"Rampant corruption at energy provider drags down South Africa"

" Rampant corruption at energy provider drags down South Africa \r\n\r\nOn a late Thursday afternoon last November, in the midst of rolling blackouts implemented by South Africa\u2019s state-owned electricity company, a contractor at a power station in the eastern Mpumalanga province pulled a plug connected to one of the site\u2019s main generation units.\r\n\r\nThe unit subsequently broke down, ensuring yet another day of nationwide outages.\r\n\r\nThe worker later confessed that he had intentionally sabotaged the machinery \u2014 resulting in $1 million in damages and almost $6 million in lost revenue \u2014 so his employer would be hired to make the repairs, according to a statement and report presented to lawmakers by Eskom Holdings SOC Ltd.\r\n\r\nThis wasn\u2019t an isolated event \u2013 rather, it was one of more than 760 criminal incidents targeting Eskom operations over a 90-day period ending in December. At every step of its supply chain, the utility, which\u00a0is responsible for producing 90% of South Africa\u2019s energy, has had to defend itself against armed robbery, fuel theft, sabotage and corruption \u2013 all of which are increasing the risk of\u00a0a complete power outage that could devastate a country\u00a0teetering on the brink of recession.\r\n\r\n\u201cIt is no exaggeration to say that [a total failure of the grid] would, in all likelihood, be a monumental and unprecedented national catastrophe that would threaten many lives,\u201d former Eskom Chief Executive Officer Andre de Ruyter said in a recent affidavit\u00a0for a case in which political parties are suing Eskom over\u00a0power cuts.\r\n\r\nThe most industrialized nation on the continent has already paid a heavy toll for the dysfunction afflicting its main energy provider. The South African Reserve Bank anticipates that the economy will grow\u00a0just 0.2% this year, with persistent outages estimated to\u00a0shave\u00a02 percentage points off output growth. The cost of running diesel generators has quadrupled, and companies that can\u2019t afford auxiliary power are struggling, quite literally, to keep the lights on.\r\n\r\nEskom\u2019s ability to meet demand was a problem even before violence and vandalism reached current levels, as\u00a0efforts to replace flailing plants have been continually delayed. Since 2008, the company has staged\u00a0rolling blackouts to avoid overtaxing the system, and in recent years, these have grown longer and more frequent, sometimes stretching for as long as 12 hours at a time. Last year, outages rose fourfold from the previous annual record and\u00a0took place on more than 200 days.\r\n\r\nMaking matters worse is the fact that the century-old utility has become\u00a0a\u00a0piggy bank for corrupt networks and complicit officials\u00a0seemingly willing to trade South Africa\u2019s stability and economic prospects for personal gain. Under the tenure of the long-ruling African National Congress party \u2013 and particularly\u00a0former President Jacob Zuma \u2013 looting at state-owned companies\u00a0including Eskom and rail and logistics company Transnet SOC Ltd.\u00a0cost the country an estimated 500 billion rand ($27 billion), according to the government. Zuma has consistently denied wrongdoing.\r\n\r\nAs problems have mounted, Eskom\u2019s board has said it has taken steps to fight the graft, but they haven\u2019t been enough.\u00a0In February, De Ruyter stepped down as CEO after\u00a0claiming that top-ranking ANC members were illicitly profiting from corruption within the utility. By that point, he had already made his share of powerful enemies: two months before, he said his morning coffee had been spiked with cyanide.\r\n\r\nFacing attacks from all sides, the company appears trapped in a race to the bottom. As government ministers and utility executives point fingers at each other, each new incident threatens further outages and continued price hikes for customers already struggling with widespread unemployment and rising costs of living.\r\n\r\n Power Down \r\n\r\nBetween the grassy brown hills of Mpumalanga\u00a0around 100 miles\u00a0east of Johannesburg, a massive web of conveyor belts ferries millions of tons of coal a year from the surrounding mines to a cluster of Eskom stations.