The Board established a vision for Eskom in 2035 which will be “… a market centric, technologically excellent, energy company with a diversified revenue portfolio focusing on South Africa and the rest of Africa.”

 The newly appointed Chairman of the Board, Mr Jabu Mabuza, noted in Eskom’s annual Integrated Report that the utility “… has experienced a tumultuous year”. There were a number of serious threats to Eskom’s ability to obtain funding for its capital expansion programme, which placed significant strains on liquidity.

 The organisation also had to contend with qualified audits which highlighted irregular expenditure and serious allegations of mismanagement that were levelled against a number of senior executives.

 These factors all contributed to further downgrades to Eskom’s credit ratings, which hampered Eskom’s ability to raise funding for current and future ventures.

 The primary mandate of the new Board was to bring stability to the organisation, improve governance and restore confidence in the company. The Board acted swiftly to investigate allegations of irregularities and cooperate with external probes into allegations of gross mismanagement.

 The governance challenges at Eskom had a debilitating impact on the company’s reputation. One of the focus areas identified by the new Board and Executive was to rebuild trust among stakeholders and strengthen public confidence in Eskom.

 A five-point plan was introduced to transform governance at Eskom, which included:

1.    Strengthening the internal ethics and fraud framework and focusing on consequence management;

2.    Implementing independent lifestyle and conflict of interest audits;

3.    Terminating all irregular supplier contracts

4.    Enhancing the commercial governance processes to ensure robust scrutiny;

5.    Instituting disciplinary charges and taking legal action, if required.

 Eskom also reviewed its procedures on supply chain management to bring them into line with the prescripts of the Public Finance Management Act and National Treasury regulations.

 Eskom’s Code of Ethics intended to promote an ethical culture as well as provide a framework for ethical behaviour. A fraud and corruption hotline was operated by an independent service provider and channels for whistle-blowing were established.

 From a business perspective the priorities were to strengthen Eskom’s financial position through demand stimulation, cost containment and efficiencies while striving to achieve a cost-reflective price of electricity.

 A new thorough review of Eskom’s long-term strategy was undertaken in support of Eskom’s mandate to be South Africa’s trusted and reliable electricity provider.

 The priorities for the foreseeable future identified by the new Board included:

•   Improving liquidity and solidifying Eskom’s status as a going concern.
•   Instilling transparent and effective governance and support a culture of ethical behaviour in line with Eskom’s values.
•   Prioritising financial sustainability and strengthening the balance sheet while minimising reliance on debt and government guarantees.
•   Influencing energy policy and the regulatory environment including government’s new Integrated Resource Plan.

 The Annual Report also emphasised that Eskom must continue to meet its developmental responsibility through building new capacity, executing the electrification programme and supporting skills development and job creation.

 Eskom supported the Strategic Intent Statement issued by its shareholder, the Department of Public Enterprises. In terms of this policy document, Eskom should:

•       Provide reliable and predictable electricity while striving for cost containment and improved operational efficiencies.
•       Ensure and maintain a financially viable and sustainable company.
•       Reduce Eskom’s impact on the environment by moving to low carbon-emitting generation and transportation.
•       Align its socio-economic contribution with national transformation imperatives to unlock growth, drive industrialisation, create employment and support skills development.

 From an operations perspective the new Board committed to driving operational excellence and reliability across the generation fleet and network, this through effective maintenance, performance improvements and better management.

 The comprehensive strategy review would explore the reduction of employee benefit costs through workforce optimisation. The focus is on the retention of core, critical and scarce skills across the business while reducing non-essential positions.

 Eskom’s long-term commitment to transformation and internal skills development has contributed to a situation in which it might be able to reduce external recruitment to manage employee benefit costs.

 The liquidity position of Eskom remained a major concern and required to be managed through a number of levers, including increased revenue, cost containment, borrowings and the utilisation of government guarantees, collection of municipal arrear debts and a reduction in capital expenditure.

 Capital savings for the year exceeded R10bn. This was achieved through project deferments and optimisation. However, headcount reduction and overtime management remained areas of concern.

 Economic growth was projected to remain sluggish despite major changes in the political leadership and new policy directions. Eskom was still faced with declining power consumption, especially among large power users in the mining and industrial sectors.

 Eskom’s Group Chief Executive, Mr Phakamani Hadebe, noted that, despite the operational and reputational challenges associated with the organisation, its contribution to economic growth and social stability in South Africa could not be underestimated.

