Ahead of Change
“One cannot manage change,” wrote noted management author Peter Drucker. “One can only be ahead of it.” That maxim could be Eskom’s motto. By preparing in advance for the end of apartheid, risking its own executives’ lives in the process, the company established a pivotal role for itself in the South African economy, and arguably in its culture as well. Eskom’s story is the sort often recounted under the banner of corporate social responsibility, but the company’s efforts were not primarily motivated by the desire for a good reputation. They had much more to do with resilience and growth as an enterprise.
Eskom’s leaders take the position that because no business can perform to its full potential in a society that is failing, companies must be involved in the societal health of their country. “It’s not only that society needs strong and sustainable businesses. Businesses need sustainable societies in which to operate,” says Wendy Poulton, Eskom’s general manager of corporate sustainability. “Our view is if you don’t recognize this as a business, you’re going to be out of business.”
Since the inception of “electricity for all,” Eskom has electrified an average of 300,000 additional homes annually. In 2006, Eskom reported delivering electricity to 3.3 million homes, compared to only 120,000 during the last years of apartheid. To be sure, this electrification rate lags behind those of other emerging economies, such as India and China, but it means that 66 percent of the South African public has electricity, which is up from 30 percent a decade ago. This rate is more than four times the percentage in the rest of sub-Saharan Africa. With wholly owned electric power operations in 20 sub-Saharan countries and partnerships in 10 others, Eskom is also trying to be an economic engine for all of Africa — intending to bring electricity to more than a billion people, many of whom still live by candles and kerosene lamps. Currently, Eskom is among the largest utilities in the world, ranking 11th in generation capacity and seventh in sales, according to its 2005 annual report. Electricity sales reached R36.6 billion (US$4.61 billion), with pretax profits of R4.6 million (US$579,710) in the 2005–06 fiscal year.
Throughout its history, Eskom has had to manage the complex relationship among South Africa’s government, financial, and industrial sectors. The utility traces its origins to private entrepreneurs at the beginning of the 20th century who won the first concessions to transmit electricity to the newly discovered gold deposits of the Witwaterstrand, the mountain range in northeastern South Africa that now houses the richest gold mines on earth. In 1910, when the Union of South Africa was formed, the Transvaal provincial government, representing the heart of the mining region, declared that supplying electricity was too important a public service to leave in private hands. In 1923, when apartheid was still a relatively informal policy in the country, the Electricity Supply Commission, abbreviated to Escom (the spelling was later changed), was created to absorb and run South Africa’s electricity assets, with no profit requirement.
Escom was one of the first parastatals — South Africa’s state corporations. Together with Iscor, which produces iron and steel; Sasol, which refines liquid fuels and other products from coal; and Foskor, which mines phosphate, Escom provided the infrastructure and raw materials to grow South Africa’s economy. The parastatals also provided critical support to the government’s increasingly separatist regime. After 1948, when apartheid became national policy, the government and therefore Escom effectively wrote off most black townships, arguing that their inhabitants would one day return to the so-called homelands. This homeland policy, or “grand apartheid,” inhibited investment in township infrastructure, schools, and other basic services. However, the demand for electricity increased among the white population — enough to drive Escom to expand its generating capacity dramatically in the 1960s and early ’70s.