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Eskom breaks new ground in corporate governance

Published: 20-JAN-05

Eskom is one of the world’s largest electricity utilities and the national power company in South Africa. Since 1991 it has electrifi ed approximately three million homes, and has demonstrated superior performance both technically and financially.

It has also become something of a beacon for state enterprises across the world in the fi eld of corporate governance.

This book, by Eskom chairman Reuel Khoza and legal adviser Mohamed Adam, emerges from the experience of transforming Eskom from a statutory entity into a state-owned enterprise incorporated in terms of South African company law. Its two-tier governance model was replaced with a single board in terms of current practices of good corporate governance.

Worldwide, there is a wealth of material available on corporate governance, including codes and guidelines for best practice in this regard. By comparison, there is little or no information that addresses the issue of corporate governance in the context of state-owned enterprises – which are often characterised by poor performance, inadequate service delivery, unnecessary bureaucracy and a lack of good governance.

What this meant was that Khoza and Adam faced unprecedented governance issues and challenges and were not adequately covered in the numerous codes and models that do exist. Instead, they and the members of the Eskom Board of Directors relied on their own resources to craft appropriate solutions to challenges such as role clarity, leadership, the independence of the board, setting performance objectives, duties of directors and transparency.

They must have got something right. In 2001, Eskom won the Financial Times Global Energy Award for Power Company of the Year at the awards ceremony in New York. It is the only stateowned enterprise from a developing country that is ranked as one of the seven largest power companies in the world.

“As participants in Eskom’s transformation, were inspired to share the lessons learnt and the knowledge gained. This is the motivation and rationale for this book,” says Khoza.

Adam says it is becoming widely recognised that good corporate governance is one of the cornerstones of business excellence. “It is our hope that this book will provide valuable insights into implementing appropriate governance practices in stateowned enterprises. By sharing practical ideas and experiences, we aim to help fill a gap that presently exists in the literature. Similar ideas may already have been tried, or it may be useful for readers just to know that others have had similar experiences.”

Africa’s experience in the 21st century has a great deal to contribute to the growth of knowledge about good corporate governance, particularly with regard to sustainability and triple bottom line performance. This book marks the beginning of a drive to export these and other triumphs to the rest of the world.

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