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CHIEF EXECUTIVE STRATEGY
DOCUMENT
Compiled by Jacob Maroga
22 October 2009
Draft 1
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TABLE OF CONTENTS
1 Purpose Of This Document
2 A Crisis Is A Terrible Thing To Waste
3 Solving Todays Problems With The Future In Mind
4 Four Pillars Of Strategic Conversation
5 The Policy Evolution And The History Of Eskom
6 Key Themes Emerging From The Policy Evolution
7 The Battle Of The Paradigms: A Reflection Of Our Society
8 Some Of Todays Problems Are Rooted In The Excellent Strategies
Of The Past
9 The Case For Fundamental Organisational Transformation
10 From Racial Accounting To Real Organisational Transformation
11 The Use Of Leadership And Organisational Effectiveness Advisors
12 The Role Of State-Owned Enterprises In This Phase Of The Democracy
13 The Specific Role Of Eskom In This Phase Of The
National Development
14 Developing Our Vision
15 Eskom 2015 Outcomes
16 Core Capabilities
17 Core Values
18 The Leadership Diamond Framework
19 The Role of the Board: The Nation Building Context
20 Principles Of The EXCO Role And Structure
21 Conclusions
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In light of the above, it is imperative that we solve todays problems with an integrated
and long term perspective. We should ensure that when we solve Eskoms challenges wedo not create problems in other parts of the economy and society. We should also ensure
that what we do today does not create future unintended negative consequences.
We should transform the solutions of todays problems into opportunities that must yield
positive spin-offs for the country and our society.
4. FOUR PILLARS OF STRATEGIC CONVERSATION
The following four areas form pillars of the ongoing strategic conversation that will
determine the development of our vision.
Shared Meaning around the Role of Eskom: I believe that spending time developing
shared meaning around the role of Eskom is the single most strategic issue for us. Weneed an ongoing dialogue with our shareholder to fully internalize their expectations and
ensure that our whole being is fully integrated into their aspirations.
Shared meaning of the role of Eskom should be followed by increased role clarity. For
Eskom to operate effectively, role clarity across the total governance structure is critical.
We need to invest time in understanding more clearly the various roles, i.e., the role ofthe shareholder, the Board, the Chairman of the Board, the Chief Executive and the
EXCO.
It is my belief that there is a major gap in shared meaning on this aspect and the
reframing of the role of Eskom is a key pillar for creating the environment for increasedrole clarity.
From Recovery to Vision: Since 2005, our organization has been dominated by
managing from crisis to crisis. Firstly it was the Western Cape power disruptions, then
the national load shedding. Now, we are managing a very tight cash situation. If we
continue to do the same things, it is extremely unreasonable to expect to achieve differentoutcomes.
Advancing the reframing work that we started in 2008 and setting the stage for the new
vision of Eskom requires the total transformation of our organization from one based on
survival and problem-solving to an Eskom that is setting the foundation for the next 25years of the development of our country.
Deepening our shared understanding of the total value stream of Eskom: The value
stream of Eskom is equivalent to mini economyin the country. From the coal mining,
financial sector, equipment suppliers, human capital development, environmental
stewardship and customers etc, Eskom has a major role in the economy.
It is my belief that, as an organization, we need to increase our full appreciation of howthe total value stream works so that we can play our role more effectively.
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Business Sustainability and the Funding Model: Since October 2008, we along withthe country leadership have recognised that the current regulatory framework is not
adequate for the size of capital expansion we are undertaking. Therefore, we have beenpart of a dialogue to examine the role of Eskom and ensure our business sustainability. A
critical outcome of the dialogue is an appropriate funding model that will set the industry
on a path of sustainability for the future.
5. THE POLICY EVOLUTION AND THE HISTORY OF ESKOM
Electricity Act No 42 of 1922: Eskom was established in 1 March 1923 in terms of the
Electricity Act No. 42 of 1922. Although the act was superseded in 1958, the followingprinciples remained intact until 2001:
Eskom was governed by the Commission comprising of membersappointed by the State President and entrusted with the task of ensuringthat Eskom plays its part in the South African economy to provide cheapand abundant supply of electricity
Eskom was expected to operate at neither a profit nor at a loss
Eskom was self funding with no financial support from the state
The Capital Development Fund: In 1972 the Franzsen Commission recommended thecreation of the Capital Development Fund. The purpose of the fund was to allow Eskom
to build up reserves to finance the capital required to expand the power system for the
country and at the same time to increase the proportion of equity in Eskom relative to itsborrowings. The impact of the Capital Development Fund on the tariffs was significant.
