Mteto Nyati confident that Eskom will turn a profit sooner than expected

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Interview starts at the 1:26 mark

JEREMY MAGGS: On the record, Eskom has promised that it will not go to government for another bailout. That promise has been categorically made by the Eskom chair, Mteto Nyati, at the Moneyweb Money Summit in an extended interview that I conducted with him.

Here now are some of the high points. First up, what has changed, given that load shedding seems to be under some degree of control?

MTETO NYATI: When we analyse this, we end up in the wrong space because we think that this is something that has happened overnight, so quickly, it’s magic, it’s none of that. We realised that the way that the problem was defined and the solution that was being implemented was wrong.

So we then came up with a new problem statement, which then resulted in a new solution, and we then put together a plan linked to this new problem statement of how do we then address this problem in the shortest period of time.

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That plan is what everybody now refers to as the Generation Recovery Plan. It was a two-year plan approved by our board in March 2023, and we have been implementing that plan now for almost 18 months, and you are seeing the results of that plan.

JEREMY MAGGS: But it does beg the question why it’s taken such a long time to turn the ship.

MTETO NYATI: The problem statement that we found, we found that it was actually the wrong problem statement.

So an analysis was done and people got to a particular conclusion that the problem that was facing Eskom was that of an aging fleet.

So almost everybody in the media were always writing aging fleet, the problem is an aging fleet. The answer to that problem was we need to retire this aging fleet. We need to not invest in this aging fleet. We need to then allow the private sector to help us with the renewables. So that was the problem.

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JEREMY MAGGS: So we all welcome the fact that progress has been made, but what are the risks then that still remain?

MTETO NYATI: I said that it is a two-year plan. In terms of this two-year plan, there are a number of activities that we needed to do.

One of them was to get Koeberg to be extended for another 20 years. Only one unit has just been approved to operate beyond its 40-year life. So we need to get the second unit in Koeberg approved.

So the other solution that this new board brought into the equation was to come up with a temporal solution to address the issues in Kusile unit one, two, and three. In doing that, we had to bypass the unit that takes away and removes the emissions. So as we now go back to a permanent solution from that temporal solution, we need to make sure that we do execute that work in the right way.

JEREMY MAGGS: All well and good, but is corruption at the parastatal under control?

MTETO NYATI: Like in any society, you can never really get corruption completely [under control]. I think it applies here in South Africa as well. But as leaders, we’ve got the responsibility of making sure that we put together much stronger controls in our operations so that you can be able to pick up these things as quickly as possible.

That is really one of the things that we have been doing, the management, together with the board, strengthening the financial controls.

But like almost anything, everything starts with leadership, in my mind, leadership matters. It is leadership that got us to be where we are now. The mess that we were in, it was largely because of leadership. Where we are now is leadership and we had to take some key steps in changing leadership at all levels within Eskom, all the way down to the power station.

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JEREMY MAGGS: I then asked him if it was a mistake to have appointed Andre de Ruyter?

MTETO NYATI: I did not have such a long time with Andre, so I cannot really comment around that. But what I can say is that when we were looking at replacing him, we had to go and look at what are the challenges that this business is facing. We said, okay, we need to find someone who is able to address these challenges. One of the key elements …

JEREMY MAGGS: Challenges or mistakes that he’d made?

MTETO NYATI: No, no, no. I’m just talking about the challenges that were in the business. So the key things, then we ended up saying, okay, we need somebody who would appreciate the problem itself. When someone is coming up and giving an explanation, someone can just take the explanation like it is and then communicate it up because you lack the appreciation of the problem.

So we decided that we need to have an engineer, for example, you need to have somebody who, if people are feeding him or her BS, this person is going to be able to call it out, and be able to see that this is BS because they’ve got a deep understanding of the environment, of the situation.

So that was a key piece.

The other important part of Eskom is you need to connect. You need to mobilise, you need to really inspire the employees of Eskom and get those people to be behind whatever you are doing.

JEREMY MAGGS: And then we spoke about the budget.

MTETO NYATI: It’s probably sitting at about R450 billion. Ja, that’s the size of the debt of Eskom. This R450 billion of debt was a problem because it was a burden to the organisation.

The fact that sometimes maybe people were not investing enough in terms of maintenance is a reflection of also this debt thing.

So that’s why we had to have this discussion with National Treasury and National Treasury was able to come to the party, meaning all of us here, we contributed about R243 billion over a three-year period that is going to help reduce the Eskom debt.

One, two, we are using less diesel or no diesel, three, the interest charge, because now your debt is coming down because of National Treasury, your interest charge is low. So a combination of those should be making Eskom profitable and that’s where we’re heading. We’re heading to a position where Eskom is profitable.

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JEREMY MAGGS: Can you put your hand on your heart and say that you’re not going to run back to Treasury and ask for another bailout?

MTETO NYATI: Yes, I can do that. I can do that for sure. Because what we’re doing, this is not rocket science.

This is basic fundamentals. Fix the machines, get the machines to operate reliably. In that way, you are able to sell your product, and because you are not using diesel, you are saving on that. So you have an entity that is profitable.

Why would you go to anybody if you’ve got an entity that is profitable. By the way, we’re going to get to a position of being profitable much sooner than many people think.

JEREMY MAGGS: Eskom chair, Mteto Nyati, speaking to me at the Moneyweb Money Summit.

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