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After months of speculation and delays, South Africa named Andre de Ruyter as chief executive officer of its debt-crippled state power utility, surprising investors with an unexpected choice and angering a key union.
De Ruyter, 51, has considerable corporate experience in the country, though not at state-owned companies. His appointment comes at a time when Eskom Holdings SOC Ltd. is undergoing a transformation that will require technical and financial knowledge as well as an ability to deal with the government and labor unions.
The appointee, currently CEO of packaging firm Nampak Ltd., will take up the post on Jan. 15, the Department of Public Enterprises said in a statement Monday. The state-owned power company has been looking for a new CEO since Phakamani Hadebe in July became the 10th person to vacate the post in as many years.
“The market is going to have to know him better and understand what qualities he is to bring to the table,” said Jones Gondo, a credit research analyst at Nedbank Group Ltd. in Johannesburg. “The market had not anticipated him to be one of the slated candidates. At least now we can possibly move on to the substantive issues.”
The 2028 yields climbed five basis points on Tuesday to 7.09%, the highest on a closing basis since Sept. 12, after rising nine basis points yesterday. Its 2021 debt jumped 20 basis points to 5.35% on Tuesday morning.
The loss-making utility has 450 billion rand ($30 billion) of debt and is struggling to fix aging power stations and correct defects at new ones. Saving the business is a key goal of the government, which is sustaining it with 138 billion rand of bailouts over the next three years alone.
The government had shortlisted three candidates for the position of CEO, including former LNG Canada CEO Andy Calitz and Jacob Maroga, who was Eskom CEO from 2007 to 2009. Media speculation about who the third person was didn’t include De Ruyter, who may face push back from labor unions that would have preferred a black candidate.
“It is a surprise to me, his name was never mentioned,” said David Shapiro, deputy chairman of Sasfin Securities Ltd. in Johannesburg. “Let’s hope he has the courage to do what he has to at Eskom.”
De Ruyter has served as Nampak CEO since 2014. His role overlapped with Finance Minister Tito Mboweni’s chairmanship of the company, which began in 2010 and ended in 2018.
Prior to his role at Nampak, De Ruyter spent more than two decades at petrochemical giant Sasol Ltd. in a number of senior management roles. He’s overseen work in the U.S., Germany, China and African nations including Nigeria and Angola, the department said.
“I would like to thank Mr. De Ruyter for not only accepting this position at a difficult time for Eskom, but, given Eskom’s current financial situation, also agreeing to a lower compensation package than the position currently pays,” the department said.
During De Ruyter’s time at Nampak, the value of the company dropped 82% to 5.07 billion rand as it had to contend with weaker growth in South Africa, stranded cash in Angola, Nigeria and Zimbabwe, and delays selling its glass business.
Over the five years, De Ruyter pocketed 21.5 million rand of bonuses, according to data compiled by Bloomberg. His compensation last year came to 16.5 million rand, including an 8.8 million rand bonus, even as the company’s share price sank 15%.
Given Eskom’s financial difficulties, De Ruyter has accepted a compensation package that is lower than “what the position currently pays,” the department said, without giving details.
De Ruyter has “significant” managerial experience in the industrial and energy sectors, as well as familiarity with managing labor unions, another challenge the head of the utility will face, according to Darias Jonker, a London-based director at Eurasia Group Ltd.
“His lack of experience at Eskom itself puts him on a steep learning curve, while the absence of political allegiances means he is unlikely to be expected to fight any of the tough political battles the position also demands,” Jonker said in a reply to questions. “It is clear that the Ramaphosa administration wants AdR to focus on management, not politics.”
The utility’s biggest labor union said it wasn’t aware that De Ruyter was a candidate and didn’t approve of the appointment.
“His credentials are questionable,” said Paris Mashego, the energy coordinator at the National Union of Mineworkers. “He has destroyed Nampak and as such he will not receive our support.”
(Updates bond yields in fifth paragraph)
--With assistance from Loni Prinsloo and Antony Sguazzin.
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