The Capital Development Fund reached a high of 32.5% of the tariffs in 1979.
The De Villiers Commission of Enquiry of 1983: Eskom went through a massive
capital expansion program during the early 70s to the mid 80s. As a result of the capital
requirements and to cater for the Capital Development Fund, massive tariff hikes whereinstituted between 1975 and 1982. The highest tariff increase recorded is 48.2% in 1977.
The massive tariff hikes prompted the Government to appoint a commission of inquiry
chaired by Dr Willem Johannes de Villiers. The enquiry was given a wide mandate to
look at all aspects of the supply of electricity in the Republic of South Africa. Of
particular relevance was the special reference to- the impact of capital formation, price
determination, methods of financing and existing tariff structure on financial policy of the country with special reference to inflation, economic growth, the creation ofinfrastructure and decentralisation
The De Villiers Commissions recommendations led to the changes in the Electricity Act
in 1987. The Capital Development Fund was abolished and the Eskom accounting
practices were revised to reflect the standard business accounting norms.
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The Energy White Paper of 1998: The White Papers key focus was the introduction of
competition and private sector participation in the power sector. The following are theobjectives articulated in the White Paper:
improved social equity by addressing the requirements of the low incomecustomers;
enhanced efficiency and competitiveness to provide low-cost and high qualityinputs to all sectors;
environmentally sustainable short and long-term usage of our naturalresources;
the right of choice of an electricity supplier;
competition in especially the generation sector;
open non-discriminatory access to the transmission system; and
private sector participation in the industry
The Eskom Conversion Act No.13 of 2001: The Conversion Act provided for the
conversion of Eskom into a public company incorporated in terms of the Companies Act.
It brought to an end the era where Eskom was operating under special legislation outsidethe auspices of the Companies Act. The Conversion Act also made the government
ownership of Eskom explicit.
The Electricity Pricing Policy (EPP) of 2008: The key aspects of the EPP are the
following:
A revenue based on full cost recovery that reflects the valuation of the
electricity assets based on the replacement cost and a market related returnon assets
Cost reflectivity of the electricity tariffs
Non-discriminatory and transparent pricing with minimal cross-subsidies
Fair and non-discriminatory access to network to all interested industryparticipants
The development and publishing of a multi-year pricing path
6. KEY THEMES EMERGING FROM THE POLICY EVOLUTION
A. THEME 1: PUBLIC BENEFIT PARADIGM
The Paradigm of the Electricity Act from 1922 to 1998: The central theme of the
Electricity Act was that electricity is primarily for public benefit and an instrument of
economic and industrial development and as such should not be used to make a profit but
to be supplied at the lowest cost. This theme persisted until the Energy White Paper of1998
Not withstanding the fact that electricity was used for economic development, thefinancial sustainability of Eskom and self- funding was hardwired in the pricing of
electricity
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B: THEME 2: COMMERCIAL AND COMPETITION PARADIGM
The Energy White Paper of 1998 and Competition: The central theme of the Energy
White Paper of 1998 was competition. The White Paper envisaged the restructuring of
Eskom into separate generation, transmission and distribution entities. Eskom generation
was to be split up into competing companies and Eskom distribution was to be absorbed
into Regional Electricity Distributors (REDS) in line with the EDI Restructuring
Blueprint.
This model of electricity reform expressed in the White Paper reflected the classical
competitive and privatised model followed internationally. This implied the vertical
unbundling in order to separate the potentially competitive components (generation andretail) from the natural monopolies (transmission and distribution wires).
The key assumption of the Energy White Paper was that the Independent Power
Producers will be attracted and provide the security of supply to South Africa. Essentially
this approach put the security of supply of the country at the mercy of the commercial
motive of potential private investors.
