No-one shone a brighter light on the corruption at ESKOM than former CEO André de Ruyter who had to leave South Africa for his own safety. Speaking to BizNews from the United States, he says the corruption at ESKOM continues “by and large unabated” – enabled by the procurement policy in government departments and State-owned entities – and will come to an end only once some of the ringleaders are arrested and properly investigated. He dissects the Government’s latest draft Integrated Resource Plan (IRP), and warns that South Africa will find itself “increasingly isolated from an export perspective” if it does not speed up its decarbonisation efforts. However, he believes South Africa’s problems are solvable with “appropriate political leadership” and policies that attract foreign direct investment that will create jobs and economic growth, and ultimately counteract the “prevailing African stereotype of failure, economic failure and corruption”. De Ruyter also shares his future plans – including his hopes to return home – and reveals the subject of his possible next book. – Chris Steyn
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Relevant timestamps from the interview
00:00 – Introduction
00:30 – What has been done to curb corruption at Eskom?
06:30 – Output of the coal fleet
08:59 – Prospects for generating new capacity
13:14 – Implications for SA if it doesn’t speed up decarbonation efforts
15:08 – His future plans
16:15 – Possibility of another book
19:20 – His wishes for South Africa
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Highlights from the interview
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No-one shone a brighter light on the corruption at ESKOM than former CEO André de Ruyter who had to leave South Africa for his own safety.
Speaking to BizNews from the United States, he says the corruption at ESKOM continues “by and large unabated” – enabled by the procurement policy in government departments and State-owned entities – and will come to an end only once some of the ringleaders are arrested and properly investigated.
He dissects the Government’s latest draft Integrated Resource Plan (IRP), and warns that South Africa will find itself “increasingly isolated from an export perspective” if it does not speed up its decarbonisation efforts.
However, he believes South Africa’s problems are solvable with “appropriate political leadership” and policies that attract foreign direct investment that will create jobs and economic growth, and ultimately counteract the “prevailing African stereotype of failure, economic failure and corruption”.
De Ruyter also shares his future plans – including his hopes to return home – and reveals the subject of his possible next book.
Here are some of the highlights from the interview:
Continuing corruption at ESKOM following his exposé:
“When this became public, obviously there was a significant outcry and I think we saw some action.
“We saw, for example, soldiers being deployed to protect infrastructure. Quite how that was intended to counteract the pervasive effects of corruption, one wouldn’t know.
“There were changes made to the senior command structures of the police in Mpumalanga. Now, typically, this is done when there is, let’s call it, a lack of diligence in pursuing investigations into crime. So those changes were made. That’s very encouraging.
“And then we saw an investigation by SARS into tax that wasn’t paid by people who are alleged to be coal thieves who operated these black sites where coal intended for ESKOM was replaced with very low grade coal just barely above rocks, which was then provided to ESKOM. And it’s interesting that it was the tax authorities that took the lead in collecting some of the amounts that they claim are due to them rather than law enforcement.
“We did see some actions where some of these black sites were raided, but we’re really talking about the tip of the iceberg here. I think there were some of the truck drivers who were arrested, but these are the operators, these are the foot soldiers. And the bigger networks, I don’t think, have been properly investigated and pursued.
“I don’t think that we’ve seen the arrests of people controlling these networks and therefore my supposition based on what I know and what my information is, is that the corruption continues by and large unabated, which of course is very concerning and plays a very considerable role in the continued lack of reliability of the coal generation fleet.
“But I think there are also some underlying factors that create an environment where corruption is enabled. And some of this relates to the procurement policy that is in place at all government departments and at all State-owned entities. And this relates to preferential procurement, which gives the opportunity for non-value adding intermediaries to insert themselves in the process and add very substantial margins on top of what the market price would be if you bought equipment, consumables on the open market through a competitive bidding process.
“And those margins, I think, add significantly to the cost. Obviously, they add to the cost of doing business in South Africa, but they also detract from being able to run an efficient business. If any business had to inflate its procurement bill by 20%, 30%, maybe more percent, then you would be in a very challenged financial situation. And again, if you look across the board at our state of enterprises, this clearly seems to be the case.
“So I think corruption will come to an end once some of the ringleaders are arrested and once they’ve been properly investigated. But I also think that there needs to be a real and substantive look at the underlying factors that give rise to an environment where corruption can flourish. And this includes the way in which the state buys goods and services.”
The output of the coal fleet:
“First of all, I think we need to acknowledge the many good people in ESKOM who work very hard and really put in an extraordinary effort.
“And I think one needs to look at the underlying factors. I think one needs to look at the fact that the average age of a coal fleet is now more than 45 years old. And we are asking those machines who have been poorly maintained, who have been neglected, who are being fed a diet of undigestible coal to perform like new pieces of equipment and to have an energy availability factor that is simply not feasible.
“And to expect that somehow we can patch up these old coal-fired power stations and persuade them to perform at an energy availability factor of 70%, I think that is just not realistic. So the solution is that we need to add more generation capacity as quickly as possible while we try and eke out the last bits of performance from these coal-fired power stations.”