\u00a0Once the coal arrives, it is pulverized and fed into the boilers that produce electricity. Industrial generators, towering stories above ducts and equipment, hum along as the plants expel mountains of ash.\r\n\r\nSouth Africa has some of the world\u2019s richest coal reserves, producing almost half as much of the mineral as the US does per year despite having a land mass about 13% of its size. Eskom spends roughly 74 billion rand a year on the resource \u2013 much of which never makes it inside the plants.\r\n\r\nTowards the end of last year, guards at the Kendal station in Mpumalanga discovered that truck drivers weren\u2019t emptying coal from their trailers. As prices have surged, coal theft has grown worse in recent years, said\u00a0Rajie Murugan, the chief executive officer of G9 Group, a company that works with Eskom suppliers.\r\n\r\n\u201cWe\u2019ve arrested many drivers involved,\u201d he said, \u201cbut it\u2019s always difficult to get the kingpins.\u201d\r\n\r\nSeveral\u00a0illicit facilities used to blend the mineral have already been shut down across Mpumalanga, and almost three dozen other sites are under investigation, Eskom said in court papers. The\u00a0coal mafias behind them\u00a0have also been known to pay off security personnel and plant workers, to force engineers and managers to create fake procurement orders for goods or services,\u00a0and to re-sell stolen Eskom parts back to the utility.\r\n\r\nIn short, \u201cevery part of the chain\u201d is bought off, Murugan explained.\r\n\r\nGetting a handle on the situation is\u00a0especially difficult as theft is\u00a0often reinforced with intimidation and violence, observed Thapelo Malekutu, an official of the National Union of Mineworkers, the biggest union at the utility. Employees suspected of working with criminal groups are rarely willing to disclose details for fear of what might happen to them, he said.\r\n\r\nIn a\u00a0detailed report to lawmakers, the utility confirmed that\u00a0\u201careas with high rate of violent crimes and well-established syndicates bear high risk of assault, injuries and fatalities.\u201d It also warned, \u201cguards are likely to lose their lives while safeguarding Eskom.\u201d\r\n\r\nNot even the roughly 3.2 billion rand that Eskom spends annually on private security has been enough to keep things under control.\u00a0Soldiers from the South African\u00a0National Defence Force were deployed at some\u00a0of the company\u2019s coal stations last year as blackouts became more frequent. In spite of the stepped-up surveillance, thieves looted thousands of dollars\u2019 worth of copper wire from the Duvha power plant\u00a0over a two-day period, and\u00a0four contractors fixing the energy grid in the Johannesburg suburb of Ekurhuleni were attacked and killed by residents who assumed they were stealing\u00a0cables, according to city officials.\r\n\r\nThe utility has also\u00a0reported a spike in incidents of industrial sabotage in recent years, pinning the blame on disgruntled contractors and heated wage negotiations.\r\n\r\nIn almost every imaginable way, the utility is haemorrhaging money. In addition to outright theft, Eskom lawyers are seeking to recoup hundreds of millions of dollars paid out through suspect contracts.\u00a0According to South Africa\u2019s Deputy President Paul Mashatile, the company, which generates nearly $14 billion in yearly revenue, is awaiting 56 billion rand in outstanding payments from municipalities across the country.\r\n\r\nBefore stepping down in February, De Ruyter estimated that 12 billion rand ($650 million) is stolen from Eskom each year \u2013 an amount that matches the company\u2019s most recent annual loss.\r\n\r\nPointing FingersWhen Cyril Ramaphosa became South Africa\u2019s president in 2018, he highlighted Eskom\u2019s reform as a major focus. The first leadership team he appointed to run the utility looked through years of records and found $1.5 billion of irregular contracts, promising to open criminal cases against senior Eskom executives. \u201cWe will continue to shake these cobwebs,\u201d former Chairman Jabu Mabuza told reporters that year. \u201cThere may be more.\u201d\r\n\r\nThe question of corruption at Eskom has always been intertwined with politics, which makes it difficult to extract at its\u00a0roots. A judicial probe\u00a0concluded last year that former President Zuma, despite his denials,\u00a0knowingly facilitated audacious looting at the state power utility during his almost nine-year rule, after scores of witnesses testified about deals secured with bribes and kickbacks.