South Africa seeks state power chief after CEO says he was poisoned

South Africa seeks state power chief after CEO says he was poisoned

JOHANNESBURG – On a Monday last month, André de Ruyter, chief executive officer of South African state-owned energy company Eskom Holdings SOC Ltd., woke up to his 5 a.m. fitness routine and then headed to an offsite meeting with the chairman of Die Tafel. Hours later he lay shaking in a hospital bed. Blood tests viewed by The Wall Street Journal showed he had ingested cyanide.

Now the South African government is looking for a replacement for Mr de Ruyter, who says he handed his resignation to the Eskom chief executive hours before he became nauseated and confused in his office on December 12. Mr de Ruyter says he suspects the cyanide was added to a cappuccino he drank from his personalized mug in his office.

Even without the poisoning allegations being investigated by local police, taking the helm of the company that supplies around 90% of South Africa’s electricity needs comes with a daunting job description.

Eskom’s fleet of aging power plants are constantly failing due to age, poor maintenance and alleged sabotage, triggering nationwide power outages that currently last more than 11 hours a day and further hampering South Africa’s already crippled economy.

Days after Mr de Ruyter’s resignation, the company’s auditors warned that Eskom was at risk of bankruptcy as it collapsed under a mountain of debt and local regulations that keep electricity tariffs below Eskom’s generation costs.

Additionally, international pressure to reduce carbon emissions means Eskom must quickly replace coal, which it relies on for around 90% of its electricity generation, with renewable energy sources.

South Africa’s President Cyril Ramaphosa said last week whoever becomes Eskom’s 12th CEO since 2010 will face a long list of challenges. “I applaud anyone who takes this job,” he added.

Outgoing CEO André de Ruyter says his efforts to overtake Eskom have been undermined by entrenched corruption.


Photo:

Waldo Swiegers/Bloomberg News

Anne Frühauf, head of political risk research for southern Africa at communications and consulting firm Teneo, put it more bluntly: “It’s hell’s job. With every move of the revolving door, it gets harder and harder to recruit. Not only is it a career-limiting move, but it is also physically dangerous.”

Mr de Ruyter, a former executive of the South African petrochemical and energy group Sasol GmbH.

became CEO of Eskom in January 2020, 13 years after the company first imposed rolling blackouts as power demand routinely outstripped available supply.

In the first nine months of last year, South Africa’s businesses and 60 million citizens suffered from an average of around eight hours a day without electricity, up from around 2½ hours in 2020.

Eskom’s coal-fired power plant fleet is on average 35 years old, and the completion of two large new coal-fired power plants is years behind schedule. In the first 10 months of 2022, Eskom spent $795 million burning diesel to help offset some of the power generation shortfalls.

According to the South African Council for Scientific and Industrial Research, Eskom was only able to call on 59% of its installed generation capacity in the first half of 2022 due to plant failures.

Mr de Ruyter says his bid to overtake Eskom has been undermined by entrenched corruption and divisions within the South African government. Although Mr Ramaphosa has called for a shift to renewable energy, the powerful Minister for Natural Resources and Energy, Gwede Mantashe, has continued to support coal as the primary energy source.

A spokesman for Mr Ramaphosa said South Africa’s energy security “requires more than Eskom”, although the turnaround of the utility remains a priority. Spokespersons for Mr. Mantashe did not respond to requests for comment.

A clothing store during a power outage. South Africa has been suffering from power outages for years.


Photo:

SIPHIWE SIBEKO/REUTERS

Peter Attard Montalto, head of capital markets research at Intellidex, a South African research firm, estimates that between 2009 and 2018 around $3 billion was plundered from Eskom’s coffers. Two of Eskom’s CEOs during this period were charged with corruption by South African prosecutors. Both deny the allegations.

Mr de Ruyter says his attempts to clean up Eskom’s ranks and finances have often been unsuccessful. “I had no idea that criminal networks were so highly organized and so ingrained,” he said.

In the last two months, police have arrested a truck driver and his manager for allegedly stealing company coal, two security guards who allegedly allowed accomplices to loot 5,863 liters of diesel and a contractor Eskom claims it has intentionally broken equipment in a power plant to secure more maintenance work.

The South African Reserve Bank has warned that Eskom’s failure to keep its lights on could cost the country up to 0.6% of gross domestic product in 2023. At the same time, the company’s debt mountain climbs to $23.7 billion, about 5.6% of South Africa’s GDP, much of which is government guaranteed, adding to concerns about the sustainability of the country’s public finances.

Mr de Ruyter says a shift from coal to renewables is the best bet for Eskom to increase its generation capacity enough to meet demand while avoiding painful tariffs on South African products from new European Union legislation , which will penalize imports from countries with high energy carbon emissions.

Eskom estimates that around 46% of South Africa’s exports to the EU are at risk if it fails to decarbonise its energy system.

Another plus for renewable energies, according to Mr. de Ruyter: “You can’t steal the sun and wind.”

South Africa still relies heavily on coal to generate its electricity.


Photo:

Waldo Swiegers/Bloomberg News

How the company will afford to phase out coal is another matter. The South African government says it will cost $42.4 billion to begin decarbonizing its power system over the next five years, multiple of the $8.5 billion funding package it approved last year was offered by a group of rich countries, including the US, to fund their energy transition.

Mr de Ruyter says he received death threats for over a year. He says his position as CEO became untenable when Mr Mantashe, the energy secretary, publicly accused him in early December of “actively agitating to overthrow the state” by allowing the ongoing blackouts to continue. Mr Ramaphosa said nothing to defend him, said Mr de Ruyter.

A spokesman for Mr Ramaphosa said Eskom’s leadership “has always enjoyed government support”.

The outgoing CEO advises his eventual successor to get assurances from the country’s president that he will support the necessary reforms and create the right conditions for private investment in the energy sector. He also added: “Don’t get a personalized mug.”

Write to Alexandra Wexler at alexandra.wexler@wsj.com

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