What should Eskom’s CEO be paid, and who should decide?

An Article by Leon Louw, Freedom Foundation & Izwe Lami

What should Eskom’s CEO be paid, and who should decide? Ask, and you expose the wider myth beneath headlines about excessive fortunes greedy executives supposedly pay themselves.

Thomas Sowell, perhaps the greatest living economist, has spent much of his superlative career dismantling this and related myths. He points out that pay, like every price, is not decreed. It emerges from competition and what people whose money it is are willing to pay. Were their remuneration decided by executives, they would earn billions, not millions.

Executive pay indignation is the luxury of commenting on transactions for which critics who lack relevant facts and incentives do not pay and incur no penalty for being wrong.

Sowell’s first question is always the same, and it is devastating in its simplicity: compared with what? A number in isolation means nothing. He condemns people pretending to have more expertise than those involved and liable. The answer to Sowell’s question is, in Eskom’s case, “not excessive”.

A R12m salary seems obscene until compared with alternatives. The median CEO remuneration across the top 40 JSE-listed companies is more than R58m, with some bank and retail executives earning more than R100m. Eskom’s turnover dwarfs the largest firms: R355bn versus an average below R90bn.

Likewise, Eskom’s assets at more than R1-trillion far exceed the R350bn average for JSE’s biggest. Only the “big four” banks (with other people’s money) and a few mining houses rival this. The turnaround under Marokane reflects a R30bn profit (after many years of losses), compared with the R10bn average for the largest companies.

Eskom CFO Calib Cassim. Picture:

Eskom’s CEO earns less than the CFO under him, Calib Cassim. Whatever the ideal, a CEO responsible for, say, a R2bn turnaround would be a bargain at R1bn. Eskom’s board must, like every board, promote the interests of the enterprise by paying whatever maximises value. A board is not spending Monopoly money. It is required to know better than columnists, podcasters and other critics.

Is it relevant that the sole Eskom shareholder is the government? Scarcely. As a registered company, Eskom must comply with company law and King IV governance principles. Had there been private shareholders, Marokane’s pay would be unquestioned. That politicians and officials tend to underperform is a political not a corporate problem.

When Apple re-employed Steve Jobs, naïve second-guessers scoffed at his package. Yet under him Apple became the world’s biggest company. Was he overpaid, or the world’s cheapest executive? The same logic applies to “excessive” severance pay where nay-sayers howl at the cost of getting rid of failed executives. A “golden handshake” is the cheap way to end bloodletting.

Eskom plunged the country into more than 200 days of blackouts euphemistically called load-shedding, as if it were a virtue. It churned through 15 chief, interim and acting CEOs in 17 years. Under Marokane blackouts ended, and Eskom posted its first profit since 2017 (R30bn in 2026 against a R55bn loss in 2024, a R75bn turnaround) and a stable grid in a R7-trillion economy. Against that, is R12m (0.016% of the turnaround or 0.0033% of turnover) a disgusting scandal or a magnificent bargain? Marokane earns the equivalent of 3.3c per R1m.

Much fuss is made of the fact that had Eskom been private and unbacked by the government it would have been liquidated, that power output and demand have fallen, that this is due in part to private rooftop solar and that blackouts curtailed industrial demand. But all Eskom is doing, and should arguably have done since the crisis started in 2007, is apply basic price mechanism economics: cut shortages and losses by charging more and selling less.

Nersa, the national energy regulator, forces Eskom to violate elementary laws of economics. Despite a legacy of market distortion we remain Nersa victims. Economics 101 teaches that prices should rise during shortages and fall during surpluses to tend perpetually towards supply-demand equilibrium.

If our lights are on thanks to Marokane, he is cheap. If he fails, he must be replaced by someone paid whatever it takes to ensure leadership excellence.

As Masibongwe Sihlahla argued in Central News, judging Marokane by his salary alone is irrational. It is an inconsequential line item in the context of a utility that generates nine-tenths of the nation’s power, serves 26-million households and carries more debt and social cost than many national budgets.

Rob Rose, one of our most celebrated financial editors, argued in the Financial Mail that Marokane should be paid “far more” for heading what is arguably the country’s single most important entity. Apart from Marokane’s BSc, MSc and MBA, he brings to Eskom two decades of heavy-industry experience.

Given Eskom’s size and national importance, the fragility of what was, the imposition of municipal debt and the seismic cost of failure, Marokane’s salary shrinks toward the vanishing point. His salary is the seen; catastrophe averted is the unseen.

Eskom adds a complication private firms do not have. The shareholder is the entire country. We are represented by a board appointed by a minister spending our money. Does that negate Sowell’s argument about people risking their own money on executives? No.

The mechanism for deciding Eskom’s executive pay is as it should be: a board, closer to the business than any politician, official or pundit, weighing what it must pay to attract requisite excellence. Confidence in the board and fear of political interference are justified. That a government-appointed board might be captured, and political “cadre” loyalty rewarded over performance, is not a case against Eskom appointments. It is why political interference in state-owned enterprises (SOEs) should end.

Conflating politics with SOEs sacrifices executive excellence for political expediency. Eskom is a case study in why we should shrink the political arena and expand the autonomy of the private sector and privatised organs of state. Legitimate debates about unbundling and privatisation should continue, but not at the expense of Eskom excellence.

Who should decide what Dan Marokane is worth? Not him. Not you. Not me. Not a politician or official. Not a broadcaster, podcaster or journalist. The people best placed to do so are a board subjected to personal liability should they fail to perform their corporate loyalty, fiduciary and governance duties.

The tragedy of a failed SOE is, as Sowell cautions, not that it might pay too much, but that it might be subverted by people who pay no price for being wrong.

We are entitled, as the owners of Eskom and all organs of state, to mandate whatever payment it takes to attract excellence and terminate the rest. Outrage should be reserved for failure and accolades for performance.

* Louw is CEO of the Freedom Foundation and Izwe Lami, as well as founder, past CEO and past president of the Free Market Foundation.

Business Day