GPSA Weekly Views

Let's talk more about Eskom.

Noseweek reported that a senior at Eskom has spilled the beans on what was once our pride and joy becoming an embarrassment for the nation. I received the full article from a friend.

Herewith some extracts from this article -

In the (dark?) old days, Eskom was a so-called creature of statute, the statute being the Eskom Act of 1987. It made a lot of money and paid no tax and no dividends. No one really minded because Eskom invested its profits in infrastructure, which meant we could turn the lights on whenever we pleased.

When the ANC came into power it took one little look at this lot and thought something like "You're joking! Plough all that money into turbines and other shit we don't understand when there are so many worthier causes – like government coffers and directors' pockets"? So in 1998 it passed the Eskom Amendment Act, which made it a company with just one shareholder – the state – to which it pays both dividends and taxes. So it now provides the state with truly huge piles of money.

So yes, it really is a case of "Eskom, Government: Can you tell the difference?" Which makes it a little strange that Eskom is so keen to distance itself from the government at the moment. As in the "It wasn't us folks, it was the government; we told them years ago that we needed to invest" routine that Eskom does whenever questions are asked. Could it be that Eskom's directors need to keep their distance so that they can justify the latest tranche of bonuses? Because, as South Africa's finest mind, Public Enterprises Minister Alec Erwin, said recently, bonuses can't be withheld from senior executives who have performed their contractual obligations, just because the country is angry with them.

Alec Erwin has retracted his "demand" for a 53% increase in electricity cost citing that our economy and it's people will not be able to cope with such a huge increase. Instead it's been decided to phase this increase in over a period of 5 years. Is he developing a brain, or did he employ consultants to explain the basics to him?

What we do know is that there's a lot of dirty laundry at Eskom with an official government investigation in full swing. Strange how government, as the sole "owner" of Eskom never kept tags on its organisation, assuming that those in power knew what they were doing. And further to last weeks story - According to our source, the government may well have been negligent when it refused to invest in power stations, but Eskom itself is run like a circus.

Noseweek offers the following:

How to run a mega-corporation into the ground in seven easy steps:

Step 1: Look after number one
As we know the Eskom directors treat themselves rather well. The best-known executive committee member is CEO Jacob Maroga. Not only do these fine business leaders seek wonderful bonuses at a time when South Africans are required to pay a whole lot more for the electricity they don't have, but they also get security protection – gates, alarms and all sorts of gadgets installed at their homes.

Step 2: Put your hand in the cookie jar
Until fairly recently Eskom employed its own security staff. Then BEE came along and Eskom needed to outsource the security function, to satisfy BEE requirements. So Eskom decided to sell the blocks of flats it owned in Edison Avenue, Sunninghill, which had been used by its security staff. The idea was to offer the flats to the staff by way of a notice on the company notice board. Fine idea, but unfortunately some senior staff cherry-picked the flats they wanted before the notice went out, and then sold them for handsome profits.

Step 3: Take in a lodger
Eskom's head office, the butt-ugly Megawatt Park in Sunninghill, consists of four enormous Soviet-style office blocks. In 2003 Eskom decided it would be a fine idea to cram its entire staff into two of the blocks and find tenants for the other two. It appointed property company Broll to find a tenant, and, with delicious irony, it duly found the organisation which Eskom had tried very hard to diddle a few years previously, SARS.

Anyway, not long after entering into this great deal, Eskom felt obliged to rent three more buildings in Sunninghill to accommodate its staff. And now, having realised that it's simply paying off someone else's mortgage, it decided that it wants to bring its staff back to Megawatt Park. But because it can't dislodge SARS, it needs to build another building on the campus – at a time when the construction industry is booming and building costs are high.

Step 4: Be too clever to take advice
In the early 'eighties, Eskom established communication with the Reserve Bank on medium and long-term growth forecasts for the country, as well as other matters which might be relevant in deciding new capacity. The thinking was no doubt that the Reserve Bank knows its stuff when it comes to the economy, and regular meetings were held. But now no such meetings take place. Is Jacob just too proud to take advice from Tito? Or can Tito not take the heat?

Step 5: Do some truly weird stuff
At one stage Eskom was quite keen on making money through power station refurbishment, so it sent two engineers to check out the possibility of doing this in Iraq. The two flew to Iraq via Jordan, and Eskom received a bill from a travel agent named Marathon – not Eskom's contracted travel agent – for R436 000. For two flights!? Actually Eskom was paying for some other passengers too. Like Jeff Radebe, now Minister of Transport, previously Public Enterprises, and one of the Pahad brothers – either Minister in the Presidency Essop or Deputy Foreign Minister Aziz. What these guys were doing in Iraq we don't know. Just like we don't know why Eskom had to pay for their trip.

