BNIC#1 redux – Eskom chair Mteto Nyati: Addressing corruption, costs, stakeholders – and De Ruyter
Mteto Nyati, Eskom chairman, discusses the challenges South Africa's power utility, has faced in addressing corruption, inefficiencies, and energy security. Nyati explains the steps Eskom has taken under the new board's leadership, including the use of artificial intelligence and advanced technologies to monitor and manage both internal operations and external factors, such as coal delivery to power stations. The interview sheds light on how Eskom is tackling long-standing issues by leveraging data analytics and innovative solutions, aiming to ensure energy stability while addressing corruption within the company.
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
Listen here
Highlights from the interview
In an interview with Alec Hogg, Eskom Chair Mteto Nyati discusses the company's efforts to improve operational efficiency and tackle corruption. Nyati emphasizes that Eskom's financial challenges are partly due to regulatory issues, where tariffs do not reflect the actual costs of generating electricity. To address these concerns, Eskom pursued legal action to ensure that tariffs align with its financial needs, and the courts mandated the regulator, NERSA, to follow specific rules. Nyati explains that Eskom's immediate priority was to secure energy supply, which has been largely resolved. The next phase focuses on cost reduction, particularly targeting inefficiencies within the business.
Nyati also highlights the burden of contracts signed with independent power producers (IPPs) under take-or-pay agreements. These contracts, signed during a period of energy crisis, require Eskom to pay high tariffs for renewable energy, even when it could use cheaper energy from coal-powered stations.
On corruption, Nyati outlines Eskom's use of advanced technology, including artificial intelligence, to identify and tackle corrupt practices. AI is used to gather data from various sources to form a clearer picture of who is involved in illicit activities. He also explains how technology is improving coal delivery operations, reducing fraud, and enhancing oversight.
Edited transcript of the interview ___STEADY_PAYWALL___
00:00:05:13 – 00:00:29:04
Alec Hogg:
At the first BizNews Investment Conference, the star of the show—you've heard it not from me, but from Neil de Beer and many of the members in the audience—was Mteto Nyati, the chairman of Eskom. But Murphy struck for reasons known only to our hardware during the second half of Mr. Nyati's discussion and the Q&A with the audience.
00:00:29:06 – 00:00:51:13
Alec Hogg:
The recording decided to go on the blink. Fortunately, that was the only issue, and fortunately, he's kindly agreed to join us again to pick up on that and share a message that the BizNews community warmly welcomed.
00:00:51:15 – 00:01:17:12
Alec Hogg:
So lovely to see you again. Thank you again for your time. Were you surprised at the warm reception that the business community gave you during your talk? Given that mainly there were people from the business community, and the reputation of Eskom within the business community—well, it's getting better—but was really not of a very high level going into this event?
00:01:17:13 – 00:01:51:08
Mteto Nyati:
Yeah, I think I was a bit surprised by the warm reception to our message. Generally, people do not quite understand our position nor think that we are representing or telling them the truth. To get an audience that really listened, had quality questions, and then a lot of one-on-one engagements afterwards—it really was good to see.
00:01:51:10 – 00:02:21:06
Mteto Nyati:
It also shows how much people out there are looking for quality information—information that is not sugarcoated, that says things as they are, and information that will help people make better decisions. I was happy because I chose to have an approach where I was fully transparent with the audience, and they appreciated that a lot.
00:02:21:07 – 00:02:48:05
Alec Hogg:
You were indeed. And it was so interesting to me that, for instance, André de Ruyter, who has been portrayed in a certain manner, did not enjoy that level of support from your perspective. But let's unpack that. You mentioned Dan Morakani, and fortunately, that part of your speech was recorded. You told us about the board, which includes many people who are doing the work, including a number of engineers. But you also said in your presentation that had André de Ruyter applied for the job now, he might not have been appointed. What did you mean by that?
00:03:04:00 – 00:03:33:09
Mteto Nyati:
What I meant by that was that we, as the board, I was sitting on the committee that was doing the interviews for the candidates. What we did was sit down first and create a brief, having been informed by the realities of Eskom. We spent a lot of time engaging with the people on the ground at Eskom, trying to understand what the issues were.
00:03:33:11 – 00:03:58:11
Mteto Nyati:
Coming out of that, it helped us to form a clear view of the kind of leader we needed for Eskom. And when I look at it, what André and many other candidates had, I honestly don't think he would have made it. First of all, we needed someone who fully understood the operations—an engineer or someone with technical expertise was required.
00:03:58:11 – 00:04:24:16
Mteto Nyati:
Second, while Eskom's problems are largely technical, they are also heavily people-related. So, we needed a leader who was exceptional with people—the ability to listen, to connect, and to mobilize them for a bigger purpose. All of those elements are required to get us to where we need to be at Eskom, and these are not areas where André was particularly strong as a leader.
00:04:51:23 – 00:05:14:12
Alec Hogg:
We also heard from you about the next big challenge, which is reducing prices. In the Q&A section, which we'll go through in a moment, there was a lot of concern from members of the business community in the audience about the sharp increase in tariffs proposed for this year. Many people are also thinking about the future. Please unpack that part for us as well.
