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Directors' report

3. Socio economic

3.1 Equity

Employment equity
Eskom aims to demonstrate exemplary corporate citizenship and harmony with society through its continued focus on affirmative action and actively promoting women and disability equity.

Employment equity policies have been implemented that consider race, gender, and people with disabilities to ensure Eskom builds an organisation that represents all the people of South Africa.

Employment equity
	Target	Actual	Actual
	March	March	March
	2006	2006	2005
Eskom Holdings Limited
Race
– Black¹ staff at managerial² level, %	> 59,4	60,1	57,9
– Black staff at all levels, %	n/a³	70,0	69,1

Gender
– Women at managerial level, %	> 31,1	31,8	28,9
– Women at all levels, %	n/a³	24,7	23,3

People with disabilities, %	> 2,4	2,5	2,0

Internal promotions
– Black staff at all levels, %	n/a³	78,1	75,3
– Women at all levels, %	n/a³	39,7	44,4
Eskom Enterprises (Pty) Limited
Race
– Black staff at managerial level, %	53,0	49,7	39,6
– Black staff at all levels, %	n/a³	50,3	52,6

Gender
– Women at managerial level, %	21,0	18,4	14,4
– Women at all levels, %	n/a³	18,8	14,9
Eskom Finance Company (Pty) Limited
Race
– Black staff at managerial level, %	52,0	54,8	50,0
– Black staff at all levels, %	n/a³	57,5	56,2

Gender
– Women at managerial level, %	70,0	64,5	70,0
– Women at all levels, %	n/a³	69,9	72,0
^1. Black, Asian and Coloured South Africans. ^2. Managers, professionals and supervisors in the CU to F Band levels on the Paterson grading. ^3. No target set.


Description	2006 12 months	2005 (Jan-Mar)	2004 (Jan-Dec)
Staff turnover full-time employees, number
Employees at start of period	29 845	28 396	28 938
Transfer of employees from Eskom Enterprises	–	1 370	–
Add: Recruitment	1 839	436	1 063
Less: Resignations	(782)	(171)	(625)
Deaths	(286)	(75)	(298)
Dismissals	(111)	(23)	(111)
Retirements	(287)	(79)	(487)
Other	(36)	(9)	(84)
Total employees at end of period	29 697	29 845	28 396
Employee turnover rate, %	5,2	5,2	5,6
Age distribution of workforce at end of period, % 18 – 20 years 20 – 29 30 – 39 40 – 49 50 – 59 Over 60	0,03 14,0 23,4 37,1 22,8 2,7	0,1 13,9 23,4 39,7 20,6 2,3	0,1 13,5 23,1 40,8 20,3 2,2

3.2 Corporate citizenship

Accelerated and shared growth initiative for South Africa
The government’s stated accelerated and shared growth initiative for South Africa (Asgisa) aims to promote economic growth and to halve poverty and unemployment by 2014. Eskom’s most significant contribution to Asgisa will continue to be through its core business of supplying affordable, available and quality electricity to facilitate economic growth. In addition, Eskom can leverage its associated activities in bridging the gap between the first and second economy.

These associated activities include:

optimising Eskom’s proposed capital infrastructure investment programme for local content, skills development, small and medium enterprise, black women-owned businesses and black economic empowerment participation
capacity-building initiatives
accelerating the electrification drive to facilitate achieving government’s stated objective of universal access by 2012
focusing its current corporate social investment programmes to deliver increasingly on the Asgisa objectives of job creation, poverty alleviation and capacity building

Black economic empowerment (BEE)
As part of its procurement policies and managerial support programmes, Eskom continues to support small, medium and micro enterprises and large black businesses for the supply of goods and services, thereby contributing to BEE. The amounts reported include expenditure on both coal and demand-side management. In 2006 Eskom procured 67% of discretionary expenditure from BEE against a target of 65%.