Government’s draft Integrated Resource Plan (IRP):
“Many studies have been carried out about the appropriate generation mix for South Africa going forward. And repeatedly studies by the CSIR, by ESKOM, by the University of Cape Town have shown that the lowest cost and fastest way of addressing our generation shortfall is to open up the gates and install as much renewable energy as possible. Now, one of the main objections is that renewable energy only works when the sun shines and the wind blows, but these can be overcome by managing the grid appropriately, by investing in storage. And even if you invest in storage, renewable energy still comes out tops as the cheapest and certainly the fastest way of solving our generation challenge.
“If you look at the assumption in the IRP 23, you will see that there will not be energy security or electricity security until 2028. Now that’s a very unambiguous admission from the policy department that load-shedding is likely to be with us for another five years.
“And if you look at the hugely detrimental impact that a lack of performance from our electricity system has had on our economic performance, on our economic growth, which again the IMF has calculated that we’ll be lucky if we exceed 1% economic growth for the current year; then to wait for another five years to solve this problem when the solution is to hand, talks to me about a dogmatic adherence to forms of generation that are not environmentally friendly, that are more expensive, and which we will struggle to finance. And in addition, will make it very difficult for our exporters to compete internationally.
“The European Union has already started to implement its carbon border adjustment mechanism. Many people in South Africa are upset by it. People in the so-called global south view this as an unwarranted attack on our God-given right to burn all the fossil fuels we want. And that may all be true. But the fact of the matter is that our major international trading partners are going to penalise economies that have a higher carbon content in the makeup of their electricity systems. And that very definitely is South Africa. We are double the global average in terms of carbon intensity of our economy.
“So to my mind, there’s an opportunity in the IRP to do two things, to accelerate the decarbonisation of our economy by rapidly enabling new investments in renewable energy. The private sector has already demonstrated the willingness to invest and invest at scale without the need for government subsidies, so no burden to the taxpayer. And then we can solve our electricity crisis by adding new generation capacity as quickly as possible.
“So the answer is so abundantly clear that one struggles to understand why IRP 23 came up with a different answer than all the modeling work by the entities that I mentioned indicated a completely different answer.”
Implications for SA of not speeding up its decarbonisation efforts:
“I think we’re going to find ourselves increasingly isolated from an export perspective.
“We already know that major motor manufacturers who export vehicles predominantly to trading partners in Europe are finding that they need to plan for green energy, low carbon, zero carbon energy.
“So for us to remain competitive as an export economy, I think it’s absolutely crucial that we maintain the tempo of decarbonisation, which to some extent was precipitated by ESKOM’s poor performance from its coal generation fleet.”
His future plans:
“Of course, eventually I’d like to return to South Africa. Much as I’m enjoying my time in the US, it’s a really enormous privilege for me to be able to teach at Yale. I find the experience hugely rewarding, hugely stimulating. I talk to some very, very bright faculty members and students, and it’s certainly forcing me to think very long and hard about some of my assumptions that I’ve had about climate change and how the world is going to work in future, which is great. So it’s a great learning opportunity for me as well. But much as I enjoyed that, South Africa is still home. I absolutely love the country and its people. And it’s the place that I’d like to return to when the situation warrants it.”
His possible next book:
“You know, there’s only so much truth that you can speak to power and then power should listen. What I do think is required is a book possibly that sets out the case for enabling very substantial capital flows from the global north to the global south to enable developing economies to grow but grow in a low carbon way.
“If you look at the way in which the global financial system is currently structured, to invest in a new generation plant anywhere in Africa, south of the Sahara, comes at a cost of capital that is 10 times that applies to countries in the global north…
“And if I look then at what is happening in Africa and the energy poverty that characterises Africa and the lack of opportunity for economic growth due to the fact that the average African consumes less electricity on an annual basis than an American refrigerator does, which is a mind-blowing statistic, then we will never address the problem of poverty in the developing world if we do not allow some way of enabling those financial flows to take place. Now this is very difficult, it’s very controversial, many people have broken their heads about this problem, but maybe there’s a solution…and that certainly would warrant something to be published.”
South Africa’s future:
“…if I look at the resources that we have in South Africa, both natural and human, surely we can do better than we’re doing at the moment. Surely with appropriate policies, we can attract foreign direct investment that will create jobs, that will create economic growth.
“But fortunately I think these are solvable problems. They are not intractable and my wish would be that political parties start positioning themselves not as what they’re against. Everybody is against corruption. Everybody is against unemployment. Everybody is against the lack of economic growth. We know all that. And most political parties are against the ruling party. But start telling us what you are for and how you intend to achieve that.
“Because I think that, my wish would be that that would sway the electorate to create a vision, if you will, of what is possible in South Africa, because the opportunities certainly are there. And in my interactions with people who manage some pretty serious amounts of money that they move around the world, they see South Africa the same way. They shake their heads and they say, you know, this country has so much opportunity. Why aren’t you using it?
“And if we can get appropriate political leadership that will open up those opportunities and a civil service that actually does its job without asking for lunch money, we can make a difference. We can counteract the prevailing African stereotype of failure, economic failure and corruption.”
Read also:
Eskom’s miraculous decline in sabotage post-De Ruyter and Oberholzer
Eskom ex-CEO André de Ruyter under legal fire for private probe and security contract
Hawks launch investigation into senior politicians named by De Ruyter in Eskom corruption reports
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