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Dear Mr President

24th May 2019

By: Terry Mackenzie-hoy

     

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Happily, if I google ‘Ramaphosa’, I get 12.7-billion hits. If I google ‘Mackenzie-Hoy’, it is 8.1-million, and if I google ‘Alan Mulally’, I get 462 000 hits. So, I am more famous than Mulally and about 8% as famous as our President. I doubt if the President or anybody in his party has the vaguest idea who Mulally is. So I will explain: he was the CEO of Ford Motor Company. In 2006, owing to a US economic downturn, Ford was not doing well; it lost $12-billion that year. Two years later, in 2008, Ford lost $14-billion. After the 2006 loss, Ford knew that things had to change and so the company headhunted Mulally, an engineer, from Boeing Corporation.

At first, Ford’s problems looked too big to fix. However, Mulally led the effort for Ford to borrow $23.6-billion by mortgaging all the company’s assets. Mulally said that he intended to use the money to finance a major overhaul and provide “a cushion to protect for a recession or other unexpected event”. The loan was interpreted as a sign of desperation, but is now widely credited with stabilising Ford’s financial position. Manufacturers General Motors and Chrysler had both gone bankrupt during the automotive industry crisis of 2008 and 2009 and had sought government bail-outs. Ford returned to profitability in 2009 and made a comfortable $3.69-billion last year.

Right now at home in sunny South Africa, State-owned electricity utility Eskom has a total debt of more than R419-billion, or $30-billion. Something has to happen. The President has set up a task team to find out what to do about this. The task team consists of eight people who, in my view, do not have the skills or breadth of vision to know what to do to fix Eskom. Reducing staff is an obvious beginning. At Ford, in 2006, Mulally cut 30 000 jobs. The 2018 Eskom plan was to cut 15 000 jobs and then 7 000, but the utility is still negotiating with unions. It is considered that Eskom needs a staff complement of 14 000 but it employs about 48 000. Revenues are down, since municipalities have a culture of nonpayment. Eskom pays for renewable energy, which is more expensive than the current average cost of Eskom power. It is claimed that Eskom recovers this by means of approved tariff adjustments but there is no adjustment for having to run gas turbines when the wind drops suddenly at night.

All this means that fixing Eskom is akin to fixing Ford. More importantly, it should be the task of one person, such as Mulally. Now Mulally is retired and probably not available. So, Eskom needs somebody else. If we look around the South African management scene, we see very few top CEOs with engineering experience.

So, it may be that we would need two people appointed to fix Eskom. This is not a good idea, since they would get in each other’s way. I suggest that the President look at the management of one of the oldest South African mining house, De Beers South Africa. It has been my personal experience that De Beers is run by very smart people. I have often been impressed by the way they have managed their way out of difficulties, how they look after their staff and, importantly, make a profit in competition with international mining companies. Look to De Beers, I say. I know that the chances of the President reading this column are about the same as my dog Tommy learning to play “Eine Kleine Nachtmusik” on an oboe. However, I had to write this letter: the President appoints school teachers to Cabinet positions, sellers of goods from bakkies to Eskom management . . . but appoints not one engineer to fix problems at our national power utility and seems to do nothing to appoint anybody with management skills to stop that utility from losing R500-million per month. Mr President, please.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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