Judged against its desired outcomes, the Energy White Paper 1998 has not delivered the
desired results.
A Review of the initiatives emanating from the 1998 White Paper: As we set the basefor the future, a fundamental review is required of all the initiatives that flow from the
White Paper of 1998. The program and scope of Electricity Distribution Industry (EDI)restructuring should be reviewed to reflect todays policy priorities and thinking.
7. THE BATTLE OF THE PARADIGMS: A REFLECTION OF OUR SOCIETY
There are three paradigms that shape the strategic responses of stakeholders to the issues
and challenges of Eskom
Paradigm 1: No one is Home Paradigm: Essentially, this paradigm is based on a
belief that the challenges of Eskom stem from management incompetence due toaffirmative action. The strategic response in this paradigm is to bring in more
experienced, mostly white people at an executive and Board level to save the situation.
The no one is home paradigm has very deep racial undertones that are reflective of the
history of this country.
In this paradigm there are Homers and No Homers.
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If one holds this paradigm, the Eskom challenges stem from the fact that there are too
many No Homers in the system hence the crisis that the organization has gone through.The strategic response based on this paradigm is to bring in more Homers. The only
measure that will bring confidence is an increasing number of Homers participating in theleadership structures of Eskom and in the departments and institutions which are critical
to the success of Eskom
Paradigm 2: Role clarity paradigm: This paradigm is based on the belief that policy
choices by the government created role confusion for Eskom, particularly on
accountability for security of supply. In this paradigm, role clarity confusion led to load
shedding and the financial challenges that Eskom finds itself in.
Paradigm 3: Identity Crisis paradigm: From 1923 -2001, Eskom operated on the basis
of the Electricity Act. Its main objective was to provide power for public benefit andneither for profit nor loss. The Eskom Conversion Act of 2001 closed the chapter of this
era.
In this paradigm, Eskoms challenges stem from its schizophrenic identity of being a
fully commercial enterprise whilst responding to a developmental mandate. The
difference between the role clarity and identity crisis paradigms is that in the latter, it isabout how Eskom perceives itself rather than what its shareholder expects it to do.
8. SOME OF TODAYS PROBLEMS ARE ROOTED IN THE EXCELLENT
STRATEGIES OF THE PAST
An analysis of some of todays problems reflects the fact that they originate from what
seems to have been excellent strategies of the past. The following are the key examples:
The scrapping of the Capital Development Fund: In 1972 the Capital Development
Fund was established as part of the funding model for the build program of the 70s and
80s. The Capital Development Fund was blamed for the massive increases in tariffs inthe late 70s. The De Villiers Commission scrapped the Capital Development Fund in
1984 as a result of the national outcry stemming from the tariff increases.
The Capital Development Fund was aimed at ensuring that Eskom builds up sufficient
reserves to contribute to the funding of new capital expansion. In hindsight, scrapping theCapital Development Fund without articulating a convincing alternative funding model
for future growth was major blow to the industry. A coherent and integrated funding
model was never developed since the scraping of the Capital Development Fund.
The cheapest electricity in the world: The last build program undertaken in the 70s and
80s left Eskom with huge excess capacity. In the past twenty years the strategy for the
cheapest electricity in the world was based on excess capacity rather than business
efficiency and operational excellence. This strategy for the cheapest electricity in theworld did not factor in the cost and the provision for building new capacity for the future
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of the country. This has contributed significantly to the current funding challenges of
Eskom because the current electricity prices are not appropriate to fund new capacity.
Commodity linked aluminium contracts: To utilise excess capacity which resultedfrom the build programme of the 70s and 80s, Eskom embarked on a strategy to attract
energy intensive customers to South Africa. Aluminium smelters were attracted to invest
in South Africa as part of this initiative. As was normal practice at the time, the
aluminium contracts where based on commodity linked pricing structure with long term
agreements (20- 30 years). These contracts did not seem to envisage the end of excess
capacity nor the fact that with the end of excess capacity the cost of power will rise.
While these contracts where seen as a stroke of brilliance at the time, they are now very
painful to Eskom and the country.