In line with Eskom’s policy framework for the economic empowerment of women, there is an increased focus on the promotion and empowerment of black women entrepreneurs to facilitate their participation in the mainstream economy. Eskom exceeded its target of 15% of discretionary expenditure from BEE by procuring 17% from black women owned businesses.

Eskom will review its policies to align them with the code of good practice as developed by the Department of Trade and Industry for the implementation of broad-based black economic empowerment.

Eskom’s black economic empowerment policy has always embraced the concept of broad-based black economic empowerment. In 1998, Eskom adopted a model similar to the current balanced scorecard that is outlined in the broad-based black economic empowerment Act no 53 of 2003 to form part of the Eskom black economic empowerment policy. This model is used to assess and accredit all companies with an annual turnover equal to or exceeding R25 million which are listed on Eskom’s supplier database as black empowered suppliers.

As a state-owned enterprise, Eskom has a broad integrated strategy for small enterprise support. The Eskom integrated strategy for black economic empowerment development and support has been influenced by numerous pieces of legislation which were passed to promote, support and develop small, medium and micro-enterprises and specifically emerging black businesses.

The Eskom integrated strategy for broad-based black economic empowerment is executed mainly through procurement, community development, poverty alleviation and rural development programmes.

BEE expenditure
	Target	Actual	Actual
	2006	2006¹	2005²
	(12 months)	(12 months)	(15 months)
Eskom Holdings Limited
Total BEE expenditure	10 197,6	11 068,8	10 334,0
Black women-owned business
(included in total BEE expenditure)	1 114,6	1 286,7	1 086,0

Eskom Enterprises (Pty) Limited
Total BEE expenditure	579,4	600,8	567,0

Escap Limited
Total BEE expenditure	11,8	10,9	11,3

Corporate social investment
Eskom’s corporate social investment (CSI) programmes are aimed at contributing to the development of the disadvantaged. Eskom’s CSI activities for the review period include various initiatives for skills development, job creation, education and health, described below.

Corporate social investment

	Target	Actual	Actual	Actual
	2006	2006	2005	2004
	(12 months)	(12 months)	(15 months)	(12 months)
	Rm	Rm	Rm	Rm
Social, economic development and national programmes	26,7	25,3	30,9	24,7
Eskom mathematics and science education programme	3,2	3,9	4,3	3,6
Legacy projects³	4,6	6,0	6,8	6,4
Donations (Eskom Development Foundation, Chairman and Chief Executive Fund)	10,3	8,1	11,7	9,1
Rural development⁴	20,0	13,6	19,8	15,6
South African Aids Vaccine Initiative	15,0	–	15,0	15,0
Health care professionals training	2,0	2,0	2,0	2,0
Eskom public scholarship programme⁵	45,8	46,3	59,9	48,0
– Mathematics and science students	7,0	7,4	16,1	10,4
– Other scholarships⁶	32,2	33,9	41,0	28,5
– Learnerships	6,6	5,0	2,8	9,1
Cause-related initiatives	5,9	5,3	9,4	9,4
– Expo for young scientists	5,4	4,8	5,9	5,9
–; Proudly South African campaign	0,5	0,5	3,5	3,5

	133,5	110,5	159,8	133,8
^1. Amounts exclude VAT. ^2. Amounts include VAT. ^3. The Development Foundation’s legacy programme focuses on support for priorities adopted at the World Summit for Sustainable Development hosted in South Africa in 2002; which are supported by the South African government. ^4. The budget variance emanates from implementation challenges which are being resolved.The release of funds had to be managed to focus on sustainability initiatives. The situation is gradually improving. ^5.Cost spent included in the training cost. ^6.The other scholarships amounts include experiential trainees, tertiary support education programme, university and university of technology bursaries, Van der Bijl and Straszacker scholarships.