\r\n\r\nPolitical sensitivities still run high.\u00a0De Ruyter, the former CEO, enraged ANC members this year by alleging in an interview that high-level government members\u00a0were involved in corruption at the utility. Days later,\u00a0following\u00a0a widespread outcry, he was gone.\u00a0Even Pravin Gordhan, the\u00a0minister of public enterprises \u2014 and\u00a0one of de Ruyter\u2019s most visible advocates in government \u2014\u00a0dismissed his remarks.\r\n\r\nWhile the ruling party acknowledges\u00a0that corruption remains a problem at Eskom, it maintains that it is being cleaned up under\u00a0Gordhan. Some top government officials barely seem to prioritize the issue. During\u00a0a March tour of 18 power stations, the newly appointed electricity minister\u00a0blamed\u00a0outages on technical problems, denying that\u00a0graft was much of a factor.\r\n\r\nIn late April, De Ruyter was called to testify before South Africa\u2019s parliament about the situation at Eskom.\u00a0Appearing via video link from a sunny\u00a0room,\u00a0told attendees that it was \u201cprobably valid\u201d that political interference played a role in Eskom\u2019s struggles, and emphasized that \u201cthe lack of intervention in crime in Eskom\u2026\u00a0is something that inflicts the organization to this day.\u201d\r\n\r\nEskom Chairman Mpho Makwana, who was part of a recent revamp of the board, said in an interview that the company is taking measures to fight the graft. This includes\u00a0carefully vetting new contracts, implementing automated procurement systems, and focusing on criminal prosecution of delinquent suppliers and former employees.\u00a0 In the last three months of last\u00a0year, he said, 144 criminal cases were opened and 42 employees were dismissed due to fraud and corruption. When reached for comment, an Eskom spokesperson said that the utility \u201chas been working tirelessly to contain crime and has been working with industry, law enforcement agencies and the criminal justice system to fight the scourge.\u201d\r\n\r\nSome critics are skeptical that\u00a0criminal activity will\u00a0ever be fully expunged from the utility. Likening\u00a0Eskom to \u201ca feast,\u201d Lumkile Mondi of the University of the Witwatersrand, who has written extensively on Eskom, predicted\u00a0that things will only get worse.\u00a0Scavengers will continue to gorge themselves, he said, \u201cuntil the beast has got no bones left and there\u2019s nothing \u2014 it\u2019s all ashes.\u201d\r\n\r\nBooting UpWhile there are positive signs \u2014 Gareth Newham, head of the Justice and Violence Prevention Programme at the Institute for Security Studies in Pretoria, notes that tighter regulation around political funding has squeezed some of the cash flows that previously enabled corruption \u2014\u00a0corporate energy consumers that can afford to are finding workarounds. Some of South Africa\u2019s top companies, including miner Anglo American\u00a0Plc. and fuel and chemical manufacturer Sasol Ltd., have opted to generate more of their own electricity rather than rely completely on Eskom.\r\n\r\nSeriti Resources,\u00a0an Eskom supplier, has \u201ctaken the opportunity to diversify,\u201d said Chief Executive Officer Mike Teke. Rather than continue buying electricity only from the utility, Seriti is setting up wind farms to\u00a0provide\u00a0clean energy\u00a0to its mining operations.\u00a0Such power purchase agreements have grown 25-fold since 2020, reducing the burden on the grid but shrinking the utility\u2019s revenue.\r\n\r\nAnd as the number of paying customers shrinks, electricity rates, which have already more than doubled over the last decade, will have to increase even more. That puts additional\u00a0pressure on townships where\u00a0two-thirds of\u00a0shops and small enterprises have cut jobs due to electricity shortages, according to a recent study by Nedbank\u00a0Group Ltd.\u00a0Small businesses have already weathered a lot, said John Dludlu, chief executive officer of the Small Business Institute, and it\u2019s not clear how much resilience is left.\r\n\r\n\u201cThe current power crisis is proving too much of a blow.\u2019\u2019"

"Rampant corruption at energy provider drags down South Africa"

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