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Former Eskom CEO Andre de Ruyter is taking no chances after publishing his instant bestseller Truth To Power, which exposes the ANC’s plundering of South Africa’s national electricity utility. De Ruyter has refused any in-person engagement – but did agree to an “email interview” with Alec Hogg of BizNews. In it, the filter-free executive answers the big questions about load-shedding, criminality and what’s next for Eskom. Also, what he learned from his three years of running SA’s “largest organised crime syndicate”. Eskom has required R500bn in direct bailouts from SA taxpayers. Still, its inability to deliver a steady electricity supply has cost the country even more through lost economic growth, lower investment, and destroyed jobs. So the book is a must. This interview, too.
Read the transcript of the interview below
Alec Hogg: I found the book well-written and easy to read. And in a league of its own for courage. What did you intend to achieve with the publication of this book?
André de Ruyter: Eskom is at the heart of the South African economy. It’s performance affects every citizen, and it is therefore a matter of public interest that people know what lies at the heart of our problems. It is also important that South Africans realize that the energy crisis is a solvable problem, and that the solution can in fact be the catalyst to unlocking economic growth, employment and improving our export competitiveness. Given the incredible complexity of the challenges involved, I thought it important that people understand more about why we are where we are, and how we can get out of it.
You appear to have gone to extraordinary lengths to get the book out quickly and to hide its distribution. Why? How big a team worked on the publishing project, and for how long?
de Ruyter: Everyone involved in the book agreed that time to publication was important, given the prevailing energy crisis. In view of the litigious environment and inflammatory comments by some role-players, getting the book out on the shelf to prevent any pre-emptive steps. Penguin put in place a top-notch editorial team who ensured that the writing and production process went as quickly and smoothly as possible. My earlier than anticipated departure also gave me an unexpected opportunity to devote substantially more time to the book.
As for the content itself, were you surprised at the depth of the corruption at Eskom?
de Ruyter: Like all South Africans, I had an apprehension of corruption at Eskom, but I must admit to being taken aback at the extent that still remained. The more I dug, the more it became apparent that corrupt networks had become entrenched, and that Eskom was the victim of rampant criminality perpetrated by organised crime cartels. With the departure of the Guptas, crime had not be excised, but instead had metastasized to affect almost every aspect of Eskom’s operations, in particular generation.
How many power stations are captured?
de Ruyter: From the information that was gathered, it seems as the bulk of power stations on the Mpumalanga highveld have significant organized crime operations in place. While the other stations (Lethabo – Free State, Medupi and Matimba – Limpopo and Koeberg – Western Cape) have had some cases of fraud and corruption, the extent is far less. It’s interesting to note that these four power stations which are outside of Mpumalanga are also far and away the best performing in the Eskom fleet, suggesting a clear link between criminal activity and poor generation performance, and hence loadshedding.
Given that it was the “bombshell” of Stage 6 for the first time in December 2020 that greeted Mr de Ruyter’s arrival, what are the risks of even higher levels being imposed in future and when does he think loadshedding will end (or at least become manageable)?
de Ruyter: The first incident of Stage 6 loadshedding took place in December 2019, immediately prior to my joining Eskom. Regrettably, due the the many reasons referred to in my book, generation performance did not improve. This is not entirely unexpected, as evidence from the US suggests a performance cliff after a station passes 50 years in age. With the average age of the Eskom fleet now more than 44 years (excluding Medupi and Kusile) and with maintenance having been badly neglected by my less than illustrious predecessors, it’s no surprise that the risk of loadshedding increases. The solution is to add much more capacity on an urgent basis – something which I started advocating for from the first month of my tenure. Once the steam generator replacement project at Koeberg is completed, and the three units at Kusile return by the end of the year, the risk of loadshedding will reduce, but not be eliminated. We need more capacity – period. The quickest and cheapest way of doing this is by further liberalising the market so that the private sector can invest, predominantly in renewables, and not by entering into expensive and onerous contracts for powerships as a result of a self-generated crisis.
