Ex-Eskom COO Oberholzer’s inside story on loadshedding, transformation, CR’s plan

Eskomite Jan Oberholzer, an electrical engineer who retired as the utility’s COO at the end of April, spent Friday evening in Hermanus answering my nothing’s-off-limit questions. Here are the highlights of that interview, providing the inside track on burning issues like why loadshedding has improved lately and when will it end. Plus the inside track on Oberholzer’s two year consulting job; his lengthy one-on-one meeting with the SA president; SA’s desperate need for a ‘crystal ball’ – and how to turn currently destructive transformation policies into a positive.Alec Hogg

The interview was in a large hall and in parts the recording is not good. But given the content, it’s is worth persevering with.

Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.

Watch Here

Relevant timestamps from the interview

  • 00:21 – Introduction
  • 02:49 – Oberholzer at Eskom
  • 04:44 – Jan Oberholzer on trying to get his own book published on Eskom
  • 06:45 – On the load shedding situation
  • 12:05 – On where we are right now
  • 19:37 – On Medupi, Kusile and the Koeberg power stations
  • 21:55 – On if this is a gift for the ANC and meetings with the President
  • 24:34 – On the minister of electricity
  • 26:42 – On transformation in the country and Eskom
  • 32:30 – SA still doesn’t have a plan to avoid a recurrence
  • 36:02 – Conclusion

Listen Here

Edited transcript of the recording

Alec Hogg: I’m really enjoying my time in Hermanus, my new home. It’s an interesting place where many people come for engaging interviews. Just last Friday evening, I had the opportunity to interview Jan Oberholzer, eskom’s ex-COO, in front of an audience of about a hundred people at the Hermanus Municipal Auditorium. Oberholzer, is a central figure in the current big story of South Africa: loadshedding, Eskom and the shortage of electricity. Our conversation was part of the recently concluded Hermanus FynArts Festival – a special slot was arranged for Jan due to his inability to participate in the event itself because of other commitments. The discussion ran for more than an hour, we couldn’t run the full hour. Here are the highlights.

To begin our conversation, we discussed Andre de Ruyter’s book, in which Jan Oberholzer, features prominently. The book has been an instant success with around 17,000 copies sold in just a week, significant in a country where 10,000 copies is considered a bestseller.

When it came to introducing Jan, I explored various options. I reviewed his LinkedIn profile, which highlighted his long career at Eskom and, for a decade, impressive track record as managing director of Stefanutti Stocks and other related fields. However, I decided the best approach would be to have someone who worked with him, preferably his boss, to provide their perspective. So I turned to De Ruyter’s book for this purpose.

Read more: Ban the blue light mafia – Ian Cameron

Jan is a dedicated Eskomite. He grew up in an Eskom home, as his father worked for the utility for 26 years. Although he wasn’t an electrical engineer like Jan, Oberholzer Senior played an important role helping to build the distribution network. Jan says his blood is Eskom Blue. He was the recipient of an Eskom Bursary and served the organisation for 22 years during his first tenure, starting in 1986. He left in 2008, so avoided the darkest days of the state capture era, returning in 2018.

Jan is a physically impressive individual, reminiscent of the rugby player he was in his youth (lock). He has aged gracefully and is now into his early 60s exudes confidence and competence,. De Ruyter says when they first me, they sat down at his office table, Jan offered him a strong cup of coffee, “perfect for our first meeting.” De Ruyter added: “Our conversation delved into many topics, and Jan wasted no time getting straight to the point: ‘Let’s clarify something. I didn’t apply for the job you were appointed to (CEO, as I love what I’m currently doing. I’m an operational man.’ That. said De Ruyter, set the tone for their relationship.

Alec Hogg: Back when you were working together at Eskom, did you know Andre de Ruyter was writing a book?