Step 6: When the shit hits the fan, lie!
Remember Koeberg 2006, when the Western Cape got a sneak preview of the blackouts which were to come? Alec Erwin rushed in and blamed "human instrumentality" and "loose bolts" and so on. The man may look all ears, but he certainly doesn't listen – the problem had nothing at all to do with Koeberg. In fact the electrical load from Mpumalanga to the Cape could not be carried because of badly maintained transmission lines, which were found melted in the Karoo. Which was, of course, all part of the "the less we spend on maintenance, the higher the profits and the higher our bonuses" strategy. And, says our source, given the state of the lines throughout the country, there'll be plenty more of this in the future.

And Eskom has been lying about the current crisis too – it has nothing to do with wet coal but rather with a lack of coal. Which is not to say that there isn't enough coal in the country, but simply that the coal isn't getting through to Eskom. Once again BEE produces its sting. In times gone by, Eskom either used its own collieries or it received its coal from large companies like BHP Billiton. But then it decided that it should use small BEE-compliant collieries out in Mpumalanga. And these small collieries soon realised that Eskom was no longer exercising any quality control. So they started sending rock instead of coal.

Step 7: Give jobs to the boys
The good news is that Eskom is actually building some new power stations. The first one will be Medupi in Lephalale, Limpopo, at a cost of some R78bn. In March 2006 Eskom put out tenders for boilers and turbines, with a deadline of 10 August 2006. Only two companies submitted bids, Alstom and Hitachi. Hitachi's offer was deemed to be unacceptable on technical grounds, so on 14 June 2007 the Eskom board conditionally approved proceeding with Alstom for turbines and an Alstom and Steinmuller consortium for boilers.

As is fairly well-known by now, Eskom then changed its mind and awarded the R20bn tender for boilers to Hitachi. Some say that this was not unrelated to the fact that the ANC front company Chancellor House is Hitachi Power Africa's 25% BEE partner, and that it stood to make some R3bn from the deal. Hitachi claims to be highly irritated by the fact that its reputation has been sullied by the suggestions of improper influence, but we suspect that it will get over it if, as expected, it also picks up the contract for the boilers at another planned power station at Emalaheni, Mpumalanga, a deal which could be worth another R20 billion.

Okay. This is obviously just some excerpts out of the original piece. Swing by Noseweek & get the rest now.

