South Africa’s electricity supply and demand balance will remain tight over the next several years. While addressing the country’s electricity challenges can only be done in partnership with all South Africans, Eskom resolves to prevent load shedding, but this resolve will be severely tested. Eskom alone cannot meet this challenge, but if 49 million South Africans and all companies save 10% of their electricity use, we can close the supply gap.

Since being appointed chief executive in July 2010, my priorities have been to keep the lights on, rebuild Eskom’s reputation and regain the trust of our stakeholders.

During my first 100 days on the job, I directed the new executive team and all senior managers to review our purpose and redefine the kind of company we want to create. Eskom’s most important job is to provide an uninterrupted supply of electricity to support economic growth, and to improve the quality of life of the people of South Africa and of our region. We seek to do so in a way that is financially and environmentally sustainable. Eskom needs to be both a good investment and a trusted, ethical and well-governed company highly rated by customers and staff.

I am proud to report that we are responding to these challenges. We have learnt from the past and are building a new Eskom.

We have embarked on a review of our entire strategy. We must become a high-performance organisation, keep the lights on while reducing our carbon footprint, secure future resources and ensure financial sustainability. We are working with our shareholder to finalise the new strategy and corporate plan.

In 2010, Eskom began transforming its performance, using improved controls and greater organisational discipline. In line with the requirements set out in the shareholder compact by the Department of Public Enterprises, we are making excellent progress in setting up an enterprise performance management system to continually measure performance across the organisation. For example, the chief executive and chairman “dashboards” now provide real-time information on key performance areas, and show true operational performance. Key performance indicators have been identified and aligned throughout the business. Simply put, everyone at Eskom knows what is required of them, and their role in meeting our strategic objectives.

This “line of sight” will allow management to take immediate and targeted action to fix problems. The project can be seen as part of the greater “Back2Basics” programme. The safety and wellbeing of our staff, contractors and the public is paramount, and we need to immediately improve our performance in this area.

Highlights and challenges experienced during the reporting period are set out below.

	Highlights
	There has been no load shedding since April 2008, despite an extremely tight supply/demand balance Eskom kept the lights on when South Africa hosted a successful 2010 FIFA World Cup™ We posted a net group profit of R8.4 billion that will be reinvested in the business, helping to fund the capacity expansion programme With government’s guarantees and explicit support, Eskom has put a funding plan in place for the next seven years In November Moody’s changed its outlook for Eskom from negative to stable (the rating stayed constant at Baa2). In January 2011, Standard & Poor’s improved both South Africa’s sovereign rating and Eskom’s rating from negative to stable (BBB+) During January 2011, Eskom issued a US dollar bond which raised USD1.75 billion (R12 billion) Construction at Medupi power station and the Ingula pumped-storage scheme is progressing well Significant progress has been made in the placing of contracts for the Kusile power station project We launched a campaign to combat electricity theft, with Business Against Crime, Business Unity South Africa, Proudly South African, South African Local Government Association and Primedia as core partners South Africa saw the first successful prosecution for electricity theft in the high court We initiated the 49M campaign to educate South Africans about the importance of saving electricity, and to help create a culture of energy efficiency All procurement and supply chain functions have been consolidated into the Group Commercial division Coal stock days were increased to 41 days (2010: 37 days) Eskom developed an innovative, containerised rail solution to transport coal to the Camden power station.

	Challenges
	Safety remains a major concern; there were 24 fatalities during the year, including staff and contractors, and this is unacceptable The power system will continue to be under severe pressure over the next five years – and particularly the next two years – because demand is growing faster than we can bring new power stations on line More maintenance is urgently required for existing plant An incident on 9 February 2011 at unit 4 (600MW) of Duvha power station removed the unit from service, and it will take more than a year to return it to full operation The distribution network performed poorly Customer service requires improvement The carbon footprint needs to be reduced Overdue electricity accounts remain a challenge Our environmental performance must be improved to reduce emissions and prevent legal contraventions.

 

Safety

No words can describe the tragic loss of life of staff, contractors and members of the public. I would like to acknowledge those people who died in the line of duty, and my thoughts go out to all their families, friends and colleagues. We are working with suppliers, customers and contractors to change the approach of leadership towards safety.

In memoriam

	Employees
	Michael Langa   Josias Maleka   Bonginkosi Benson Mhlauli   Phillimon Nkosi   Betheniel Tumisang Nkwe   Hilton Andre Smit

	Contractors
	Thamsanga Dlamini   Shigamani Paul Hobo   Dumisani Khumaro   Joel Phumowakhe Majola   Gabangane William Masilela   Alfred Mbonani   Job Mkwanazi   Bongani Christopher Mthembu   Themba Jeremiah Ndaba   Siviwe Nomavila   Musa Phiri   Bongani Wonder Releni   Lekwaba Edison Sebela   Mishack Simelane   Sipho Simelane   Sipho Skosana   Meliseli Sweli   Tumelo Timothy Tshehla