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Matona drawing energy from days as activist, diplomat to navigate Eskom perils

Eskom CEO Tshediso Matona

Eskom CEO Tshediso Matona

Photo by Duane Daws

23rd January 2015

By: Terence Creamer

Creamer Media Editor

  

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Apart, perhaps, from the Stoney ginger beer pick-me-up on his conference table and the queue of awaiting visitors in his reception area, there are few other signs of the pressure Eskom CEO Tshediso Matona is under. His corner office on the third-floor at Megawatt Park, in Sunninghill, provides enough natural light to almost conceal the air conditioner’s red digital display, set religiously to the 22 °C standard demanded by the utility’s ‘Live Lightly’ campaign.

Jacketless, but impeccably attired, Matona is unable to hide his annoyance at the reportage surrounding his cancelled trip to the World Economic Forum, grumbling that the withdrawal was made at his insistence and ahead of the media storm that had gathered around his proposed jaunt to the Swiss Alps town of Davos.

Possibly because of his experience as a trade diplomat at the World Trade Organisation in Geneva – a two-year posting he took up in 1996 when Alec Erwin was still Trade and Industry Minister – he soon composes himself and turns his attention to a question about how a career civil servant ended up leading a crisis-ridden power utility and whether a bureaucrat, rather than an engineer, is really cut out for the role.

“Contrary to reports, I was never parachuted into this position, because of a political decision,” Matona declares, revealing that he was approached by an executive-search agency and, after much soul searching and consultation, decided to throw his “hat into the ring”.

He was subjected to the normal “rigorous and daunting” interview process, including the psychometric tests and the presentations in front of a “formidable” board-selection committee.

A key incentive for Matona in applying for the job was a desire to rebuild the electricity security and stability required for South Africa to pursue its “well thought out” economic policies and vision, which he had helped craft in his previous positions at the Department of Trade and Industry (DTI) and the Department of Public Enterprises (DPE); policies that envisage the reindustrialisation of South Africa, as well as greater mineral value addition ahead of export. “All those efforts will come to nought if we don’t have the electricity.”

This motivation has its roots primarily in his experiences at the DTI, where Matona started “at the bottom” in 1995, before climbing through the ranks to eventually become director-general in 2006, under Minister Rob Davies.

There, he was almost immediately exposed to the risks and opportunities being faced by South African business as a result of ongoing and relentless trade liberalisation. He was thrust into the heat of the country’s flagship trade negotiations with the European Union (EU), which culminated in the Trade, Development and Cooperation Agreement that has governed South Africa’s trade relations with the EU since 2004 – a framework that is now being replaced by an Economic Partnership Agreement.

In January 2011, he moved to the DPE where he served as Minister Malusi Gigaba’s director-general until taking up his current position on September 1, 2014, after Cabinet endorsed his appointment in the previous month.

It was at the DPE where Matona began to truly grasp the depth of Eskom’s financial and operational problems and that the ‘keeping the lights on’ mandate was probably not sustainable. His sense of urgency, however, has been heightened since September, saying with a self-conscious laugh: “There is no place to hide when the lights go off, if you can excuse the ironic pun”.

Although familiar with a degree of media attention, Matona acknowledges that the intensity has increased along with the antagonism. Some have already dubbed him the ‘prince of darkness’, owing to the fact that he has already presided over several load-shedding episodes and has become the face of the power-cut threat.

“Load shedding is not an intention, it’s a consequence – a consequence of Eskom having become operationally compromised, which has left no margin for much-needed maintenance that can no longer be delayed.”

Nevertheless, he believes the resilience he developed as a student activist in Soweto in the 1980s – when as a founding member of the Congress of South Africa Students, or Cosas, he was jailed in Protea police station for two years and served 13 months in solitary confinement – is standing him in good stead.

The exercise regime he developed while in detention also remains core to sustaining his personal energy levels, notwithstanding the lack of it at the utility itself.

“I remember that I was first arrested on a cold day in June and, because there was no warm water in the cell, I did not wash for the first two weeks. Then my skin started flaking, which really freaked me out. So, I decided to exercise hard and work up a sweat so that I could bear taking a cold shower.”

He admits that the time pressures of his current job have cut into his running schedule, but says his training regime is being supplemented by Eskom’s “very good” wellness programme, a far cry from his time as a trade diplomat when he “talked, ate and drank” for his country.

