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Cabinet appoints Public Enterprises DG Matona as new Eskom CEO

Tshediso Matona

Photo by Duane Daws

Public Enterprises Minister Lynne Brown

Photo by Duane Daws

20th August 2014

By: Terence Creamer

Creamer Media Editor

  

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Public Enterprises Minister Lynne Brown announced on Wednesday that Cabinet had approved the appointment of Department of Public Enterprises (DPE) director-general Tshediso Matona as the new CEO of State-owned electricity producer Eskom.

Brown made the announcement following an ordinary meeting of Cabinet, which was held in Cape Town.

Matona would fill a position left vacant when former CEO Brian Dames departed Eskom at the end of March, having announced his resignation in early December. In the interim, nonexecutive board member Collin Matjila had been acting as CEO.

Matona was selected from a short list of candidates to emerge from a board-led executive search process, which was formally initiated in January.

He is a seasoned bureaucrat, but has never led a large corporation. Matona served as director-general at the Department of Trade and Industry, before taking up the same position at the DPE in 2009. Prior to that, he served as a trade diplomat in the South African Mission to the United Nations and the World Trade Organisaiton in Geneva, Switzerland, from 1996 to 1998.

The appointment came amid a growing expectation that government would need to offer additional financial support to the utility, which was facing a R225-billion revenue shortfall over the five-year period between 2013 and 2018. The shortfall has arisen partly as a result of Eskom having been granted yearly tariff increases of 8% for the five-year period, instead of the 16% a year it had requested from the National Energy Regulator of South Africa (Nersa).

Nersa has also made a determination relating to Eskom’s Regulatory Clearing Account (RCA) application for the second multiyear price determination period (MYPD2) covering the three-year time horizon from April 1, 2010, to March 31, 2013, which is likely to result in electricity tariffs increasing by more than the 8% already sanctioned for the year starting April 1, 2015. Further RCA applications for the MYPD3 period are expected to follow, but Eskom has indicated that efficiencies and RCA clawbacks will be insufficient to fully plug its financial hole.

Matona has an intimate knowledge of the financial problems being faced by Eskom, as he has chaired the interdepartmental task team made up of officials from the DPE, the National Treasury, the Department of Energy and Eskom that was set up to seek solutions to the problem.

Brown stressed this experience when making the announcement, saying “Matona has been closely involved in providing oversight to Eskom and the other State-owned companies in the department’s portfolio for the past three years”.

“In recent months he has played a key role in the Inter-departmental Task Team comprising of the Departments of Public Enterprises, Energy and National Treasury which have been working with Eskom and the National Regulator to formulate a solution to the immediate challenges facing Eskom. The Task Team should present its report to Cabinet by September,” Brown added.

It has been reported that the utility might require a R50-billion equity injection along with further upward tariff adjustments to safeguard its sustainability.

Brown indicated recently that she, together with Finance Minister Nhlanhla Nene and Energy Minister Tina Joemat-Pettersson, was studying a draft support package that included additional shareholder assistance, possibly involving the conversion of loans into equity, the injection of new equity and the extension of further guarantees.

But the privatisation of Eskom assets, she said, was not current government policy.

SOME REACTION

Reacting to the appointment, Business Unity South Africa (Busa) acting CEO Cas Coovadia indicated that the appointment should help end some of the uncertainty that had prevailed at Eskom since Dames’ departure.

He said that Busa was concerned about the state of the electricity sector, as well as Eskom and was finalising a document outlining business’ approach to engaging with both government and Eskom about these concerns. “So we will be hoping to meet with Mr. Matona very soon,” Coovadia told Engineering News Online.

Energy Intensive User Group (EIUG) spokesperson Shaun Nel welcomed the fact that Matona had an intimate understanding of the problems confronting the utility.

The EIUG was also not overly concerned about Matona’s lack of operational experience. But Nel said it would be important for Matona to build a team around him that could address the current maintenance backlog as well as the falling availability of energy.

Matona holds a Masters Degree in Development Economics from the University of East Anglia, in the UK and a Bachelor and Honours degrees in Economics and Political Science from the University of Cape Town. He has also completed various certificates, including in Executive Management and Infrastructure Development from Harvard University’s Kennedy School of Government, in the US.

“The CEO cannot be everything to everyone,” Nel told Engineering News Online, adding that Matona would be a trusted interface with government, Eskom’s sole shareholder.

Coovadia was also not overly concerned by Cabinet’s decision to chose a bureaucrat over a energy-sector operator saying that “it can work” as long at the CEO is able to grasp the strategic issues, while putting in place the structures that allow executives the space to tackle the operational challenges.

However, Pan-African Advisory Services CEO Iraj Abedian was more sceptical, arguing on Radio 702 that the “broken” utility required a strong corporate captain, rather than a bureaucrat.

Abedian also suggested that Matona might require the support of an experienced chief operations officer to help navigate Eskom through its current difficulties.

University of Cape Town Graduate School of Business' Professor Anton Eberhard highlighted the fact that Eskom had 47 000 employees and revenue of R140-billion.

"Tshediso Motona will need to demonstrate that he has the experience and nous to manage a large, complex organisation," he said, adding that his first priorities would be to reverse the precipitous decline in the availability of existing power stations, shorten the delays in commissioning Medupi and Kusile and restore Eskom’s financial health.

"A bailout from government will be a stopgap measure and is not sustainable. Ultimately, Eskom needs to fulfil its core purpose, namely supplying adequate and competitively priced electricity to power our economy. It has not done this for the last five years. We cannot afford another five years of power supply constraints," Eberhard cautioned.

Edited by Creamer Media Reporter

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