Eskom moves to multi-national status
Eskom is South Africa’s national electricity utility. It supplies 95% of the electricity requirements of South Africa, and in the process generates more electricity than all the other suppliers in Africa combined. It is also one of the top seven utilities in the world in terms of size and sales.
It intends to maintain this position by adopting strategies that strengthen its ability to react to changing requirements, while embracing flexibility to deal with uncertainty. This position is embodied in Eskom’s strategic intent – to be the pre-eminent African energy and related services business of global stature.
In March 2002 the Eskom Group announced its financial results, posting an after-tax profit of R2.56b, compared with the previous year’s R1.86b. This 37% increase was achieved despite difficult trading conditions, depressed ferrochrome prices and a depreciating currency. These results are opportune, as the utility is anticipating a new era in the electricity distribution and supply industries.
The regulated business contributed 96% of the group revenue and 92% of the group profit. However, sales growth was relatively low at 1.8% and this, together with an effective price increase of 4%, resulted in an increase of only 6% in revenue.
Eskom is undertaking a transformation into a fully fledged company, bound by corporate governance principles and new structures such as a new board of directors with specific terms of reference, powers and authority. Last year the organisation received the Global Power Company for 2001 award in recognition of providing the world’s lowest-cost electricity while making superior technical innovations to increase transmission system reliability and develop economical, efficient and safe combustion of low-grade fuel. Eskom was also a finalist in the categories of Pre-commercial Technology Development of the Year, Most Successful Strategy Shift of the Year and Chief Executive of the Year.
To retain its position as one of the world’s leading power producers, Eskom also concentrates on diversifying its interests by leveraging its core competencies into services such as gas, telecommunications and information technology. The utility has started exploring the opportunities presented by other forms of energy such as gas, wind and solar. Eskom is also positioning itself at the cutting edge of technological innovations. It is developing a variety of energy-based technologies, it has immense telecommunications capacity, and its information technology capacity has been combined and reconfigured with that of other state-owned businesses to form one of the largest IT organisations in the country.
Eskom Enterprises has also emerged as a key ingredient in the recipe for the New Partnership for Africa’s Development, or NEPAD, and is on the way to becoming the leading energy and related services business in emerging markets. It has positioned itself to benefit from the domestic and international investment that is expected in the African energy sector over the next two decades. The organisation is turning the African Renaissance vision into a reality, working towards providing the energy backbone for current and future development by utilising world-class technology and skills. Moreover, its presence already extends well beyond the African continent into South America and India, among other countries. Eskom Enterprises contributed R108m towards the consolidated after-tax profit of the group – a commendable increase compared with the previous year’s R17m, and a 535% growth in only its second year of trading.
Eskom is also committed to sound environmental management and performance, and will be participating in the World Summit on Sustainable Development taking place in August this year. The challenge we are all faced with in global development is to reverse the current negative trends in poor countries and place them on the development ladder. One of the primary enablers of sustainable social and economic development lies in the upgrading of the infrastructure of developing countries and the provision of essential services to all sectors of society.
Eskom’s three-millionth customer was connected last year. The power utility met its commitment to electrify 1.75 million homes by 1999, a year ahead of the projected delivery date, and has since committed itself to electrifying an additional 600,000 homes by 2002. Today more than 66% of South Africans have access to electricity.
Eskom’s research and development programme is strongly driven by the operational needs of the business. A technology roadmap has been designed, taking into account the long-term strategic and environmental drivers of the southern and South African power sector. This is aligned with Eskom’s strategic intent to leverage technology and apply it competitively. Progress has been made with a portfolio of research activities aimed at improving technical performance, managing environmental impacts, adding value for customers and developing new business opportunities.
Demand-side management (DSM) research has resulted in a DSM Implementation Programme, to start in 2002. Considerable progress has also been made in supply-side technologies. A feasibility study was completed for the PBMR (pebble bed modular reactor) and progress has been made with the environmental impact assessment and nuclear licencing. Planning for a large-scale wind demonstration facility has been completed and, depending on the outcome of the pilot project, wind turbines will be erected later this year.
While Eskom was engaging in all these endeavours, it was also exploring a new identity to carry it into the future, and Eskom’s new corporate identity was launched in March 2002. The organisational objectives, strategies, values and culture are changing considerably and these shifts resulted in the decision to revise that aspect of the business which visually represents the desired image – its logo. The new logo epitomises all the organisation stands for, namely that it is African, global and supportive of partnerships.
In line with President Mbeki’s African Renaissance vision and in pursuance of his declaration of this century as the ‘African Century’, Eskom is doing its utmost to energise and revitalise the African continent. The availability and reliability of the generating plant exceeded international best quartile performance and a record peak demand of 30 599 MW was recorded on 24 July 2001.
Eskom’s challenge is to keep running the business effectively while concentrating on delivering its product in the most cost-effective manner. The organisation will continue to meet the challenges of the day and the future, mindful of the developments taking place in a globalising world. Eskom’s strategic intent envisages, among other things, pre-eminence in Africa as well as global stature. World-class sustainable businesses have multinational markets and operations, and this is the path Eskom has chosen.