Harvesting gerberas at the Timbali project at Nelspruit

Students doing practical work at the electrical workshop at a further education and training college in Limpopo equipped by the Eskom Development Foundation

Eskom Development Foundation

Many CSI programmes are executed by the Eskom Development Foundation, a section 21 (not-for-profit) company. The Development Foundation’s mission is to contribute to improving the lives of the disadvantaged through integrated, efficient and effective development programmes. During the period, the Development Foundation approved grants and donations to the value of R42,1 million; benefiting 200 982 people, with particular emphasis on support for women (2 797), youths (192 306) and people with disabilities (3 709). Since inception on 1 January 1999 to 31 March 2006, the Development Foundation has invested R370,8 million in grants and donations.

During the review period, the Development Foundation received a number of awards, including being rated as one of the top three most caring companies¹ in South Africa, and among the top five in this category since 1994. Eskom and Absa were also rated as having the most hands-on approaches to corporate social investment².

South African Aids Vaccine Initiative

Eskom continues to support the South African Aids Vaccine Initiative (SAAVI) in its search for a vaccine. SAAVI, co-ordinated by the Medical Research Council, was set up to co-ordinate the research, development and testing of affordable and effective HIV and Aids vaccines for southern Africa. At 31 March 2006 R82,5 million has been contributed since the inception of this initiative in 2000. Eskom has committed to continue funding this research until 2007.

Foundation for professional development

Eskom contributes to the funding, governance and strategic direction of the training programme for health care professionals hosted by the Foundation for professional development in the clinical management of HIV and Aids. This programme aims to ensure that health care workers have the knowledge and skills to care for people living with HIV and Aids. As a founding sponsor, Eskom contributed R6 million to the programme over three years, beginning in 2003.

Rural development

Eskom supports government’s integrated sustainable rural development programme which aims to empower rural communities with limited resources and improve the lives of South Africans. Eskom invested R13,6 million to complete eight schools, one multi-purpose community centre and a goat-farming project.

Skills development and public scholarship programme

In line with the objectives of Asgisa, Eskom intends to maximise its skills development in conjunction with the capital expansion programme. This will be achieved through optimising the use of its existing training facilities, providing in-service training and development, awarding merit bursaries, involving suppliers and contractors and the industry at large in the training and development of learners. As such, Eskom has committed to train 4 000 learners by the end of 2007.

The South African Centre for Essential Community Services (SACECS)

Through SACECS, Eskom aims to identify, develop and implement technologies with a beneficial impact on the quality of life of South African communities. This has resulted in poverty alleviation programmes, through applying technological research, such as the fish farm in Dindi village.

Electrification
The Department of Minerals and Energy (DME) started funding the national electrification programme in April 2001. Eskom is responsible for implementing the programme in its licensed areas of supply on behalf of the DME. Operating costs continue to be the responsibility of licensed distributors.

Since the inception of Eskom’s electrification programme in 1991, a total of 3 317 525 homes have been electrified.

The results of the electrification programme were:

Electrification


	Target	Actual	Actual
	2006	2006	2005
	(12 months)	(15 months)	(12 months)
Total connections, number	104 854	106 968	222 314
Direct connections, excluding farm workers, number	98 069	101 621	219 885
Farm worker connections, number	982	1 105	2 429
Special projects¹, number	5 803	4 242	n/a
Capital expenditure, Rm	506	496	891
Farm worker connections incentives paid, Rm	3	2	5
Special projects, Rm	48	44	n/a

Electrification of schools and clinics


Funds applied to	Target		Actual		Actual
the electrification	2006		2006		2005
of grid schools	(12 months)		(12 months)		(15 months)
and clinics	Number	Rm	Number	Rm	Number	Rm
DME	375	51,9	473	36,5	1 286	79,8

1. The special projects were at the request of the DME.

The electrification of schools and clinics has been fully funded by the DME through the National Electrification Fund since 2002. Funding for projects committed but not completed in the previous period had been carried forward.

Free basic electricity
The national electricity basic services support tariff policy seeks to bring relief, through government intervention, to low-income households and to ensure optimal socio-economic benefits from the national electrification programme. Qualifying customers are eligible to receive 50kWh of free electricity every
month.