Let's have your ideas -

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Weekly View
	18 May 2008
Let's talk more about Eskom. Noseweek reported that a senior at Eskom has spilled the beans on what was once our pride and joy becoming an embarrassment for the nation. I received the full article from a friend. Herewith some extracts from this article - In the (dark?) old days, Eskom was a so-called creature of statute, the statute being the Eskom Act of 1987. It made a lot of money and paid no tax and no dividends. No one really minded because Eskom invested its profits in infrastructure, which meant we could turn the lights on whenever we pleased. When the ANC came into power it took one little look at this lot and thought something like "You're joking! Plough all that money into turbines and other shit we don't understand when there are so many worthier causes – like government coffers and directors' pockets"? So in 1998 it passed the Eskom Amendment Act, which made it a company with just one shareholder – the state – to which it pays both dividends and taxes. So it now provides the state with truly huge piles of money. So yes, it really is a case of "Eskom, Government: Can you tell the difference?" Which makes it a little strange that Eskom is so keen to distance itself from the government at the moment. As in the "It wasn't us folks, it was the government; we told them years ago that we needed to invest" routine that Eskom does whenever questions are asked. Could it be that Eskom's directors need to keep their distance so that they can justify the latest tranche of bonuses? Because, as South Africa's finest mind, Public Enterprises Minister Alec Erwin, said recently, bonuses can't be withheld from senior executives who have performed their contractual obligations, just because the country is angry with them. Alec Erwin has retracted his "demand" for a 53% increase in electricity cost citing that our economy and it's people will not be able to cope with such a huge increase. Instead it's been decided to phase this increase in over a period of 5 years. Is he developing a brain, or did he employ consultants to explain the basics to him? What we do know is that there's a lot of dirty laundry at Eskom with an official government investigation in full swing. Strange how government, as the sole "owner" of Eskom never kept tags on its organisation, assuming that those in power knew what they were doing. And further to last weeks story - According to our source, the government may well have been negligent when it refused to invest in power stations, but Eskom itself is run like a circus. Noseweek offers the following: How to run a mega-corporation into the ground in seven easy steps: Step 1: Look after number one As we know the Eskom directors treat themselves rather well. The best-known executive committee member is CEO Jacob Maroga. Not only do these fine business leaders seek wonderful bonuses at a time when South Africans are required to pay a whole lot more for the electricity they don't have, but they also get security protection – gates, alarms and all sorts of gadgets installed at their homes. Step 2: Put your hand in the cookie jar Until fairly recently Eskom employed its own security staff. Then BEE came along and Eskom needed to outsource the security function, to satisfy BEE requirements. So Eskom decided to sell the blocks of flats it owned in Edison Avenue, Sunninghill, which had been used by its security staff. The idea was to offer the flats to the staff by way of a notice on the company notice board. Fine idea, but unfortunately some senior staff cherry-picked the flats they wanted before the notice went out, and then sold them for handsome profits. Step 3: Take in a lodger Eskom's head office, the butt-ugly Megawatt Park in Sunninghill, consists of four enormous Soviet-style office blocks. In 2003 Eskom decided it would be a fine idea to cram its entire staff into two of the blocks and find tenants for the other two. It appointed property company Broll to find a tenant, and, with delicious irony, it duly found the organisation which Eskom had tried very hard to diddle a few years previously, SARS. Anyway, not long after entering into this great deal, Eskom felt obliged to rent three more buildings in Sunninghill to accommodate its staff. And now, having realised that it's simply paying off someone else's mortgage, it decided that it wants to bring its staff back to Megawatt Park. But because it can't dislodge SARS, it needs to build another building on the campus – at a time when the construction industry is booming and building costs are high. Step 4: Be too clever to take advice In the early 'eighties, Eskom established communication with the Reserve Bank on medium and long-term growth forecasts for the country, as well as other matters which might be relevant in deciding new capacity. The thinking was no doubt that the Reserve Bank knows its stuff when it comes to the economy, and regular meetings were held. But now no such meetings take place. Is Jacob just too proud to take advice from Tito? Or can Tito not take the heat? Step 5: Do some truly weird stuff At one stage Eskom was quite keen on making money through power station refurbishment, so it sent two engineers to check out the possibility of doing this in Iraq. The two flew to Iraq via Jordan, and Eskom received a bill from a travel agent named Marathon – not Eskom's contracted travel agent – for R436 000. For two flights!? Actually Eskom was paying for some other passengers too. Like Jeff Radebe, now Minister of Transport, previously Public Enterprises, and one of the Pahad brothers – either Minister in the Presidency Essop or Deputy Foreign Minister Aziz. What these guys were doing in Iraq we don't know. Just like we don't know why Eskom had to pay for their trip. Step 6: When the shit hits the fan, lie! Remember Koeberg 2006, when the Western Cape got a sneak preview of the blackouts which were to come? Alec Erwin rushed in and blamed "human instrumentality" and "loose bolts" and so on. The man may look all ears, but he certainly doesn't listen – the problem had nothing at all to do with Koeberg. In fact the electrical load from Mpumalanga to the Cape could not be carried because of badly maintained transmission lines, which were found melted in the Karoo. Which was, of course, all part of the "the less we spend on maintenance, the higher the profits and the higher our bonuses" strategy. And, says our source, given the state of the lines throughout the country, there'll be plenty more of this in the future. And Eskom has been lying about the current crisis too – it has nothing to do with wet coal but rather with a lack of coal. Which is not to say that there isn't enough coal in the country, but simply that the coal isn't getting through to Eskom. Once again BEE produces its sting. In times gone by, Eskom either used its own collieries or it received its coal from large companies like BHP Billiton. But then it decided that it should use small BEE-compliant collieries out in Mpumalanga. And these small collieries soon realised that Eskom was no longer exercising any quality control. So they started sending rock instead of coal. Step 7: Give jobs to the boys The good news is that Eskom is actually building some new power stations. The first one will be Medupi in Lephalale, Limpopo, at a cost of some R78bn. In March 2006 Eskom put out tenders for boilers and turbines, with a deadline of 10 August 2006. Only two companies submitted bids, Alstom and Hitachi. Hitachi's offer was deemed to be unacceptable on technical grounds, so on 14 June 2007 the Eskom board conditionally approved proceeding with Alstom for turbines and an Alstom and Steinmuller consortium for boilers. As is fairly well-known by now, Eskom then changed its mind and awarded the R20bn tender for boilers to Hitachi. Some say that this was not unrelated to the fact that the ANC front company Chancellor House is Hitachi Power Africa's 25% BEE partner, and that it stood to make some R3bn from the deal. Hitachi claims to be highly irritated by the fact that its reputation has been sullied by the suggestions of improper influence, but we suspect that it will get over it if, as expected, it also picks up the contract for the boilers at another planned power station at Emalaheni, Mpumalanga, a deal which could be worth another R20 billion. Okay. This is obviously just some excerpts out of the original piece. Swing by Noseweek & get the rest now. Let's have your ideas - Message Board Free Forums by Bravenet.com	Online Shop Past Views Current Joke Past jokes Gallery Links Current Exchange Rate Daily News Headlines Articles
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