After the R254bn bailout for Eskom in the February 2023 Budget, taxpayers have injected over R500bn into Eskom in recent years. Did you support or motivate this bailout? If so, why?
de Ruyter: As a result of numerous adverse tariff decision made by Nersa, Eskom’s revenue cannot begin to cover its reasonable costs (i.e. excluding inefficiency and corruption). As Eskom is still responsible for executing capital projects, and keeping its operations running, it has to borrow to fund its operating expenses. It doesn’t take an MBA to figure out that this is unsustainable. To prevent Eskom defaulting on its debt, which would in all probability result in a sovereign default, there was no option but for the taxpayer – via National Treasury – to inject additional equity. Of course, the answer is to let users pay for electricity through cost-reflective tariffs, which Nersa was only starting to do after Eskom took it to court, and won eight times.
From the evidence in your book, even a superficial reading suggests Eskom has become a direct conduit through which a large chunk of the taxes paid by citizens and companies are channelled into the pockets of criminals. Of that R500bn Eskom has received from Treasury, how much would you estimate has been plundered through corruption; how much has been lost through incompetence?
de Ruyter: That’s a tough call to make without all the evidence, but it’s possible to arrive at an educated guess. If we only look at Medupi and Kusile, the contracting strategy that was followed was clearly wrong, exposing Eskom to huge claims because of poor project management and extensive corruption which was well documented by the Zondo Commission. If both power stations has been built by an experienced EPC contractor, with proper financial controls and project management, they would have been finished in half the time, and probably at R20-30 bn cheaper, also because of the interest that was capitalized during construction. As a result of these delays, Eskom has spent billions burning diesel, while loadshedding has cost the country billions. As I have said on a number of occasions, Eskom loses about R1bn per month due to crime and corruption. So the numbers are huge. And the taxpayer ultimately bears the burden, also because of losses due to municipalities not paying, and Soweto, where debts have had to be repeatedly written off.
Among the criminality exposed in detail in the book is the way the ANC Chancellor House engineered what you call its R97m pieces of silver to switch the Medupi and Kusile contract away from Eskom’s choice of contractor – Alstom – to Hitachi. You say this has cost South African taxpayers billions. Please explain how…
de Ruyter: The cost of loadshedding is well known to run into the billions of rands every year. Because of the boiler design defects, which I would argue were baked into the contract award, Medupi and Kusile were significantly delayed, which contributed to years more loadshedding. Furthermore, to stave off the worst loadshedding, Eskom burns billions of rands of diesel every year. If we then add the opportunity cost of lost economic growth, deferred investments, jobs lost – the cost is truly ruinous.
Before the publication of your book, given that you must have been aware of its consequences, did you bounce it off anyone you trust – specifically Tito Mboweni and Colin Coleman, whom you mention early on having lobbied for you to become Eskom CEO? What has their reaction been? Have you been contacted by other members of the SA business community – only to express their private support?
de Ruyter: I did not bounce it off Coleman and Mboweni, not least because I didn’t want to compromise anyone. As I’ve changed my mobile number, I have not been contacted by many people, but I have been told by others of private support. South Africans face an uncertain future. Unless we tackle our problems honestly and openly, we will continue to condone by being silent, and by being silent, also being complicit.
You share details of the private sector-funded investigation into Eskom criminality, including the central role of a leading philanthropist. Why does that person want to remain anonymous? Has there been any concrete consequence of this investment? Do you know if it is continuing?
de Ruyter: The consequence of the investigation has been to catalyze arrests, the deployment of the army, the shutdown of 18 illegal coal sites, the deployment of specialized units of the police, changes to police structures – so I would say that the investigation has at least achieved some success. I don’t want to disclose the identity of donors to the project, given that they did so anonymously. Given how I have been treated, I can understand that they don’t want to disclose their identity.
In an interview with Biznews six months ago, global energy expert KW Miller said nothing he had seen anywhere in the world comes close to this Eskom disaster. The reaction from SA’s supposed experts to that interview is not dissimilar to the way your book has been received – i.e. conscious denial of the facts. Were you able to pay any attention to Miller’s contentions? Do you think he’s worth paying attention to now?
de Ruyter: I have followed Miller’s proposals. I am not sure that they have South Africa and Eskom’s best interests at heart, or whether they are aimed a securing a prime spot in a lucrative debt restructuring deal. The debt issue needs to be addressed, but I would not favour going through Miller to do it – I think there are better ways which will probably be cheaper and less onerous to bondholders.