Jan Oberholzer: Yes. There was a time, until the end of last year, 2022, when I was approached by several publishers to write my book. I discussed the issue with Andre and he told me about his. As for my book, it has been put on hold. A couple of months ago, Jacques Paauw was going to write it with me. But things didn’t turn out as expected. Jacques and I signed a contract, but for some undisclosed reason, Jacques decided to cancel it. You can read what he said in News 24, which caused quite a stir.

Alec Hogg: I hadn’t read Jacques Paauw’s article in News 24, but duly did. It discusses his meeting with a former Security Police operative from the apartheid era, who had been involved in an investigation commissioned by Andre de Ruyter regarding an investigation into illegal activities at Eskom. Jan Oberholzer is still puzzled as to why Jacques Paauw backed out of writing his book, but the experience wasn’t pleasant, as you can imagine. After this light conversation, we shifted to the serious issue of load shedding.

Read more: Less load-shedding is no coincidence as generation keeps pace with demand

Alec Hogg: Were you around when load shedding started?

Jan Oberholzer: I wasn’t there when it started in 2008. Since I returned in 2018 we have had several occasions where we had to implement load shedding due to the lack of sufficient capacity. The first Stage Six load shedding event happened on December 9, 2019. At that time, president Cyril Ramaphosa was in Egypt for a short state visit and had to rush back. On December 11, I had to face him. He was seated with David Mabuza on his right and Gwede Mantashe on his left, and Pravin Gordhan was also present. That was when I started using the analogy of a car.

If you have an old car, you don’t expect it to perform at its best. Eskom plant is old. Also, if you have a Mercedes car, you would take it to a qualified Mercedes dealership with experienced mechanics and use genuine Mercedes spares. Unfortunately, we haven’t followed this approach in Eskom. So, I used this analogy to explain the situation. Towards the end, the president asked me, “What do we do now? How do we avoid being in the same situation again?” I told him, and these were my exact words, which I reiterated at the beginning of this year in another meeting, “Mr. President, we urgently need 4 000 to 6 000 Megawatts of base load capacity as soon as possible. If we fail to do so, dark days are ahead.” If you ask me how many thousand megawatts we have added since then, the answer is none.

We haven’t invested in additional capacity for the grid. If you use the analogy of cars, they haven’t been properly maintained because the funds for doing so were used for other purposes. Consequently, we have an unreliable and unpredictable system. Demand for electricity exceeds what we are producing. The system is running on the edge all the time, just like an old worn-out car. It’s like engaging the accelerator and constantly keeping it pressed to the floor. So, how do you then take some of the units offline and repair them for three to five months, or however long it takes, while the demand remains high? It means the situation will only worsen. The only solution is to increase capacity. It’s as simple as that.

Therefore, I find it quite disappointing. Everyone is blaming Eskom. We need to recognise that the Department of Mineral and Energy is responsible for making policies. Eskom has many issues to address, but the responsibility of implementing new capacity lies with policymakers.

Essentially, what he’s saying is that the South African government was warned back in 1998, which was 25 years ago, that load shedding would occur in 2008, 15 years ago, and indeed it did happen. The warning even included a specific date. “Obtain new capacity, or this will happen.” It’s not a difficult concept to grasp.

Jan Oberholzer: Let’s examine our current situation. Currently, our installed capacity stands at 47 000 megawatts, but we only have around 28 000 megawatts available. Demand is at 35 000 megawatts. There is still a significant difference between demand and availability. I’m sure you’ve heard that we’re depleting our emergency reserves. We’re consuming so much diesel that our tanks are always running low, and the ships can’t arrive quickly enough to refill them. This is a fact. I assure you, it’s a fact.

Additionally, we have pump storage. There’s one reservoir on top of the mountain and another at the bottom. When more electricity is required, water is allowed to flow through the generator to generate power. During low-demand periods, such as at night, the water is pumped back up. However, when we need to generate more electricity than we can pump, the upper reservoirs’ levels decrease. This means there isn’t enough time or availability to refill them. Consequently, we run out of diesel and water. To prevent a complete blackout, load shedding becomes more frequent.

Alec Hogg: The pressing question for all of us is: When will this end? Can you provide us with some hope this evening?

