South Africa’s electricity utility Eskom has initiated a series of interactions with stakeholders as part of a review process designed to deliver a new long-term strategy, dubbed ‘Strategy 2035’, for the beleaguered organisation.
The new leadership at the State-owned company, together with Public Enterprises Minister Pravin Gordhan, have already formally acknowledged that the group’s business model is no longer sustainable, or fit for purpose, particularly in light of material technology changes in the electricity sector.
Gordhan has, thus, mandated Eskom to revise its short-term corporate plan before the end of September, while simultaneously undertaking a review aimed at defining the long-term strategy and architecture of the business.
As part of the process, Eskom is meeting with various stakeholders and, on Thursday, hosted several business chambers at its Megawatt Park head office to outline its objectives for the review and to appeal for input.
Divisional executive in the office of the CEO Freddy Ndou said the review was intended to address both current business issues, as well as to reposition Eskom for the longer term.
It was premised on the understanding that the “current model is unsustainable” and that Eskom should “evolve to embrace the future”.
A dedicated team, comprising functional and subject experts, had been established to oversee the review and ensure that the immediate corporate plan was aligned with the longer-term strategy.
“We have also partnered with external strategic expertise from mid-August to configure and finalise the strategy and thereafter focus on implementation.”
Ndou did not offer details as to the possible new architecture, saying only that the review would assess the appropriateness of the current vertically integrated design, which embraces the full electricity value chain of generation, transmission, system operations and distribution.
Some of the questions being asked related to both Eskom and the future structure of the electricity industry including: “Should Eskom remain a vertically integrated organisation, or should it be broken up? Is Eskom too big, or is it right as it is? Should we be in the generation business, or should we be in the transmission business? Should we have an independent system and market operator (ISMO), or should we have an ISMO within the transmission business? Should the distribution business be structured as it is with municipalities, or should we be looking at regional electricity distributors?”
Government, he stressed, would make these policy choices, but Eskom was keen to have its voice heard. “We have to look at the changes to the industry structure and assess how it influences the Eskom business model.”
Ndou lamented the fact that the utility had not been changing at the same pace as the industry, particularly with regard to the adoption of renewable energy.
Besides defining Eskom’s future business model and structure, Strategy 2035 would also focus on Eskom’s customer strategy, as well as its ability to grow into new markets in the rest of Africa.
Skills and leadership stability would also receive attention, with the utility having had a total of 14 CEOs, including acting CEOs, since 2007, including newly appointed CEO Phakamani Hadebe.
“Regardless of what happens, it’s clear that the current model is unsustainable . . . so we have to change,” Ndou concluded.