 “It is important to remember that what Eskom employees do every day changes the lives of millions of South Africans and also has an impact on the rest of the continent. Access to water, shelter, food and infrastructure would not be possible without Eskom. Eskom enables businesses to create jobs, and families to put food on the table and alleviate the scourge of poverty.”

 Eskom noted, however, that its strengths – in terms of market position and experience – means that it is capable of confronting the challenges presented by its current circumstances. It has a wealth of experience with an excellent pool of resources available and the strength of its network will present opportunities to expand the business and improve its financial position.

 The projected growth in independent power producers, coupled with a switch towards renewable energy meant that Eskom’s contribution to the grid is expected to decline from about 91% to just 88% over the coming five years.

 This could create a situation in which Eskom is left with stranded assets and a long-term strategy was required to deal with an operating surplus capacity, while minimising the impact on the workforce, suppliers and the community at large.

 Concerns about the failure to charge cost-reflective tariffs continued to grow. Nersa granted an 8% standard tariff average price increase for the period 2013-18 resulting in a revenue shortfall of R225bn over the period. Cost containment initiatives alone would not restore Eskom’s financial sustainability and the price of electricity should move towards cost reflectivity over time.

 Three units at Medupi and Kusile achieved commercial operation during the year adding 2 387MW to the national grid. The high-voltage network was strengthened with an additional 722km while new transformer capacity of 2 010MVA was installed.

 Eskom was undertaking the largest capital investment programme in the country – and on the African continent – to ensure adequate electricity capacity for growth. This was being done in a macro-economic climate of low growth, sub-optimal tariff allocations and a concerted shift in policy to bring independent power producers into the generation chain.

 New grid connections were prioritised to provide new clients with access to electricity and radically improving the client experience.

 Figures released by Statistics South Africa showed that over 90% of households in the country had access to electricity and new customers in remote and rural areas are constantly added to the grid. National Treasury allocated R17.3bn to Eskom to electrify a further 640 000 households in the coming three years.

 Eskom’s partnership with the African Development Bank Group (AfDB) was further strengthened with the signing of a loan agreement of R2.8bn to improve power transmission in Southern Africa. The funds will contribute to the construction of transmission lines which reach from Eskom into neighbouring countries and improve the reliability and security of electricity supply. Further loan facilities were signed with the German Development Bank and the French Development Agency (AFD) to facilitate the grid integration of renewable energy projects in the Northern Cape and strengthen the transmission infrastructure.

 Total procurement spend for the group during the year amounted to R127.4bn of which 91,5% was allocated to B-BBEE compliant suppliers. More than 38 100 people were employed on the new build programmes and on the large transmission projects.

 More than 1 500 employees – 56% of them women – were enrolled with various academic institutions to further their studies. The Eskom Academy of Learning continued its contribution to close competency gaps among employees.

 The company’s health and wellness strategy is designed to improve the wellbeing of every employee through programmes aimed at the prevention of occupational diseases, medical surveillance and medical fitness assessments. Drive safety campaigns were launched to address the occurrence of motor vehicle accidents – the highest contributor to fatalities and lost-time incidents in the organisation.

 The Eskom Development Foundation’s activities impacted the lives of 1,1m beneficiaries and it committed some R225m to initiatives. 

 Its activities reached deep into communities: it provided mobile health clinics for school children in five provinces; donated wheelchairs to people living with disabilities; handed over electrical infrastructure to orphanages and built classrooms at rural schools.

 As part of its health programme, it participated in a 16 Days of Activism campaign Against Violence on Women in KwaZulu-Natal to raise awareness about government programmes which are available to protect vulnerable sectors of society.

 The annual Eskom Business Investment Competition rewards outstanding work in entrepreneurship and encourages the growth of small and medium enterprises. It handed over prizes to the value of R1.3m to participants in the agriculture, engineering, construction, manufacturing, trade and services sectors.

 Through its participation in Teach SA it recruits, selects and places dynamic young graduates who have excelled at university and are willing to improve the quality of learning in township and rural schools.

 During the year some 171 grant-holders at 16 universities received financial support for post-graduate research through the Foundation’s Tertiary Education Support Programme.

 Eskom is a member of the GO15, an organisation which represents the world’s largest grid operators in Africa, Europe, Asia, Australasia and the Americas. These operators deliver electricity to over half of the world’s population and accounts for more than 66% of global electricity consumption.

 Mr Thava Govender, the head of Generation, stepped in as president of the GO15 steering board for 2017/18.

 Eskom Research, Testing Development received the annual Technology Transfer Award given by the US-based Electric Power Research Institute in recognition of research conducted on the 765kV insulator project.