Jan Oberholzer: I believe within the next ten years, you will witness…(laughs)

Let’s compare what happened last year to the current situation. We are experiencing more frequent load shedding now. Because we have several large units at the Kusile Power Station and another one in Medupi Power Station not working. There are six units in total, of which four were in commercial operation, ranging from 720 to 800 megawatts. Units one, two, and three at Kusile had to be taken out of service at the end of last year, resulting in a loss of over 2,000 megawatts, equivalent to more than two stages of load shedding.

Why did they need to be shut down? We had a catastrophic failure in the flue duct inside the chimney. The chimney consists of three flue ducts for units one, two, and three. Flooding occurred in the flue ducts, causing them to detach and resulting in a catastrophic failure. As all three units share the same chimney, we had to shut them all down. We are currently working on fixing the issue and constructing three temporary smokestacks. I visited the site on Tuesday, and by the end of this year, the remaining three units will be operational again, adding 2,000 megawatts of power. It’s important to note that this isn’t a simple breakdown that can be quickly fixed in a garage. It’s a complex project. So, those 2,000 megawatts are being restored.

Additionally, at the same power station, unit number five experienced a fire in the gas heater while we were preparing to synchronise it with the grid for the first time. This setback means that another 750 megawatts were taken off, but will now only be available in November. So, in total, we’re looking at nearly 3,000 megawatts, from the four Kusile units, equivalent to three stages of load shedding.

Furthermore, if you recall, in August 2021, there was an explosion in the generator of Medupi unit four. That unit will only be back in service in September next year, providing another 720 megawatts. The same goes for the entire unit at the Koeberg nuclear power station, where I’ve been for the past two days. We are preparing to extend Koeberg’s lifespan by 20 years, and this involves replacing the three steam generators in each unit. As you can imagine, it’s a lengthy outage, ranging from 260 to 300 days. So, we’re looking at a loss of 920 megawatts. Unit number one at Koeberg will only be back in operation in October, and as soon as it’s up, unit number two will go offline. Therefore, this means a thousand megawatts won’t be available until the middle of next year.

In summary, when you add up all these factors, it amounts to approximately 4,500 megawatts, equivalent to five stages of load shedding. There has been a decrease of between 400 and 800 megawatts in demand. This reduction is also a positive aspect.

Another issue we’re facing is the substantial consumption of diesel. When I was the COO (until end April) my yearly provision for diesel was R6bn. In the last three months of this year, April, May and June, we spent R9bn on diesel. We’re burning a substantial amount of diesel. However, one advantage we have is that the demand is lower during the day, allowing us to reduce diesel consumption then. This is beneficial.

Additionally, I want to highlight something that brings me great satisfaction. About three years ago, we publicly announced that we would prioritise maintenance for our existing plants, even if it meant occasional load shedding. After two and a half to three years, we are starting to see the positive results of this approach. It’s common sense. If you invest time and money into maintaining a crop, it will improve, and that’s what we’re witnessing. So, while the situation is certainly challenging, it’s not as dire as it could have been. Moreover, there has been a significant installation of rooftop solar panels, with an estimated capacity of 3,000 to 4,000 megawatts. And that is helping us through the day.

This situation of fluctuating power supply is concerning. While the demand for electricity is low during certain periods, such as when the sun isn’t shining or during rainy weather, it creates a challenge for charging the (inverter) batteries that store excess energy. This creates a dilemma as people rely on electricity during peak times, and when it’s time to recharge the batteries, they turn to Eskom, when the power is actually needed elsewhere. It’s a complex issue that requires careful consideration.

