How short-term Eskom objectives impacted on its long-term performance

December 17th, 2014, Published in Articles: EE Publishers, Articles: Energize


A fascinating document written by a senior Eskom executive in 1996 has come to the attention of EE Publishers.

The document was handed to Public Enterprises Minister Stella Sigau at that time when a proposal was submitted to her that Government / Eskom dispose of a mothballed power station to an interested consortium comprising a BEE group, Alstom and Siemens.

The document is as relevant today as it was then, and in light of the current generation maintenance issues, and widespread calls for an independent investigation into the problems besetting Eskom, we feel that it is in the public interest that this document be published, which we do as follows:

Nov 1996

The potential detrimental impact on Eskom’s future longer-term performance caused by its current intensive drive to further reduce operating costs

Several years back, Eskom made a commitment to streamline its business and submit to an intensive cost-cutting drive in order to further reduce the price of electricity. This is acknowledged as a most noble self-imposed initiative provided there is no risk of introducing any negative long-term consequences which would cause hardship to its consumers sometime in the future.

There are several examples in the international electricity generation business where hard-driven short term objectives which have resulted in grave longer term consequences. Biased judgement in many cases caused the infrastructure to be severely stressed with inadequate care of long term integrity of plant and equipment. Needless to say, those who inherited the infrastructure at a later date were faced with extensive costs to reinstate the equipment back to the requisite level of technical integrity. It is extremely difficult to explain the cost consequences to the consumer when this occurs as their perception usually leads them to believe that this is due to poor current management and not due to the events of the past.

It has often been found that when one is enthusiastically directly involved in pursuing very challenging annual cost targets, one’s thinking and actions are dominantly short-term focussed. The longer term consequences are viewed with rather extreme optimism until one day in the future suddenly equipment failure starts to cascade.

Such risks cannot readily be assessed by those directly involved in driving to achieve these challenging cost targets.

The most reliable and objective method to ensure that unacceptable compromises are not being made to the longer term integrity of the equipment and business is by having independent technical audits carried out with an objective but adversarial approach. Specialist organisations are available to undertake such audits. It is most desirable that the appointment of such organisations is done by officials who are not in any way connected with the executive of the organisation being audited.

We would be able to suggest some names of organisations who are well equipped to undertake such audits.

The envisaged adversarial audit should not only embrace a representative number of operating power stations, but also include the so-called mothballed power stations to ensure these are not being asset-stripped or being allowed to self­destruct due to corrosion, neglect, etc. These latter assets are a national asset and if Eskom is reluctant to effectively return these to useful service, others in private enterprises would be more than willing to do so at their cost.

Clearly such audits must not be seen as introducing any threat to the executives of the organisation who in fact should welcome the opportunity of receiving an objectively critical review of the likely long term consequences of their well-meaning current actions. A defensive or negative response to such a proposal could already be an indication that the longer term state of the organisation is not receiving due concern and attention, and hence the obvious question: “And why should that be so?

Note: The author of the document is known to EE Publishers but is being withheld by us. 

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