The Energy White Paper of 1998, the introduction of IPPs and Competition: During
the development of the White Paper, competition and private sector participation in theenergy sector was seen as a panacea in some major economies of the world. This was
based on the paradigm that the private sector can bring more efficiencies than state-owned vertically integrated utilities. However the complexities and risks associated with
this policy were seriously underestimated. The Energy White Paper of 1998 has left the
electricity security of supply of South Africa very vulnerable.
9. THE CASE FOR FUNDAMENTAL ORGANISATIONAL
TRANSFORMATION
Over twenty years of excess capacity: Eskom has lived with excess capacity since the
mid 80s. Excess capacity mentality has impacted every facet of Eskom. The excesscapacity era gave Eskom a false sense of excellence and invincibility. The leadership
paradigms and the organisational culture formed in the era of excess capacity are nolonger appropriate during a time of constrained power system and massive build
program. The past three Chief Executive of Eskom all served during a period of excess
capacity, Ian McRae- 1987 1994, Allen Morgan -1994 -2000 and Thulani Gcabashe-
2000 2007.
Commencing with the build program without a clear funding model: In 2005, we
committed the organisation to a massive investment program without the full
appreciation of the funding sources for the capital. This is the best illustration of silo
thinking. The part of the organisation where the build decision was motivated had no clueabout the funding process for any of the capital requirements. The EXCO and the Board
at the time did not fully appreciate the integrated impact of such a decision. Today we are
solving the funding model retrospectively.
The past forward pricing curves were fundamentally flawed: In 2005, at the start of
the MYPD process, we put an application for CPI + 2%. This was based on our
understanding at the time of the forward pricing curve which was required to fully cover
the cash requirement (opex and capex) in the future. The current reality of cash flowclearly proves that our view of four year ago was grossly inaccurate. Without
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culture and leadership paradigm of the past. This leadership paradigm is characterised by
technocratic arrogance, apartheid style supervisory mentality, lack of transparency andsecrecy.
The initial phase of racial transformation in Eskom was based on promoting black
executives, but also appointing white senior managers as second in charge. Some of the
white executives were seen (and seeing themselves) as the ones really in charge with the
black faces at the top. This approach has promoted tokenism rather than encourage real
transformation.
The White Supervision Phenomenon: Issues that emanate from our past will not just
fade away unless we confront them frankly and openly. This section is aimed at raisingissues that will contribute to honest reflection so that we can transcend the entrenched
paradigms that emanate from the history of our country. One of these issues is the
phenomenon ofwhite supervision.
White Supervision is a phenomenon that derives from our past of racialsegregation and racial hierarchy. This phenomenon is based on the view that
without white supervision, blacks by themselves are not able to lead and achieve
anything of significance. This thinking was so entrenched that a few years ago
some adverts for simple services, such as gardening and painting, the mention ofwhite supervision in the adverts was felt necessary to attract business.
White Supervision and Corporate Leadership: There have been some key
appointments of black executives in some large corporations in South Africa
which has demonstrated the phenomenon of White Supervision. Some largecorporation have appointed new black senior executives and proceeded
immediately to restructure the reporting lines such that the major parts of theportfolio are under white supervision.
White Supervision and black people: White supervision mentality is not
exclusive to white people. There are a significant number of black people whoreflect this mentality. Some black people will attach more trust and confidence in
organisations led by white people than those dominated by blacks. There are also
a number of black leaders who derive their confidence from the validation and
endorsement by white consensus. All of us have been affected by this racial
segregation history of our country.
White Supervision and endorsement of black leaders: White supervision also
manifest itself in the practice where black leaders are assumed to be destined to
failure until their competence has been endorsed by white consensus. Those
blacks whose competence has been endorsed by white consensus are then
classified as the exception rather than a demonstration of inherent potential of all
human beings.
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White Supervision and Eskom: There are a number of examples that reflect the
white supervision phenomenon in Eskom.
White Supervision and the media: There are a number of people in thegovernance structures of Eskom who give more credibility to the reporting
of the white dominated media than the internal management reporting
processes. The internal management control processes, internal audit and
independent external auditors are perceived to be less credible that theviews of white journalists and the media.
