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Saturday, May 18, 2024

STRATEGIC INSIGHTS: Eskom versus Ferrari

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Eskom, in its 2023 December annual financial statements, stated that it generated around R259.5 billion in revenue. The National Energy Regulator of South Africa has granted a revenue application to Eskom, to increase in its revenue recovery to R318bn for Eskom for the 2023/2024 and R352bn for the 2024/2025 financial years.

The 100 day test:

The board announced the arrival of group chief executive Dan Marokane.

Over his 46 days in operations, while achieving 22 days of no load shedding, Marokane has managed to dodge and defuse the prodigal Eskom poisoned chalice of load shedding and he has done well in keeping the lights on.

He has had only 46 days in operation while keeping the Eskom ship afloat.

He has shockingly over-performed while he is aiming to achieve a zero no-load shedding incident for the remainder of the month of April with a 70% EAF recovery by 2025.

This is a true mark of leadership. Can Dan Marokane live up to the test of time? It will all boil down to his leadership skills.

Dan Marokane. Picture: Jennifer Bruce.

Eskom vs Ferrari:

Enzo Ferrari was a man driven by motor sports and racing passion.

When confronted about his company’s struggling financial situation he pegged all his bets on raising his fortunes on winning the races, that would change the financial destiny of his company.

He was an erudite engineer and a former racing driver champion.

Caught between the web of his passion for building high quality performance racing cars, still producing commercial vehicles to keep his company alive and to support his passion for racing.

The history and documentary of Ferrari is told so eloquently in a movie entitled Ferrari.

Ferrari (2023 film)

A movie starring Adam Driver and Penélope Cruz.

Based on the 1991 biography of Enzo Ferrari: The Man, the Cars, the Races, the Machine.

The film follows the personal and professional struggles of Enzo Ferrari, the Italian founder of the car manufacturer Ferrari, during the summer of 1957 as his team Scuderia Ferrari prepares to compete in the 1957 Mille Miglia.

During the summer of 1957, bankruptcy loomed over the company which Enzo Ferrari and his wife Laura had built 10 years earlier.

He decides to roll the dice and wager it all on the iconic Mille Miglia, a treacherous 1000-mile race across Italy. This race placed Ferrari on the global high performance race cars map.

Successful companies are always built on the bedrock of passion and outstanding overall performance.

Ferrari rose to be a highly successful high performance luxury racing cars and design car manufacturer.

Eskom, just like Ferrari, shares a lot in common. While on the other hand Eskom in South Africa was built with similar engineering genius and a passion for building high quality big power plants to drive industrialisation by Dr. Hendrik Van Der Bijl, who was considered one of the first truly great South African genius and scientists.

When one looks at the successes of both companies and in comparison to how each company went through painful stages to achieve success.

An incredible highlight in the history of passion, high performance and success, springs out in the two companies Ferrari and Eskom.

Eskom was and is still a highly successful company in comparison.

It has the potential to achieve even greater success if it attracts the right leadership coupled with a strong vision, mission, strategy and clear objectives.

So how come is Eskom struggling with reeling itself out of this colossal quagmire of always finding itself in these never ending strategic, financial and political woes?

It all boils down to focus.

Unlike Ferrari to the contrary, Eskom enjoys huge public empathy, financial backing and support, despite all of these Eskom still fails to rise to the challenge of performing at its peak performance level.

In the science of success leadership is everything. It’s almost impossible to achieve success without the right leader and a team of experts in their craft, highly innovative and talented people in the leadership ranks.

A good company can be turned around into a great international phenomenon if it attracts the right leadership just like in the successes of Ferrari.

When Enzo Ferrari was building his high performance racing cars in his factory in Modena, Italy, his passion for racing was the sole reason that enabled his factory to survive and maintain its focus of producing leading racing cars while simultaneously manufacturing non racing production cars to sustain his racing cars division.

He was driven by single focus to win.

If Ferrari produces high quality racing cars and wins the races that would enable his production cars factory to survive.

Just like Eskom during its by-gone era of producing high quality products and components that enabled Eskom to survive.