Two categories of customers receive free basic electricity, namely:

billed customers: customers who receive a monthly bill for electricity consumption, where their free electricity is automatically included via an adjustment on their monthly bill
prepaid customers: customers who buy prepaid electricity tokens. Free basic electricity can only be issued if the customer collects the token from an electricity vendor

Eskom is a service provider for free basic electricity in its areas of supply. Payment for this is recoverable from municipalities at a standard tariff. Any shortfall from differences between the actual customer tariff and the applied free basic electricity standard tariff, implementation costs or other costs is recoverable from government.

The results of the free basic electricity programme were as follows:


Description	2006	2005
	(12 months)	(15 months)
Municipalities identified to provide free basic electricity, number	239	238
Municipalities contracted to provide free basic electricity, %	98	88
Customers approved by municipalities to receive free basic electricity, number	1 254 199	750 000
Customers with meters reconfigured to receive free basic electricity, number	1 048 000	585 000
Reconfigured customers consuming free basic electricity over the 12-month period, average %	55	57
Invoiced to contracted municipalities, Rm	107,0	64,8
Tariff shortfall recoverable from government, Rm	12,0	6,2

3.3 Support for New Partnership for Africa’s Development (Nepad)

During the review period, the dedicated Nepad team refined its role from developing to facilitating projects and international relations.

Eskom is focusing on increasing the generation and transmission power infrastructure in South Africa. It will however continue to play a pivotal role in the Southern African Power Pool in the South African Development Communities region. It will continue to partner with other power utilities on projects that are mutually beneficial, aimed at increasing generation capacity, strengthening the regional grid and facilitating training and development with utilities in the region. During the review period, the following was achieved:

establishing Western power corridor project as a joint venture company for:
– the construction of Inga III hydropower station with a generation capacity of 3 500MW on the Congo River
in the Democratic Republic of Congo (DRC)
– the construction of hydropower generation projects on the Capanda River in Angola with a potential generation capacity of 7 000MW
– in Namibia, this project will see the development of hybrid transmission lines carrying power to DRC, Angola, Botswana,
Namibia and South Africa with distances exceeding 3 000km and providing an important western grid
signing the regional intergovernmental memorandum of understanding

Sierra Leone: Under a South African government funded project (R30 million) to rehabilitate the electricity infrastructure in Free Town, Eskom was assigned the responsibility for carrying out the engineering, procurement, installation and commissioning of a 7MW diesel generator on behalf of the national utility.
DRC: Eskom carried out a feasibility study and is currently involved in other activities necessary to assist the DRC government and SNEL in developing and accessing funds for a peri-urban electrification project in Kimbanseke, Kinshasa.
Angola: Eskom carried out a feasibility study to assist ENE, Angola’s power utility, in developing a project business case, related to the rehabilitation of the electricity generation and distribution network in the Huambo district
Algeria: Under a bi-national agreement Eskom is providing advice to Sonlegas, the national utility, concerning maintenance of its boiler plants;
Eskom continues to liase with the Nepad Secretariat, providing a critical source of information and mapping out strategies aimed at facilitating the development of power projects in Africa.

3.4 United Nations Global Compact

The United Nations Global Compact asks companies to embrace, support and enact 10 universal principles on human rights, labour standards, environment and anti-corruption.

Eskom – as a signatory to the compact – continues its support through its sustainable practices by participating in the international process and playing an active role in the national network. Eskom hosted a number of South African company chief executives in October 2005 to gain support from South African companies for the compact and to develop the national network.

Eskom’s commitment to the compact is largely demonstrated through its sustainability strategy. The Eskom sustainability performance index was finalised and the renewable energy and climate change strategies developed as part of this strategy.