White Supervision and leaked document: The leaking of internaldocuments to the white dominated organisations also reflects the whitesupervision phenomenon. The underlying logic is that some white people
in Eskom have more knowledge and competence than the largely black
executives. By selectively leaking documents to like minded individuals
and institutions, they can prove the need for more White Supervision and
scrutiny.
White Supervision and the Olsen Report: Susan Olsen, a consultant anda coal procurement expert wrote a letter to me in July 2007. The letter
triggered by my request of a meeting with Olsen, which was aimed at
giving inputs to a process of restructuring the Primary Energy function.The Olsen letter was leaked to the media and a specific opposition
political party. The manner in which the Olsen report was given status
and attention is one example of white supervision mentality. The Olsenreport was written by a white person and leaked by a white person to a
political party and the media. It did not matter that this report was in
response to already identified weaknesses that were already being
addressed.
White Supervision and the Sherpas: A group of former whiteexecutive directors approached me last year expressing a desire to advise
and support us during the difficult period that Eskom was going through.
They decided to call themselves the sherpas. Whilst I initially accepted
this good gesture at face value, it became clear that their motivation wasdriven by the mentality of White Supervision rather than a genuine desire
to support the leadership of Eskom. We have since parted ways and the
sherpas have now launched a campaign of criticism on the leadership ofEskom and the government.
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13. THE SPECIFIC ROLE OF ESKOMS IN THIS PHASE OF THE NATIONAL
DEVELOPEMENT:
Providing reliable and affordable power: Electricity is like oxygen to the economy.Reliable and affordable power is critical to the growth and economic development of the
country.
Supporting the development of other industries: Eskoms footprint in the economy is
extensive. From the supply of coal, diesel, water, financing, spares, transport fleet, labour
many others, Eskom is a significant anchor customer to many industries. This footprint of
Eskom can be strategically leveraged to support the specific national objectives which are
consistent with the overall developmental agenda
Providing an economic stimulus through the build programme: Eskom is embarking
on the largest capital expansion program in the history of South Africa. This growingexpansion program provides a very attractive opportunity to stimulate the growth of the
economy for the next few years.
Providing the power needs for the future: Confidence about the future provision of
power is necessary for investment to happen in the country. By rolling out the power
expansion program, Eskom is laying a foundation for new investment to happen to growthe economy.
Creating more jobs: The ongoing operations of Eskom as well as the construction of
new power infrastructure serves as key contributors to decent employment and
sustainable livelihoods. An integrated approach to maximise employment opportunitiesby SOEs is crucial.
Developing a platform for massive skill training: Historically, SOEs like Eskom,
Iscor and Sasol played a pivotal role in creating skills development opportunities for
white South Africans. An integrated and purposeful skill development plan by the SOEs
can make a huge contribution to providing opportunities to many young South Africans
Supporting the economic development of the region and the continent: The
development of energy and in particular electricity is also critical to the economic
development of SADC and the continent. South Africa, through Eskom is critical for the
successful development of additional capacity in the region. Without the support of SouthAfrica there are very few power projects that can be developed in the region.
Development of national infrastructure and social services: As Eskom expands its
power system and build more power projects it requires infrastructure like roads, rail,
water, housing, schools and other social services. Through a pro-active and integrated
approach, these can be leveraged to make an impact to service delivery beyond just
providing power
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Broad Based Black Economic Empowerment (BBEE): SOEs should be at the
forefront of BBBEE. The government has the best vehicle in SOEs to drive an integratedand impactful economic transformation programme.
Contributing to Industrial Strategy and Foreign Direct Investment: The provision of
power is central to the industrial strategy of South Africa. The success of projects like
Coega depends on the availability and the cost of power. The power sector can also be
important in attracting new foreign direct investment into the country
14. DEVELOPING OUR VISION
The development of our vision derives from a deep desire to see the role of Eskomvisibly and vividly embedded in the aspirations of the nation.
Eskom Vision Framework: Empowering the South African Dream
2015 Outcomes& value proposition
Leadership
Behaviors
Superior
Stewardship
SuperiorWhole System
Thinking
Superior
Relationships
SuperiorKnowledgeApplication
SuperiorLeadership
CoreCapabilities
Preamble &6 country principles
Core Values
The six universal country principles that guides our thoughts and actions.