00:05:23:00 – 00:05:54:10
Mteto Nyati:
If you look at the past, Eskom has been, as expected, making applications for tariff increases to NERSA. For many years, Eskom was not granted the increases it needed, and those prices were not reflective of the actual cost.
00:05:54:10 – 00:06:18:13
Mteto Nyati
You know, Eskom has the costs of running the business, and you need to be able to recover those costs. When the regulator is unable or chooses not to give you tariffs that reflect those costs, then you end up in a difficult situation where, perpetually, you would end up having to be bailed out.
00:06:18:15 – 00:06:50:07
Mteto Nyati
So, a couple of years ago, Eskom decided to take this to the courts, and finally, they were awarded a judgment. The court told NERSA to follow its own rules in terms of making sure that Eskom receives what it should be getting. So, we have a backlog, and that's where we are right now—Eskom is trying to catch up.
00:06:50:09 – 00:07:24:19
Mteto Nyati
That's really the situation. What I said to your audience was that our priority, as the board and management, was to ensure energy security, meaning energy must be available. Now that we've secured energy, our next priority as the board is to put a lot of pressure on Dan and his leadership team to ensure that we cut costs out of the business.
00:07:24:21 – 00:07:39:12
Mteto Nyati
Because it's one thing to say prices must reflect costs, but there should be efficiencies. We need to make sure we remove inefficiencies. That's the next phase of our drive as this board.
00:07:39:14 – 00:08:01:08
Alec Hogg
I guess the question many people wouldn't have known about, which you also addressed, was renewables. Eskom has a chunk of renewable energy that it's committed to paying high tariffs on, and that's going to be difficult to integrate into the overall cost equation.
00:08:01:10 – 00:08:33:06
Mteto Nyati
Yeah, so when you look back at the time when the previous leadership was in Eskom, and we had our backs against the wall, we ended up signing contracts known as "take or pay." Regardless of whether you use the energy or not, you pay, which is a good deal for the supplier—they face no downside. So, we signed these contracts at much higher rates, which are costly for Eskom.
00:08:33:07 – 00:08:55:09
Mteto Nyati
But of course, you have to remember that at the time, the country was going through a difficult energy crisis, and we needed that energy. So, we signed these contracts at ridiculous prices. Now, though, we have a much larger availability of energy from our coal fleet, which is coming at a much lower cost.
00:08:55:09 – 00:09:41:11
Mteto Nyati
We now have more supply than demand. Instead of using the cheaper coal fleet, we are forced to prioritize the independent power producers' input—the renewables, which come at much higher prices. It's really painful to switch off power stations that are producing energy at low costs, but that's the situation we're in. We have to find a way to navigate this new problem—yes, it's a good problem to have more energy, but it's not ideal to switch off lower-cost energy to prioritize IPPs.
00:09:41:13 – 00:10:14:12
Alec Hogg
Indeed. I suppose, looking forward, the country can be relieved that when you switch on the light, it actually turns on. But the issue now is sustainability. I guess the last point from your talk, before we move to the Q&A, that really stood out for me was how Eskom is using technology to tackle corruption and track down those who have been plundering the state through Eskom.
00:10:14:13 – 00:10:57:22
Alec Hogg
It would be very interesting for the broader audience if you could explain how that's working.
00:10:58:00 – 00:11:49:18
Mteto Nyati
This is one of those areas where I can't go into too much detail because you can understand how sensitive it is. But one of the main priorities we've set for ourselves as this new board, together with management, is to address the issue of corruption. To tackle this, we decided to use the support of artificial intelligence, where we're gathering information from CPC and many external sources—things like auctions, title deeds, and all that information—combined with data from our own employees. We're connecting it with the…
00:11:49:22 – 00:12:21:12
Mteto Nyati
…orders being generated from our SAP system and pulling all of that together. This gives us an interesting picture of who is doing what, with whom, and what transactions are taking place. We can see which groups of employees are involved in certain activities. This picture is quite different from simply saying that there's corruption in Eskom—now we know who the people are that are involved. That's the big breakthrough we've achieved.
00:12:21:17 – 00:12:48:02
Mteto Nyati
We've set up a project office within the CEO's office to handle this information and drive consequence management around these issues, again leveraging artificial intelligence. This has helped us reach this point. Another major area where we faced issues was in the delivery of coal to our power stations from the mines. The problem was particularly linked to the road transportation of coal by trucks, which would sometimes disappear or switch the coal, even bringing in stones instead.
00:12:48:04 – 00:13:22:12
Mteto Nyati
Now, by using advanced technologies and working with some local suppliers, we've developed innovative ways to monitor the trucks, almost like ring-fencing them. If they deviate from their assigned route, we can detect it immediately, and inspections are carried out when they arrive at the destination to identify any wrongdoings.
00:13:22:14 – 00:13:59:23
Mteto Nyati
I don't want to go into too much detail, but this has effectively eliminated the coal quality issues we've been facing, where coal was being switched. The use of technology has proved to be quite helpful, and it will continue to be as we think about using drones and other technologies across all of Eskom.
Read also