Eskom’s new boss is ‘Mr Coal’ and a natural-born CEO, former colleagues say
- André de Ruyter's appointment as Eskom's new CEO has been met with some criticism, primarily centred on his tenure as CEO of the struggling Nampak.
- But former colleagues and analysts have defended his track record, saying that he has shown strong leadership skills.
- He has also built up an exceptional knowledge of coal over the years.
- For more stories, go to www.BusinessInsider.co.za.
André de Ruyter didn’t have much of a honeymoon period following his appointment as Eskom’s new CEO, amid union criticism and the utility’s bond yields taking a hit in the wake of the news.
Much of the criticism was centred on the struggling performance of Nampak during his tenure as CEO – with his track record at Sasol largely ignored.
But analysts and former Sasol colleagues told Business Insider SA that his time at the energy giant is key to understanding what he will contribute to Eskom.
One former executive at Sasol said that De Ruyter is “a natural-born CEO”.
“André is a very good people person and he understands that you win on the ground,” his colleague says. “He will be looking to the factory floor to rebuild trust and confidence. He used to walk the floor in Sasolburg all the time. He knew every major process on the plant, he knew about coal quality, he dealt with unions all the time and he spent many years managing Sasol's international coal sales.”
The Sasol years
Those who worked with De Ruyter at Sasol rate him highly, says energy expert and publisher Chris Yelland. De Ruyter started at Sasol straight after university – he received an LLB through Unisa and later an MBA from a Dutch university - and held various positions in Sasol Mining, Sasol Oil, Sasol Gas and Sasol Synfuels International.
One of his biggest achievements was restoring the loss-making Sasol Olefins and Surfactants in Germany to profitability. Sasol wanted to sell the unit in the early 2000s, but after De Ruyter was seconded to the business, he managed to turn it around.
“By the time he left, Olefins and Surfactants was the second-best performing business in the Sasol Group, secondly only to Synfuels,” a Sasol colleague remembers. He was also credited with trying to persuade Sasol not to pursue a Chinese coal-to-liquid project due to environmental and cost reasons – which eventually was the course they took.
One blot against his name was his initial work on what would eventually be the disastrous Lake Charles Chemicals Project, which may end up costing almost R200bn – double the budgeted amount.
Still Yelland believes that De Ruyter cannot be blamed for how the project, which largely went pear-shaped in the most recent years, turned out. By their very nature, mega-projects like Lake Charles carry large risks and are massively unpredictable, he added.
In 2014, De Ruyter left Sasol to join Africa’s largest diversified packaging firm, which was starting to show some serious cracks. The company struggled with net debt of R5.7 billion due to aggressive expansion outside of South Africa, particularly in Nigeria and Angola. This started to backfire after the oil price collapse in 2014-2015, which contributed to foreign currency volatility and problems repatriating money from those markets, as well as from Zimbabwe, which continued to crater during this time.
In addition, its UK operation was hit by Brexit and the South African economy faltered, hitting demand for its products in local markets.
While De Ruyter succeeded in lowering Nampak's net debt to below R4bn by last year – by selling some of its assets and cutting costs - the company continued to suffer, with its revenue down from R20bn five years ago to R17bn, and trading profit remaining flat. Its share price has lost more than 80% of its value during this time.
“Everything you need to know (about De Ruyter) is right there in the numbers,” one prominent analyst told Business Insider SA. He criticised De Ruyter’s decision to persist in the company’s strategy to build businesses on the rest of the continent, using profits from the stable South African businesses, and to sell local assets.
Shareholder activist Theo Botha of Proxy View also objects to De Ruyter’s large pay packets – which included a “retention bonus” of R7m, initially rejected by shareholders – while the company was struggling. Botha says De Ruyter, who earned more than R18m in the past year, was “hopelessly overcompensated”, while failing to turn around Nampak. He believes that shareholders may have eventually forced De Ruyter out.
But Wayne McCurrie of FNB Wealth and Investments says the criticism of De Ruyter’s performance at Nampak is misplaced. He says De Ruyter took over at a disastrous time for the company, following its over-investment in Angola and Nigeria which left it with massive debt while those countries’ currencies collapsed after the oil price bust. “SA was already flat (plastic packaging and packaging in general are really no longer sexy)," McCurrie added, and Nampak also faced big structural competition in a stagnant local economy.
“He inherited a mess,” an associate close to De Ruyter told Business Insider SA. “Much of which was not clear from the financials at the time."
In response, “De Ruyter did take the tough decisions,” says McCurrie. This includes selling Nampak’s glass division for R1.5bn.
“So while Nampak clearly did not go from strength to strength and recover its ‘blue chip’ status of the 1990s, I think it would be harsh to negatively judge him on this. It is most likely that Nampak would have been worse off had a person of his calibre not been employed,” McCurrie says.
Yelland believes De Ruyter is well-suited to the Eskom job given that Sasol is a large energy provider itself. Apart from importing gas, it generates a lot of its own power, and also owns its own coal mines, using the output as feedstock to generate power.
“What people are forgetting is that this man knows coal,” the former Sasol executive says. “By the time he left Sasol he was running probably 90% of the Sasol business. The only thing he didn’t control was Synfuels (Secunda), SPI (the very small exploration arm of the business). Every other part of the business that he ran required coal.”
There has also been some criticism about the fact that De Ruyter is not an engineer, but Yelland says leadership and people skills will be more important than technical skills to sell a clear vision of the future.
“André is super smart, considered, calm, and he doesn't take any k*k,” the former Sasol executive told Business Insider South Africa. “He hates internal politics that distract from the business and he does not suffer fools. This may be tough for people at Eskom, as he will call out poor performance, but he absolutely understands the shop floor.”
He knows manufacturing – and is focused on customers
As chairperson of the industry group, the Manufacturing Circle, De Ruyter vehemently opposed above-inflation Eskom tariff hikes and demanded that the utility should address its own inefficiencies before it recovers losses from its customers. He slammed high power costs for the dire state of manufacturing in South Africa.
Apart from his manufacturing skills, he also brings something else to Eskom which insiders of the state-owned utility lacks – he sees the world from customers’ eyes, says Yelland.
SA’s biggest challenge
De Ruyter’s job won’t be to save or fix Eskom, says Yelland. Eskom can’t survive in its current format: its earnings from operations are now less than half of its debt service commitments.
“It won’t ever be restored to its former glory.” The new CEO will have to unbundle and restructure Eskom, making sure that it is equipped for a sustainable future, says Yelland.
“As we all know, (Eskom) is probably the biggest challenge that SA has at the moment,” McCurrie added.
When Business Insider SA spoke to him briefly on Tuesday, De Ruyter was upbeat, and only laughed when asked why he sounded so calm in the face of such a daunting task - before referring all queries to the department of public enterprises.
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