From the Preamble of the Constitution and other sources, we developed the following sixuniversal principles which we believe represents the hopes and aspirations of the country
and will guide all our thoughts and actions.
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15. ESKOM 2O15 OUTCOMES
The 2015 outcomes are set in two phases.
A: Solving todays problems with 2015 in mind
B: Setting the 2015 outcomes
A: Solving todays problems with 2015 in mind
1 Continuity of electricity supply: Whilst we fully appreciate the tightness of thepower system, given the disruptive nature of load shedding, we resolve that, in
collaboration with the country, we will ensure that there is no load shedding in South
Africa. This resolve will be supported by a comprehensive and integrated plan that
will mobilise all of society towards this goal.
2 Financial Stability: Whilst we fully appreciate the current precarious financialposition of Eskom, we resolve that 2008/09 will be the last year to post operatingincome losses.
3 Embedded derivatives impacts eliminated by 1 April 2011: We aim that the2011/2012 annual report will not report any embedded derivatives impacts from
commodity linked contracts
4 Committed funding plan for all committed projects 1 April 2010: Based on theoutcomes of the NERSA determination and the ongoing funding model discussions,
1. A united, democratic and prosperous South Africa
2. Eradication of poverty and unemployment
3. A thriving economy, connected to the world and integrated with the broaderAfrican continent
4. A sustainable economy, not harmful to the environment and committed to climatechanges mitigation strategies.
5. Enhancing the potential of each citizen
6. Leveraging the role of SOEs for the economic development of the country
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we resolve that a clear and committed funding plan for all current committed projects
will be in place by 1 April 2010.
5 Stabilise the cost and logistics of primary energy by December 2010: Theprimary energy cost has been escalating significantly in the past 5 years due to
reserve margin constraints. By December 2010, we will have stabilised the primary
energy cost and the logistics for all our power stations.
6 Lock in the total cost and schedule of Medupi and Kusile by March 2010: Theconclusion of the funding model and Nersa determination will allow us to place all
contracts for Medupi and Kusile. This will allow us to lock-in the cost and give more
certainty to the construction schedule of these power stations.
B: The 2015 outcomes
Specific targets for the following objectives will still be developed:
1. Power adequacy outcomes2. Financial position outcomes3. Commitment on renewables4. Emission target achieved5. No. of trainees achieved6. Demand side management achieved7. Value of industrialisation achieved based on Eskom activities8. Cogen and IPPs achieved
9. Regional IPP projects supported10.Employee dispensation framework outcomes11. Jobs created12.Percentage electrification achieved
16. CORE CAPABILITIES
In order to reach our vision of a reframed Eskom, and to contribute to the aspirations of
this country, there are a set of core capabilities we will develop.
Superior Relationships: Our aspirations to embed the contribution of Eskom in the
dreams of the nation, are so ambitious, to be attained through an organisation that has afragmented and isolationist approach.
We cannot achieve the promise of our ideal future if we act as separate individuals with
separate goals nor can we attain it as an organisation working in isolation.
Superior relationships mean exemplary internal collaboration, close connection to key
constituents and powerful stakeholder alliances.
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Superior Stewardship: We are stewards of a vital national asset, Eskom. Also our
operations has an extensive and broad impact on many areas and national aspects, such asthe economy, the environment, investors confidence, interaction relations, national
resource, skills, etc.
Superior Stewardship means: We will in all times act in a manner that serves the best
interest of the country and its resources. We will always put the interest of the country
above our sectoral and narrow organisation interests. This will be done in cognisance to
all relevant corporate governance and statutory requirements.
Superior Leadership: Superior leadership is the key ingredient that translates an
ambitious vision to successful outcomes. We believe that leadership is not a position.But leadership is an attitude.
Superior leadership takes three forms:
As individuals, we take initiative within our circles of influence to educate and engageothers in ways to increase our effectiveness for the organisation,
Organisation-wide we maintain a pipeline that develops leaders, as an organisation we
lead coalitions and collaboration with stakeholders to achieve our vision, that advancesthe aspirations of our country.
Superior Whole Systems Thinking: Our product has a unique feature, that it is
consumed immediately as it is produced.