Miller said that Eskom bondholders, most of whom are foreign, are agitating for a massive restructuring of the SOE into an organisation which is removed from ANC control and managed by professionals. Do you think this would be an option? If not, what do you see as the solution?
de Ruyter: I agree that as a utility, Eskom needs to be run by professionals who are insulated from political interference. In my view, the demise of Eskom started when it was converted from a public utility effectively owned by its customers, to a state owned enterprise subject to direct political supervision. Ultimately though, we need to bid farewell to the monolithic monopoly of the past, and embrace a restructured electricity industry in which the state plays a much reduced role, and where market forces drive investment and growth.
During your period in office, how did you respond to Eskom bondholders who expressed concern at the rampant criminality that your book chronicles? Did they engage after the Annika Larsen interview?
de Ruyter: Bondholders have not engaged with me. In my experience, they are quite sanguine as long as their coupon is either explicitly or implicitly guaranteed by National Treasury. The yield reflects the perceived risk – which is part of the reason why even government guaranteed Eskom debt trades at a premium of between 180-300 basis points above sovereign debt. The other reason, of course, is that the universe of investors prepared to buy debt of a heavy carbon emitter is shrinking – driving up the cost.
Any progress from the SAPS on your cyanide poisoning attempt? Any thoughts on what motivated it?
de Ruyter: There are probably quite a few people sufficiently irritated with me to want me removed on a permanent basis. After a slow start, the police are now investigating, and my legal team is cooperating with that investigation.
If there were to be a change in government in South Africa after the 2024 National Election – on Eskom, what advice would you give the new Energy Minister for their first 100 days? And the new Police Minister?
de Ruyter: It will be crucial to give a clear policy signal that will encourage investors, not only in new generation capacity, but also in the manufacture of renewable energy components, contractors for construction of new plant and grids and investors in debt. We also need to reassure investors that South Africa will stay the course and that they can earn a decent return to reward their capital. I’m convinced that we will then see huge investments into SA, creating jobs and ensuring that our exports don’t fall foul of carbon border export taxes.
From a law enforcement perspective, we need action to stop the crime wave against Eskom. This needs to be intelligence-driven, and must look towards the root of the problem, not only the runners on the ground. It can be done, but structural problems on the ground in Mpumalanga need to be vigorously addressed if we are to make headway against the crooks.
You express numerous forthright opinions in your book that, privately, many South Africans share but are not prepared to say in the way you have done. What gave you the motivation to do so? Are you serving a higher purpose, a higher power – i.e. do you draw your strength from a religious/spiritual source?
de Ruyter: I think it’s important to stop pretending in public that everything is ok, while privately complaining and making contingency plans. If we care about the country as patriots (a deeply unfashionable word, it seems) we, as citizens, need to act. If we don’t, we forego the right to complain.
With this book, you have become the ultimate South African whistleblower and, for many, a national hero. How do you expect your life and that of your family to change?
de Ruyter: I’m taking it a day at a time right now. I’m trying to have a bit of a rest while come consulting with lawyers and forensic specialists, and of course attending to media queries. I hope that in the fullness of time the ad hominem attacks will die down, and that we will start engaging on the core of the problem, and how we can solve it.
On reflection, could you have blown the whistle differently? You’ve been accused of being naive – was there an alternative?
de Ruyter: In some ways I’m the boy who pointed out that the emperor’s new clothes were imaginary, and that the naked truth was far less attractive than everyone pretended. But I think someone has to say out loud what many were thinking – otherwise we are forsaking our duty to our country. Fortunately I am not alone: courageous people like Busi Mavuso, Malegapuru Makgoba, Thumi Madonsela and many others have been speaking up and that makes a huge difference.
- SARS Whistleblower JvL: De Ruyter’s ‘naive’ investigation; Pravin Gordhan; being mugged
- Political analyst Eugene Brink: The toxic break up between de Ruyter and the ANC over Eskom
- Eskom in Pictures: No denying ANC’s blame. Corruption or incompetence?
- Eskom’s secret security deal: Fidelity Group paid R500 million for three-month contract
- Gordhan slams de Ruyter, power struggles and accusations fly
- André de Ruyter’s assassination attempt conspiracy
- André de Ruyter and Electricity Minister at odds over corruption’s role in loadshedding
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