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By Paul Burkhardt
(Bloomberg) – South Africa appointed Andre de Ruyter as chief executive officer of Eskom, the debt-strapped utility that provides about 95% of the nation’s electricity and poses the biggest threat to its economy.
De Ruyter, currently CEO of packaging firm Nampak, will take up the post on Jan. 15, the Department of Public Enterprises said in a statement. The state-owned power company has been looking for a new CEO since Phakamani Hadebe in July became the 10th person to vacate the post in as many years.
De Ruyter takes the helm at Eskom in what is the most critical period since its establishment in 1923. The loss-making utility has R450bn ($30bn) of debt and is struggling to fix ageing power stations and correct defects in new ones. Saving the business is a key goal of the government, which is sustaining it with R138bn of bailouts over the next three years alone.
“I would like to thank Mr. 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,” the department said Monday in a statement.
Incoming Eskom CEO Andre de Ruyter will probably take a pay cut. Former CEO Phakamani Hadebe was paid an annual remuneration package of R8.6m (incl. short-term incentives) during 2018/19. Over this period as Nampak CEO, Andre was paid R18.3m (incl. long & short-term incentives)
— Ray Mahlaka (@RayMahlaka) November 18, 2019
The government had shortlisted three candidates for the position of CEO, including former LNG Canada CEO Andy Calitz and Jacob Maroga, who was Eskom CEO from 2007 to 2009. Meida speculation about who the third person was didn’t include De Ruyter.
The rand pared a decline after the announcement, while Eskom’s dollar bonds were little changed.
“Neutral in my books,” said Jones Gondo, a credit research analyst at Nedbank in Johannesburg. “The market is going to have to know him better and understand what qualities he is going to bring to the table. The market had not anticipated him to be one of the slated candidates.“
Public Enterprises Minister Pravin Gordhan has unveiled plans to split Eskom into generation, transmission and distribution units by the end of 2021, a reorganisation he says will enable the businesses to manage costs more effectively and make it easier for them to raise funding. A policy paper released last month also envisions the utility being exposed to greater competition, lowering its fuel costs and increasing its renewable-energy output.
Oh wow! Andre De Ruyter, ex Nampak CEO, appointed CEO of Eskom. Good luck. Very distinguished man in looks and skill.
— David Shapiro (@davidshapiro61) November 18, 2019
In addition to his role at Nampak, De Ruyter spent more than two decades at petrochemical giant Sasol in a number of senior management roles. He’s overseen work in the US, Germany, China and African nations including Nigeria and Angola, the department said.
A chief restructuring officer has been appointed to consider how to reorganise Eskom’s debt, but the government has yet to reveal its preferred option. Finance Minister Tito Mboweni has said debt relief will only be considered after the utility shows progress in improving cash flow management and operations, setting up the three units and ensuring they are run within their means.
While the Treasury suggested that Eskom could settle its entire debt by selling some of its plants, President Cyril Ramaphosa said the utility’s new plants are its “crown jewels” and should be retained, while it would be difficult to find buyers for the older ones.
The CEO will need to work in concert with the presidency and a swath of teams, ministries and consultants charged with rescuing Eskom, which isn’t selling enough power to cover its costs and posted a record R20.7bn loss in the year through March. Labour unions, which represent the bulk of the utility’s 46,665 workers, oppose a breakup of the business and plant sales because they see them as a precursor to job losses.
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