Therefore our superior capability to think about the system as a whole is critical to our
success.
Superior whole system thinking means, wherever we are on the value stream of the
organisation, we fully understand how the whole system works and we are conscious of
the impact our decisions to the total system. We take steps to ensure that our decisionsand actions maximises the effectiveness of the whole system.
Superior Knowledge Application: We take a view that, it is not what we know that
matters, but how we use our knowledge to advance the broader interest of the
organisation.
Superior knowledge application means we have superior capability to acquire new
information, new insights, simplify, educate and integrate and apply the insights to
improve our effectiveness and improve our results.
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Teamwork facilitates superior relationships across the organisation and all the
stakeholders that we are interdependent with.
Effective teamwork thrives on an environment of trust and transparency, collaborationand dialogue, respect and understanding.
Integrity
As stewards of the critical national asset, as well as the critical impact of our actions to
society, we have the responsibility to always act with absolute integrity.
Integrity means, at all times, we will be true to our values and principles at a personal
level and at an organisational level.
Empowerment
Empowerment means all individuals are authorised, competent and motivated to act
interdependently on behalf of the organisation.
Empowerment entails:
We understand not only the vision, but how the vision relates to our work.
We have the skills to act on our initiatives.
We have information as well as the power to act.
We know we are trusted and will not be punished when we take initiative that is
within the scope of discretion or in pursuits of our vision.
Sustainability
The core value of sustainability will reinforce our core capability of stewardship.Sustainability will permeate all aspecs of our activities and decisions. It will start at a
personal level, organisational level and national level. From personal safety,
environmental, environmental, financial, business, community and all other aspects.
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18 THE LEADERSHIP DIAMOND FRAMEWORK (LEADERSHIP QUOTIENT)
Superior leadership is a critical core capability for our success at Eskom. It is superiorleadership that will translate all our core capabilities into integrated and abundant
decisions and outcomes that will take us closer to our vision.
The Leadership Diamond Framework, brings together all the aspects of our core
capabilities in the form of the four aspects of an integrated decision making process.
This leadership model, forces us to continuously integrate all the interest of all impacted
parties in our decisions and actions.
JOH-BUP036-20070507-JvW-P1
1
The Leadership Diamond
Interest of own division,unit or portfolio(Technical Quotient) TQ
Interest of the wholeOrganisation (Team dynamicQuotient) TDQ
Interest of the Country
(Political Quotient) PQ
Interest of the customersand stakeholders(StakeholderQuotient)SQ
Integrated leadershipdecision (maximise interest
of all)
A. Technical Quotient (TQ)
The Technical Quotient narrowly describes our ability to make decisions that only
reflects our narrow technical and divisional interest. However, the TQ can be
associated with our core capability of Superior Knowledge application.
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Superior Knowledge Application reflects the transformation of our narrow technical
knowledge into relevant simplified and accessible knowledge that empowers the restof the organisation and our stakeholders to make integrated and abundant decisions.
Superior Knowledge application instils an attitude of sharing and teaching of our area
of expertise.
B. Team Dynamics Quotient (TDQ)
Team Dynamics Quotient, is closely associated with our core value of teamwork.
Our decisions and actions can be much more impactful if we build close working
relationships and collaborate with our peers across the broader business and industry.
C. Stakeholder Quotient (SQ)
As an organisation, our product and services are critical to the success of the country,
and our ability to work with stakeholders is critical.
SQ is strongly associated with the core value of service excellence.
Our SQ will be reflected by our intimate relationships and responsiveness to thosewho depend on our service.
D. Political Quotient (PQ)
PQ is understanding the value of positive politics. Positive politics takes the formof creating alliances and broad coalitions with people whom we have common
interests.
At a national level, our ability to continuously reflect our role in the context of the
broad national aspirations is positive politics.
At an organisational level, maintaining superior relationships within and outside the
organisation in the interest of the broader vision of the organisation is positive
politics.