Eskom had the highest level of engineering ingenuity that was combined with technical expertise and a passion to produce high quality longer lasting technology, components, parts and instruments that were used in building the big engine power plants that Eskom was rolling out across the length and breadth of South Africa.

So what went wrong?

How did Eskom end up in such a bad state? It is simple. Eskom stopped being an engineering company that manufactured high performance quality products which built and maintained power plants.

Post-democracy Eskom was converted into a power generation company that chased sales, focused on market driven politics and financial survival.

That’s how Eskom lost its leading technological edge.

Unlike Ferrari, today the leading luxury manufacturer, which maintained its core focus while perfecting its craft of the trade and focusing on its niche.

Eskom was tossed all over the show to be everything and while failing to deliver on core strategic niche expertise and gift.

Eskom stands out as one of the largest companies in the Southern hemisphere in revenue and capital asset base and one of the biggest single-run and managed entities in the world. Why is it allowed to fail, conspiracy theories aside? It all boils down to leadership and focus.

If the government was focused on its strategy for production of abundant energy to drive the economy.

The state must create an enabling environment backed up by injecting capital to build capital assets(power stations). Eskom must return to its core focus, regain its technological, financial and technical expertise of manufacturing and developing state of the art products, services and components for the energy sector.

If Eskom had to return to its niche and focus, it’s fortunes would change. Eskom must be turned-around and positioned as one of the leading technology and energy companies in the world.

Eskom should refocus its vision and slightly twig its strategic objectives and priorities towards achieving this goal.

Eskom is losing sales at a staggering pace, even though its revenues are growing.

The task of Eskom must be to research and develop, design, manufacture and produce world-class technology and components used in the building of high-tech (mega and modular builds) power plant builds.

Just like Ferrari, in the early years it started with a vision to build high-quality racing cars which evolved into producing and manufacturing world class luxury super cars. Eskom should refocus its vision and slightly twig its strategic vision, objectives and priorities towards achieving this goal.

Eskom should reposition itself as a future company dominating the power and energy generation sector. Leveraging off its inherited history of being the global industry leader in the engineering, manufacturing and energy generation, transmission and distribution sector. It’s a matter of leadership and single minded focus.

Today Ferrari is the leading luxury super cars manufacturer and a leading Formula 1 racing brand. Eskom had in its former years borrowed a management strategy from Formula 1 Grand Prix racing, where Ferrari is still the leading racing contender, having produced racing cars and racing drivers the likes of Michael Schumacher.

Today Ferrari is registered at a 30 billion dollar market valuation in 2020. In 2016 Ferrari went public at the NYSE to raise further funding. By 2030 Ferrari is planning to be producing cars based on its 20/40/40 strategy.

Ferrari will produce 20% ICE (Internal Combustion Engine) car models, 40 hybrid car models and 40 fully electric car models. Ferrari today is a world-class high performance racing car and a luxury super cars manufacturer brand.

The future of Eskom is not looking great. Eskom operates at a marginal 55% energy generation capacity with almost half of its plants completely broken down and non operational.

Eskom is losing sales at a staggering pace, although its revenues are declining. It is a shadow of its former glory, it no longer operates as a technology and engineering company. Instead Eskom of today is a mere plant management and a sales company.

Looking at future prospects if nothing drastic happens in correcting the failures and challenges in Eskom. And by driving transformation through applying an aggressive turnaround strategy.

Eskom could either emerge as a leading global energy company, although highly improbable. Alternatively Eskom could simply fail and fade into the horizon of a once promising energy company in the southern hemisphere.

Both Ferrari and Eskom were started and built by engineering geniuses who placed performance above all else and both companies stood the test of time and survived all challenges.

One (Ferrari) is a highly successful global automotive success icon and the other (Eskom) is a national / regional power generation failure. The lesson is leadership is everything.

For an organisation to succeed you need leaders across the organisation who are driven by a single focus goal and the passion and determination to win and succeed no matter the challenges.

It’s all about leadership. Will Dan Marokane save Eskom? Only time will tell.

Success is an outcome of leadership.

Crown Prince Adil Nchabeleng is president of Transform RSA and an independent energy expert.

* The views in this column are independent of Business Report and Independent Media.

BUSINESS REPORT

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