Eskom's acting chief executive, Collin Matjila. Photo: Simphiwe Mbokazi

Leadership challenges facing Eskom as the organisation struggled to finalise the appointment of a chief executive and instead clung to Collin Matjila, the controversy-surrounded acting chief executive, would cost the utility dearly, experts said yesterday.

Eskom reported last month that it had submitted a shortlist of potential successors of Brian Dames, the man who pulled out all the stops to keep the lights on during the cold winter nights when he led Eskom for more than three years.

Dames left Eskom in March and even though his resignation was announced in December, his successor has not yet been named. Yesterday the power utility said it could not comment on the reasons for the hold-up or estimate how far the process had gone since it had submitted the candidates’ names to Public Enterprises Minister Lynne Brown.

But Lynn McGregor, a senior research fellow at the University of Stellenbosch Business School’s unit for corporate governance, expressed concerns over the lack of urgency to finalise this appointment.

“What we’ve observed is that when organisations become leaderless they can lose up to two years of good success stories or good results. That’s because you need a leader to ensure that things happen and you need someone who has the ability to maintain the [previous] director’s work,” she said.

McGregor said appointing a new leader three months after the predecessor’s departure was “too late”. She suggested that the parliamentary selection committees that oversaw the appointments of parastatal leaders should account to the public, letting it in on the process so that everyone could know that appointments were made on merit and not because of political connections.

For now Eskom has Matjila, the acting chief executive in whom the board declared its “full confidence”. It also backed his ability to lead the organisation when allegations of misconduct surfaced about him.

“Those in government and companies should demonstrate zero tolerance for corruption,” McGregor said. “This [Eskom’s retention of Matjila] gives a message in the public eye that anyone can get away with corrupt practices.”

She said even though people were innocent until proven guilty, putting people on paid leave while they were being investigated helped the organisation’s image.

On Friday ratings agency Standard & Poor’s downgraded Eskom’s long-term local and foreign currency ratings from BBB to BBB-, the lowest investment grade in terms of market participants perception. To make matters worse, it was placed on “credit watch with potential negative implications”. Fitch Ratings has also changed the utility’s ratings outlook to negative.

“It was not a surprise but the important issue now is how do we move forward and leadership is an important issue here,” Nicky Weimar, a senior economist at Nedbank, said.

Weimar said that while the ratings agencies could not ignore the revenue shortfall that Eskom had projected, which justified their actions, it was clear that everything that Eskom did was “hugely expensive” and was indicative of a lack of leadership and controls.

“You look at the delays and cost overruns on Medupi and it shows lack of control. But they have approached the government for [financial] assistance and the government doesn’t have a choice because we opted for a monopoly,” Weimar said.

Eskom said it was in discussions with the government to address its capital structure after its rating downgrade but yesterday the utility said it could not engage in discussion about its recapitalisation plans as the talks were still at a relatively early stage.

Three ministries including the Treasury have started working out a recapitalisation plan for Eskom as part of the new energy master plan that will be submitted to the cabinet. - Business Report