among South Africa’s state-owned enterprises.

Eskom was established in 1922, after an act of the Parliament of the Union of South Africa, bringing together several disparate companies involved in the generation of electricity that mainly grew out of mining houses on the Rand.

The name "Eskom" was derived from the company’s original name – the Electricity Supply Commission (Escom), or the Elektrisiteitsvoorsieningskorporasie (Evkom), as it was known in Afrikaans.

The first chairperson of the board was Dr Hendrik van der Bijl, a South African scientist and industrialist after whom the town of Vanderbijlpark is named.

Starting small: 1924-1940

In the company’s very first annual report dated August 9, 1924, the necessity of affordable electricity is put front and centre of its mission: "The Commission regards cheap power as an important factor in promoting industrial development and has, therefore, devoted, and will continue to devote, the closest attention to this aspect of its duties and responsibilities under the Electricity Act."

According to the report, it started small. "The Commission started out with a small skeleton organisation, and, as its work is growing and new schemes developing, its staff is gradually increased in order to cope efficiently with the work."

According the annual report of 1939-’40, the national grid generated less than 1 000 MW of electricity. "The total kilowatt capacity installed…at 31st December 1939, to 954 146 KW.

Corporate structure: 1980s

The Koeberg Nuclear Power Station was fully commissioned in 1984, after its two generators were supposed to go online in 1982 and 1983 respectively.

The company’s structure was changed in 1985, after an amendment to the Electricity Act was passed, replacing the Commission with a new corporate structure consisting of a management board and a management team.

According to the annual report in 1986, Escom provided electricity to Botswana, Lesotho, Mozambique…as well as the apartheid "homelands" of Bophuthatswana, Ciskei and Transkei.

In 1987 Escom’s name changed to Eskom. It operated 27 power stations with a capacity of more than 33 000 MW. It also employed more than 56 000 people "with advancement and remuneration linked to performance, without reference to race, creed or sex", according to its annual report.

Massive electrification: 1990s

Post-1994, Eskom embarked on a massive electrification scheme, connecting townships and households that were not connected to the national grid during apartheid. In 1995 alone, the power utility connected more than 300 000 households.

In its annual report John Maree, chairperson of the board, restated the company’s mission: to force down the price of electricity for consumers. In Maree's words, the company was "admired internationally" and "a pillar" for the country’s economic growth.

Accoring to Maree, Eskom was generating enough revenue to cover its costs, and would be able to raise affordable finance on the international markets to partially help finance expansion projects.

Power company of the year: 2001

In 2001, Eskom was named the Financial Times Power Company of the Year at the Global Energy Awards Ceremony in New York.

It was described as "providing the world’s lowest-cost electricity, while at the same time making superior technological innovations, increasing transmission system reliability, and developing economic, efficient and safe methods for combustion of low-grade coal."

In 2005 Reuel Khoza, chairperson of the Eskom board, said one of the many factors that made the company successful was its commitment to good corporate governance – it wasn't shackled by "a regime of crippling debt or unsustainable subsidies from government".

Cripping debt: 2019

Today its debt levels of R430bn represent about 15% of the state’s total debt, debt from municipalities are growing by R1bn per month, and its wage bill has exploded from R9.5bn annually in 2007 to R29.5bn in 2018.

There has been a "significant loss of critical skills", with "poor quality of maintenance" and "poor workmanship" causing breakdowns, of which 40% is due to human error, according to Gordhan.

The company is suffering from "systemic corruption, malfeasance, fraud and state capture" that has "compromised the credibility of the organisation and eroded investor confidence", Gordhan added.

Eskom has a total installed electricity capacity of more than 45 000 MW.

On Tuesday, it could only generate capacity of 27 000 MW against a demand of 30 000 MW.

pravin gordhan  |  eskom  |  load shedding  |  electricity
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