According to De Ruyter’s book, the building of the giant Medupi and Kusile power stations were tainted by corruption. He wrote that the ANC received a R96 million Rand ‘success fee’ from Hitachi, which was awarded the contract after several failed attempts. Alstom had actually won the bid, not only because of its past work with Eskom but also due to its competitive pricing. Nevertheless, the ANC pushed for Hitachi, and now we see the consequences. Boilers one, two, and three at Kusile are not operational due to a construction error in the chimney – two stages of load shedding. And unit five is also not working because of poor construction. It raises questions about the role corruption or the selection of the wrong contractor played a role in these issues – and loadshedding. Draw your own conclusions. When you combine all these factors, it’s evident that Jan Oberholzer, who retired as the chief operating officer in April and now works as a consultant, has the responsibility to ensure that units at Kusile, Koeberg, and Medupi are restored in the next few months – to be cynical, in time for ending loadshedding ahead of the 2024 election.

This situation seems advantageous for Cyril Ramaphosa and the ANC, especially with the upcoming election. However, when asked if Ramaphosa has influenced him, Jan Oberholzer denies any whispering or planned coordination with the ANC. While he has had meetings with Ramaphosa, the most recent being at Ramaphosa’s house on January 22nd, he emphasises that the discussions were open and informative. Oberholzer describes Ramaphosa as a charming and intelligent man who demonstrates a solid understanding of the challenges, particularly regarding electricity in the country. During their dialogue, Oberholzer provided feedback on various issues, including the need for additional capacity. He believes that Ramaphosa fully appreciates the importance of electricity to the country, its economy, and the lives of its citizens.

Oberholzer mentions his belief that his discussion with Ramaphosa may have influenced the appointment of a Minister of Electricity, which he sees as a positive signal for the country. He expresses satisfaction with the performance of Minister Ramokgopa, noting that the initial difficulties seem to have been overcome, and the minister is now tackling the issues effectively. Overall, Oberholzer is optimistic and impressed with Ramaphosa’s understanding and dedication.

And well… Jan Oberholzer clearly holds respect and admiration for South Africa’s president, but he does not necessarily share the same sentiments towards the president’s policies. This became evident as we delved into the topic of transformation, particularly in his area of expertise.

Alec Hogg: Jan, you mentioned the importance of mentorship and investment in the organisation’s most valuable assets, including human capital, coaching, mentoring, training, and development. Eskom had a practice of nurturing its own talent, rarely appointing individuals from outside the company. Could you elaborate on that?

Jan Oberholzer: Absolutely, Alec. In my days at Eskom, there was a strong focus on coaching and mentoring. We invested heavily in developing our own workforce, which resulted in a robust internal talent pool. It was a rarity for someone to be appointed from outside Eskom. We prioritised competence and skills when filling vacancies, and the decision-making process usually involved considering just five suitable candidates. However, over time, we have witnessed a decline in skills and competence. It’s crucial to understand that qualifications alone do not guarantee the ability to perform a job effectively. This poses a significant issue.

Alec Hogg: When discussing this matter with President Ramaphosa, what were the key points of your conversation?

Jan Oberholzer: Alec, in my conversation with President Ramaphosa about transformation, he expressed his views, and I shared mine openly. I want to make it clear that I have nothing against transformation. In fact, I truly support it. The president even mentioned that his best friend is a 25-year-old black man. However, I emphasised the importance of understanding the successful outcome of transformation beyond mere numbers. Focusing solely on numerical targets without considering the necessary skills and experience leads us astray. This is where we find ourselves as a country. I had discussions with Minister Gwede Mantashe, and I’m pleased to say that he shares our view. We believe that bringing back experienced professionals and facilitating knowledge transfer is crucial. I must add that Eskom has exceptional individuals working for us. They possess great potential, but the value of experience cannot be ignored. Even after all these years, having worked in various roles, I can walk into a substation and sense its health. The only way to acquire such insight is by spending time on the ground, listening and feeling the organisation.

Alec Hogg: I can imagine that achieving transformation goals while meeting government objectives and targets poses a significant challenge. How do you navigate through this?