TURNAROUND NOT RESTRUCTURING

Matona believes physical and mental agility is going to be vital in his ambition to turn Eskom around over the coming 18 to 24 months. But he does not view wholesale restructuring of the organisation as central to his immediate plans. Instead, his current focus is on building greater alignment between Eskom and its shareholder, whose financial, policy and moral support has become more than crucial to seeing the utility through its current woes.

Besides the R20-billion injection that was announced by Finance Minister Nhlanhla Nene in October, talks are under way on a R3-billion “bridging finance” arrangement to allow Eskom to continue to buy the diesel it will require in February and March to operate the expensive open-cycle gas turbines. While controversial, the utility is arguing that the cost of burning diesel to create space for its summer maintenance programme, is materially lower than the cost of unserved energy and, thus, prudent.

It will not be sufficient, though, to fully mitigate the load-shedding risk in the months ahead, owing to a dramatic rise in unplanned plant breakdowns since 2009, which has resulted in Eskom running the diesel plants for up to 12 hours a day, increasing its diesel budget from a couple of million rand a few years ago to R10.5-billion in 2013/14.

Matona does not anticipate Eskom assets being sold in order to raise funds for the support packages, emphasising that any far-reaching restructuring of Eskom would be counter productive at a time when the “platform is burning”. Instead, attention should be give, he avers, to stabilising the organisation, rebuilding employee morale and creating the space for plant maintenance.

For this reason the voluntary severance package, which raised eyebrows at the tail-end of 2014, has been revised in order to “ring-fence” critical skills from the scheme, including most of the organisation’s 3 000 engineers.

Matona laments the departure of a number of senior executives and managers in recent months, but says he is comforted by the depth of talent within Eskom. Nevertheless, stabilisation of the organisation, including of the executive and management teams, remains a key concern and focus for the CEO.

Stakeholder communication, which is increasingly being pursued under the aegis of the Eskom ‘war room’, is another priority, particularly in light of the rising risk of rotational power cuts. “Part of telling it as it is, and telling it like it has never been told, is to improve South Africa’s [understanding of the problem]. I can’t see that I can come to Eskom and perpetuate the tendency of being less than forthcoming and too afraid to tell the bad news.”

But besides sharing the “full ugliness” of the prognosis, there is also a desire to use the engagements to galvanise new thinking, investment and support for demand- and supply-side remedies that can relieve the system of some of its current pressures.

COST-REFLECTIVITY CALL

There will also be an attempt to reinforce Eskom’s call for a more accelerated, yet smoothed, transition to so-called cost-reflective electricity tariffs.

Matona tells Engineering News Online that, while there is agreement on the need for cost-reflectivity, actions are required to ensure greater “convergence” on the matter. Improved visibility is needed on how that transition will take place and over what period.

“Further work is needed on scenarios that would not further harm the economy or constrain growth, but at the same time respond to the financial shortcomings and challenges of Eskom.”

Matona agrees that this could imply an approach that is broader than using the National Energy Regulator of South Africa’s Regulatory Clearing Account, through which Eskom has already clawed back R7.8-billion for the second multiyear price determination period (MYPD2), which means that the tariff will rise by 12.7% from April 1, 2015, instead of the 8% originally sanctioned.

However, a reopening of the MYPD3 determination is but one mechanism being assessed, with Matona saying only that “a more thoroughgoing review of the regulatory framework” is probably needed, with the “intention of recalibrating” towards cost-reflectivity.  In parallel, Eskom will be assessing the opportunities to secure more non-regulated revenues, as well as the re-engineering of its financial model. However, Matona offered no specifics in this regard.

Another burning priority relates to the issue of Eskom’s burgeoning municipal debt, which has increased materially, with about R15-billion overdue and with Soweto comprising a big chunk of that. Having grown up in Soweto, Matona is acutely aware of the non-payment culture, which was born out of a desire to dismantle the apartheid regime.

But in a recent meeting with businesspeople in Soweto, Matona warned that a problem was being created that could truly come back and haunt all citizens. “Resolving non-payment is bigger than just Eskom and it’s debt, it has far wider implications,” he warned, arguing that it has the potential to undermine the country’s future sustainability.

With his ginger beer drained and the temperature of his office rising as the afternoon sun beats directly onto his west-facing window, Matona moves on to his next appointment.

Edited by Creamer Media Reporter

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