19. THE ROLE OF THE BOARD: THE NATION BUILDING CONTEXT
Fiduciary responsibility and corporate governance: The board of a SOEs is entrusted
with the stewardship of a critical public asset and resource. Therefore, the level of
corporate governance in a SOEs like Eskom must be of the highest standard and this is
the fundamental role of the Board. Guidelines and principles of fiduciary responsibilities
and corporate governance are fully articulated in various codes and statutes like the
PFMA, the King Code of Governance as well as the Companies Act. This paper focuses
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on the broader role of the Board in responding to the demands for nation building in this
phase of our democracy.
The role of the Board of Eskom in this phase of the democracy: The role of Eskom iscentral to the success of South Africa in this phase of the democracy. Electricity
provision touches almost all facets of the economy and society. The Board of Eskom
should be actively engaged in the national dialogue on the key national initiatives that
impact on energy security in South Africa.
Redefine the Role of the Board to be more strategic with greater external
collaborative leadership: As the dialogue on energy security, climate change, the role
of SOEs, the role of Eskom, the funding model and various national strategic issuesunfolds, there is an ever-increasing need to lead and collaborate with the external
environment. There is an increasing opportunity and requirement to engage with
parliamentary committees, labour movements, business associations, ministers, politicalparties and many other stakeholders. The Chairman and the Board members are
appointed on the basis of their extensive networks in these environments and they shouldutilise them on behalf of Eskom. The EXCO structure will empower the non-executive
directors to play an increased role in the external environment.
Participating in the national dialogue on key strategic matters: The Green Paper onthe National Planning Commission has been issued recently. This Green Paper recognises
energy security as one of the key focus areas for the National Planning Commission. The
Board of Eskom must be ready and prepared to participate meaningfully in the national
dialogue on such matters as the Green Paper of the National Planning Commission
Maximising the benefit of the profile of Board members: Each of the Board
members of Eskom is appointed on the basis of a profile that has potential significantvalue to the organisation. Amongst the Board members reside a wealth of experience,
extensive networks and specialist knowledge that must be exploited to the maximum for
the benefit of Eskom and the country. The breadth of the expertise in the Board ranges
from senior organised labour leadership, business leadership at country and global level,financial and accounting management, global authority on climate change, local
government expertise, organisational transformation and international power industry
leadership. This expertise must be transformed through a concerted strategic discourse to
a national resource that can contribute to broader country aspirations.
Thought Leadership: There are a number of topics that Eskom is grappling with which
have national and global significance. Topics such as Climate Change, Renewable
Energy, Funding, Nuclear power, Poverty Eradication, Employment Creation etc. There
are members of the Board who are already thought leaders on these topics who must be
given more platforms to contribute to the national and international discourse on the
topics on to the benefit of Eskom and the country.
.
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20. PRINCIPLES OF THE EXCO ROLE AND STRUCTURE:
In the context of the review and the discussions in this document, it is now appropriate todiscuss an appropriate EXCO structure that will set the base for the future we desire. The
current EXCO structure was developed based on the need to recover the system during
the height of the energy crisis in February 2008. I have reviewed and developed a
structure for the current situation which also sets a base for the future.
Our vision, core capabilities, core values and leadership behaviours provides the
framework for people selection at all organisational levels.
Solving todays problems with the future in mind: As we reframe the role of Eskom,
we need to solve todays challenges with the future in mind. The EXCO structure will
integrate the capabilities to respond to the day to day challenges of the business whilstsetting the base for the next 25 years.
We need to solve the current challenges
Keeping the lights on
Cash management and funding
Primary energy availability and cost
Execution of the build program
Whilst we set a base for the next 25 years
Organisational Effectiveness and Reframing
Future Security of supply
Climate Change Strategy
Financial sustainability
Uplifting the poor
Introduction of IPPs
Regional IPP Projects
Renewables
DSM
Empower the Chief Executive and the EXCO team to be closer to the operations ofthe whole business: The EXCO structure will allow the CE and the team as a collective
to get closer to the operations of the entire business. Solving todays problems and setting
a base for the next 25 years requires that the EXCO team develop superior appreciation
of the entire value stream of the business. This will require a much flatter structure thanthe current arrangements.
Allow the Chief Executive to get closer to the critical business units: The Chief
Executive must get closer to the business units that require a step change to solve thecurrent business challenges. This means that the CE will have to get closer to all the
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