Jan Oberholzer: Indeed, Alec. Eskom operates independently from the government, but we have our own set of objectives and targets to meet, which adds another layer of complexity. It’s a highly challenging situation. People often wonder if a new government would bring about change, but I can tell you from experience that it’s not that simple. We face numerous hurdles, and the process of transformation is not an easy one. Let’s take the example of appointing skilled individuals to Eskom. There are thousands of applicants for a single position, and choosing just one is no easy task. At the core, people need to make a living. Merely labelling someone as “useless” and dismissing them doesn’t align with the realities of life. Therefore, I firmly believe that Eskom, and any organisation, should give attention and invest in its most crucial asset: its people. Transformation efforts should extend beyond voluntary separation packages. It should involve transferring knowledge and skills to others. Unfortunately, this aspect has often been neglected. We need to move away from the approach of paying employees to leave without ensuring a successful transfer of their expertise.

We have recently taken steps to bring back experienced professionals. Bringing back the old hands was actually my idea, and I played a crucial role in implementing it. We established a program within our organisation to incentivise skills transfer. Now, 30% of an employee’s remuneration depends on their ability to transfer their knowledge to younger colleagues. When an experienced new employee joins us, we identify a few promising young colleagues and evaluate their competency. After a contract period of two years or a year, depending on the case, we evaluate their progress again. If there’s improvement, the employee receives the 30% incentive. If not, they do not receive it. This approach ensures that both parties benefit from the skills transfer process. It’s a practical and effective way to achieve transformation objectives. Understanding the successful outcome of transformation is crucial.

Read more: Eskom’s controversial R500 million security contract raises eyebrows: Allegations of mismanagement and overspending

Alec Hogg: That makes a lot of sense, Jan. Proper skills transfer is indeed a vital aspect of successful transformation. It’s evident that transformation is required in South Africa, but it’s also apparent that mistakes have been made in the process. However, there is hope, especially when organisations like Eskom prioritise skills transfer rather than simply placing inexperienced individuals in challenging roles. Despite the challenges faced and the years of load shedding, South Africa still lacks a comprehensive plan to prevent a recurrence. What are your thoughts on this?

Jan Oberholzer: It’s a somber reality, Alec. South Africa’s failure to develop a plan to avoid future load shedding is concerning. It’s essential for policymakers to have a crystal ball, to accurately predict demand in the short-term and long-term, from the next three months to 50 years ahead. Understanding the future demand profile and how technological innovations will shape industries is crucial for planning. Without a clear understanding of future needs, it’s impossible to determine the necessary infrastructure requirements. At Eskom, we have around 14 coal-fired power plants, with an average age of 44 years. These plants have not been adequately maintained, and within the next 12 to 15 years, those producing approximately 20 000 megawatts will reach the end of their operational life. To plan for the future, we need to assess our current assets in the context of future demand.

It’s not good enough for policymakers to dismiss the issue and claim there is no problem. We need a comprehensive understanding of our infrastructure needs, considering factors such as gas, batteries, and other emerging technologies. Unfortunately, this is still lacking in our country.

Alec Hogg: It’s evident that a comprehensive plan and foresight are crucial to avoid future energy challenges. Jan, you’ve highlighted the importance of understanding the future demand profile and the state of existing infrastructure. Despite the mistakes made, it’s essential for shareholders and policymakers to acknowledge these issues and make informed choices. Before we conclude, do you have any final thoughts?

Jan Oberholzer: The mistakes that have been made must be acknowledged, and it’s crucial for shareholders and policymakers to take responsibility for their choices. Without proper planning and a clear understanding of the future, we cannot ensure a stable energy supply for our country. We need a collective effort and a commitment to developing a comprehensive plan to address these challenges. I’ve emphasised this point on numerous public platforms, and I’ll reiterate it here: we must work together as SA Inc. and grasp the basic concept I’ve explained. It’s imperative that we have a crystal ball, figuratively speaking, to understand our energy needs and avoid the current predicament. We need a clear vision of what is required, what resources are available, how the landscape is changing, and the timeframes involved in implementing necessary solutions. It may sound simple, but it’s the foundation of our path forward. I firmly believe that the country needs this level of foresight to overcome our challenges.

Read also: