The history of parastatals or state-owned enterprises in Africa from the colonial and Apartheid eras to present day, is littered with contradictions. This is so because of the schizophrenic attitude that governments, private capital and citizens have towards these humongous entities that seem to do nothing better than gobble up loans from treasury whilst harbouring corrupt and inept “liberation war heroes”.
The stunning turnaround of South Africa’s electricity state enterprise, Eskom, from a dysfunctional entity that threatened the mortality of many businesses through “loadshedding” to a stable entity supplying power at an Energy Availability Factor (EAF) of 70% gives hope that some critical parastatals can be revived. But, to do that, many factors have to be considered and they relate to political leadership, appointment of competent business leaders and managers and prudent financial management.
The politics of redress in the new independent state
The newly born African nations knew they had to address the vast needs of the majority of the people who had been neglected by self-serving colonial regimes and thus saw state intervention in the economy as critical to extend and expand the provision of infrastructure (roads, hospitals, schools) and stimulate jobs-led economic growth. They saw in the state enterprise the opportunity to modernise the economy, minimise interference from international financial institutions and provide services in areas that were not economically viable. In 1969, Kenneth Kaunda went a step further and nationalised the copper mining companies that brought in 50% of the country’s revenue.
However, within a decade or two of independence, the African states, from Ghana to Zimbabwe, were implementing painful economic structural adjustment programmes under the supervision of the International Monetary Fund (IMF) and the World Bank. In most cases, the World Bank teams would recommend measures such as abolition, elimination, merger and restructuring of state enterprises.
Enter Eskom
Writing at the dawn of South Africa’s democracy, Anton Eberhard observed in his book Poverty and Power: Energy and the South African State (1995):
“South Africa…represents an unusual combination of, on the one hand, an industrialised economy, a sophisticated financial and banking system and developed infrastructure, and, on the other, conditions of severe underdevelopment, poverty and inadequate access to services to services by the majority of its population.”
In such a situation, the expectations on the positive developmental role of state enterprises such as Eskom were high. Eskom was established in 1923 in terms of the Electricity Act of 1922 and engages in generation, transmission and distribution of electricity. In 1995, Eskom generated 98% of South Africa’s electricity, 94% of which was coal, 5% from nuclear and the balance from hydroelectric and pumped storage stations.
The initial electrification programme of the democratic government was a huge success, as millions of households were connected.
When the vultures eat the State
The admirable expansion of electricity provision and modest growth in the economy were not met with investment in new power plants. By 2007, that meaningless term “loadshedding” had entered the South African lexicon. But something even more sinister had begun to happen in the country – state capture.
One comrade had stated with candour: “I did not join the struggle to die poor.” Well, Eskom was one place to ensure the comrades would not face death on an empty belly. The Gupta family, enabled by various senior Eskom executives, feasted on the carcass of a stumbling entity, endangering its viability. Eskom had become the asylum centre for politically connected cronies. Dishing out dubious supply and maintenance contracts, deliberately sabotaging the state enterprise and hounding out any managers who did not play along, Eskom became a horror show that played out in front of a despairing nation.
Mteto Nyati and team rescue Eskom
Mteto Nyati, a well-respected business leader, was appointed to the Eskom board of directors in October 2022. A year later, he became the chairman of the state enterprise. The prevailing wisdom was that Mteto had made a mistake in staking his reputation on turning Eskom around. What if he failed to stop the debilitating power cuts by the end of his three-year tenure?
Having had the privilege of working under Mteto when he was the group chief executive of Altron, I should have known better. A mechanical engineer by profession, he is a turnaround specialist who insists on understanding the root problem and then developing a strategic response based on that. Nothing excites him more than the challenge of a company in distress.
Mteto’s mantra is that culture eats strategy for breakfast. In other words, culture is strategy, and that should be the starting point in turning around a company in distress. I have not spoken to Mteto about how he led his fellow board members, the executive management team and employees to buy into a new culture at Eskom. However, knowing some elements of his bold leadership in times of crises (Covid-19, company distress) and gleaning insights from his tweets, I can speak broadly of what he probably did at Eskom.
It was clear that Mteto only accepted the board role at Eskom on the basis that there would be no political interference and that there would be alignment amongst four key stakeholders: Government, Eskom board, executive leadership and employees.
From the outside, one could see the emergence of a different kind of Eskom. A credible group chief executive (Dan Marokane) was appointed, competent managers were promoted or brought back into the organisation, and others were bid farewell; there was alignment in the communication from the responsible minister, the chairman and the chief executive.
Lessons from the Eskom case
The Eskom turnaround is a case study for those who wish to learn about bold leadership in times of crisis and how to turn around distressed state entities. A precondition is that the government of the day should step out of the way or enable the leadership of the state enterprise to get on with the job of stabilising the entity and ensuring its sustainability. It is also necessary to allow patriots from the private and civic sectors to step forward and offer their time and skills.
With the international capital markets in turmoil and the Global North cutting overseas development assistance, Africa will increasingly have to look to domestic resource mobilisation to spur economic growth. We cannot afford state enterprises that bleed the fiscus without delivering value to people and the economy.
