Necom, multiple-minister dilemma root cause of load shedding

Dan Marokane as Eskom’s CEO has his work cut out for him. Picture: Jennifer Bruce

Dan Marokane as Eskom’s CEO has his work cut out for him. Picture: Jennifer Bruce

Published Mar 20, 2024


With the publication of the Vgbe Energy Report highlighting the deteriorating status of the power utility’s coal fleet and the start of Dan Marokane as Eskom’s new CEO on March 1, 2024, South Africans can understand Eskom better by employing the “5 Whys”-approach to root-cause analysis.

The “5 Whys” technique was introduced by Toyota under the leadership of the industrialist Taiichi Ohno, who played a key role in turning it into an international success story.

∎ Why didn’t the receptionist answer her phone? She was at lunch.

∎ Why was she at lunch? Because the receptionists eat lunch together at 12pm.

∎ Why did all the receptionists eat lunch together at 12pm? Because there is no schedule for the different receptionists.

∎ Why isn’t there a schedule? There is no policy to rotate receptionists.

∎ Why didn’t management implement such a policy? When asked the question, the managers were confused and didn’t know that there should be such a policy.

As demonstrated in the above example, by the fifth “why”, the underlying truth and necessary corrective action is apparent. Even in seemingly simplistic issues, like a receptionist not answering her phone promptly, the root cause lies not with the receptionists, but rather within the decision-making structure at management-level. This identification helps pinpoint where corrective action is most needed.

The Vgbe Energy Report clearly used root cause analysis techniques in their findings of the status of Eskom’s coal fleet where on page 60, it correctly identifies the reason for the lack of energy availability (EAF).

The main root cause for the low EAF is the dysfunctional management system at Eskom. It is characterised by inefficient processes – especially in procurement – the lack of authority, and an opaque decision-making structure.

In my perspective, this constitutes the fourth “why”. The crucial step now is to ask the fifth: Why is there a lack of authority and an opaque decision-making structure?

The turnover rate at Eskom, with one CEO per year, raises questions. Not every CEO could be the root cause.

As revealed in the Vgbe Energy Report’s section titled “Government Oversight and Governance”, there are too many cooks at the top at Eskom.

The National Energy Crisis Committee (Necom) consists of representatives from:

∎ The Department of Forestries and Fisheries.

∎ Department of Public Enterprises, National Treasury.

∎ The Presidency of the Republic of South Africa,

∎ The National Energy Regulator of South Africa (Nersa)

In addition to the above, South Africa has a minister of electricity with a poorly defined portfolio.

In what world can the following setup work?

∎ The public enterprises minister appoints Eskom’s board. The minerals and energy minister shapes Eskom’s policies, determining South Africa’s electricity mix through the Integrated Resources Plan. Furthermore, they influence tenders; raising concerns about potential connections to politically-affiliated oligarchs — regardless of whether these decisions align with business interests.

∎ The electricity minister handles media briefings and oversees the planning of unbankable investments, such as the new transmission lines.

∎ The National Treasury establishes procurement policies, notably the challenging Preferential Procurement Policy Framework Act (PPPFA) and Treasury note 3.

∎ The Presidential Climate Commission shapes the decarbonisation policy, but it’s got members that have conflicted interests/environmental lobbyists.

∎ Nersa appropriately oversees the industry, yet its tariff on Eskom is not cost-reflective.

∎ Several licensing mechanisms impede the timely integration of new capacity into the grid. The prescription of the Department of Mineral Resources and Energy section 34 determination additionally restricts Eskom from incorporating necessary new capacity.

With this setup, we should not be surprised that there are union rebellions at Eskom; that there is a lack of decision-making in the structure and that maintenance and operations have been in decline.

My proposal for corrective action after asking the “5th why” would be:

∎ Streamline operations by closing down the Department of Public Enterprises.

∎ Establish a single minerals and energy minister with the sole authority to appoint the board and set policy.

∎ Dissolve Necom and make sure the Presidential Climate Commission is free of lobbyists/conflicts of interest.

∎ Suspend the various policies around Eskom’s neck such as Treasury note 3, the PPPFA and mandatory localisation.

∎ All functions, including the Integrated Resource Plan (IRP) and the tender processes should emanate from Eskom’s executive: they should not be the function of a ministry.

South Africa’s policy priorities should be structured in the following order:

a) Energy security

b) Electricity cost and equity

c) Decarbonisation and other environmental concerns.

In the short term some of the technical solutions should, in my view, be:

∎ Address the issues with the coal fleet and Koeberg, backed by a legal commitment to start an overhaul, funded by Treasury.

∎ Eskom should come into compliance with ISO 9000 and other quality control standards. This includes stabilising the coal-supply even if it means renegotiating the contracts.

∎ Revitalise abandoned coal power stations such as Duvha 3, Grootvlei, Hendrina, Pretoria West and Rooiwal.

∎ Renegotiate the expensive diesel contracts with PetroSA that costs R3 more per litre than you can get at the petrol pump.

∎ Procure LNG, preferably at Matola, to safeguard heavy industry from collapsing.

∎ Procure coal by railway, and not truck, which would save South Africa up to R70 000 per truck, among other measures.

Marokane is a highly competent and qualified man, but with all the political interference at numerous government-levels, he simply will be another André de Ruyter.

To allow him to do his job, the process needs to be streamlined.

Eskom is a failure of policy, it is a failure of governance, it is a consequence of executive overreach. Unless the political economy works towards reform, then load shedding will unfortunately remain with South Africa.

Corrective action is now needed, South Africa doesn’t need more paralysis in analysis.

Hügo Krüger, MSc in Civil Nuclear Engineering.

* The views in this column are independent of Business Report and Independent Media.