Practical examples of how Eskom has implemented these principles are detailed below:

United Nations Global Compact	Eskom's main activities in support of principles
Human rights Principle 1 Businesses should support and respect the protection of internationally proclaimed human rights within their sphere of influence. Principle 2 Make sure that they are not complicit in human rights abuses.	South Africa is a member of the International Labour Organisation (ILO) and has ratified the ILO instruments. These requirements have been included in related South African legislation. Eskom supports the ILO requirements and this is demonstrated by its compliance with legislation. Examples include: employment equity, including gender and disability equity; electrification BEE; and SMMEs development and training Ongoing HIV and Aids programme Eskom has incorporated issues on human rights into decision-making, and engaged in public consultation and community involvement through various projects and initiatives such as the electrification programme project developments. The procurement practices in Eskom support SMMEs and large black businesses for the supply of goods and services. Eskom's policies and procedures are developed to ensure compliance with South African legislation, including the constitution which specifically provides for the protection of human rights.
Labour standards Principle 3 Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining. Principle 4 The elimination of all forms of forced and compulsory labour. Principle 5 The effective abolition of child labour. Principle 6 Eliminate discrimination in respect of employment and occupation.	Eskom practices freedom of association and recognises the right to collective bargaining, as set out in the South African Labour Relations Act. Eskom continues to maintain transparency and worker consultation in decision-making through forums and agreements with employees and unions. Eskom supports the involvement of labour at the highest levels of governance. Employment equity policies have been implemented that are inclusive of race, gender and people with disabilities to ensure Eskom builds an organisation that represents all the people of South Africa. Blacks accounted for 62,4% (2005: 57,9%) of management, professional and supervisory staff in 2006 (with women in these positions accounting for 31,8% (2005: 28,9%)). Eskom has an established home ownership and rental subsidy scheme for employees to enable them to have access to accommodation.
Environment Principle 7 Businesses should support a precautionary approach to environmental challenges. Principle 8 Undertake initiatives to promote greater environmental responsibility. Principle 9 Encourage the development and diffusion of environmentally friendly technologies.	The board sustainability committee addresses economic, environmental and social issues and is responsible for the approval and the presentation of recommendations to the board regarding policies, strategies and guidelines particularly for safety, health, quality, environment and nuclear issues. The chief executive is responsible for Eskom's overall sustainability and environmental performance. Environmental performance measures are integrated into the business units and relevant performance contracts. The overall assessment and measurement of environmental performance is managed through the operational sustainability index and reporting on additional key environmental indicators and issues to the Exco sustainability sub-committee. Continual improvement in environmental performance is achieved through the development and implementation of environmental management systems based on ISO 14001. Parts of Eskom have received ISO 14001 certification, while other parts of Eskom where environmental risks have been identified undertake audits, self-evaluations and management reviews to determine whether the environmental management system conforms to planned arrangements and has been implemented and maintained in terms of ISO 14001. As example, the Generation Division achieved compliance with the standard in 2005 through external audits. Research, development and demonstration focuses on supporting sustainable development.
Principle 10 Business should work against corruption in all its forms, including extortion and bribery.	Compliance, not only with the letter but also with the spirit of relevant governance codes, remains a priority for the organisation. As a state-owned enterprise, Eskom is guided by the principles of the Code of Corporate Practices and Conduct contained in the King Report on Corporate Governance for South Africa 2002 (King II Report), as well as the Protocol on Corporate Governance in the Public Sector 2002. Eskom values integrity, excellence, innovation and customer satisfaction, and is committed to the highest standard of ethical behaviour in all its actions and decisions. Eskom's ethics office focuses on ongoing ethics awareness and training throughout the Eskom Group to monitor compliance with Eskom's business conduct policy, and to promote an ethical culture throughout the organisation including contractors and suppliers. The board is responsible for ensuring that an integrated crime prevention plan is implemented to minimise the risk and opportunity for crime and irregularities, in particular fraud. The security risk management department is mandated to assist Eskom, its subsidiaries and alliances by providing strategic crime prevention, detection and investigative direction and services, which support the strategic intent and business objectives.

General footnotes
^1. Rated by Corporate and Social Market Research in Corporate Care Check, August 2005.
^2. Rated by Trilogue Publishers in CSI Handbook, 8th Edition.

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