Conceptualising and operating Medupi: Challenges and insights on project management principles at work in SA

On any given day, 11 000 workers make their way to Eskom’s Medupi Power Station, which stands visible on the Limpopo landscape amid the cranes and equipment supporting one of the biggest developments on the continent. It is a major project, designed to ensure South Africa’s energy security for the decades ahead in the context of a global economic environment where Africa’s growth prospects have proven to be immense in the midst of global downturns.

Formerly known as Project Alpha and Charlie, the power station was quickly rebranded “Medupi”, meaning “rain that soaks parched lands, giving economic relief”. The new name of the project is indicative of both the economic intent of the colossal power station, as well as its location in Africa’s powerhouse.

Medupi is set to serve as the fourth largest dry-cooled coal power station on the planet, at a total value of R98.9 billion.

The project is no small task, and included leveraging a $3.75-billion loan from the World Bank which, inclusive of conditions, mandates that the construction of the site include local content and skills. With some worried that the World Bank’s loan would include conditionalities unfavourable to South Africa, concern has since subsided for now – given that the requirements for local empowerment, such as those listed above, were well-received in a country where unemployment is a matter of grave national concern.

Construction began in May 2007, two years after the project was given the green light. One of the highly touted benefits of the project, in addition to fulfilling the country’s energy supply mandate, included the local development spin-offs for the Limpopo province.

According to Eskom, upon its completion the power station will have six boilers, each powering an 800-megawatt turbine, producing 4 800MW of power – making it the largest dry-cooled coal-fired power station in the world. That means major management skill spread across a workforce set to peak at 15 000, according to some estimates.

Scheduled to kick off energy provision in May 2013, Medupi is the first station to be built in South Africa in 30 years, with forecasts from major financial news outlets revealing that the power station will directly grow South Africa’s gross domestic product by about 0.35% per year.

Reuters sent news across the world toward the end of 2011, noting the first phase of Medupi could be on line from May 2013 “if all contractors meet their obligations” – referring to the words of the state power utility’s chief financial officer, Paul O’Flaherty. The global news source alluded directly to investor concern, adding that “getting Medupi up and running is key to avoiding a repeat of 2008’s rolling blackouts which hit Africa’s largest economy hard”.

Like any project management task, delays are possible and sometimes probable. In the case of Medupi, this has been clear, with a six-month delay on the project, given the scheduled first phase was due in the second half of 2012. The government, however, has stated it has made clear plans to ensure project delays do not hurt the economy in the interim between now and the phase-by-phase completion of the project, which holds a stated objective of safeguarding South Africa’s energy reserves.

According to the Mail & Guardian, Eskom estimated that the effect on Lephalale’s GDP would be 95%; “whereas 58% of the project spend would be local. Its annual report stated that the parastatal was fulfilling its objectives.” The paper notes the total contracted local content was R33bn, or 64.27% of the total contracted amount of R51bn.

“According to the parastatal, infrastructure upgrades such as sewerage, housing and roads would be an added benefit for the surrounding community; and a large share of the Medupi spend would benefit local construction companies,” said journalist Lisa Steyn, who led an investigative piece into the degree to which the project was fulfilling its pledge to local economic development in Lephalale.

“Eskom needs to monitor and evaluate, and ensure the empowerment of the local people,” said Justice Ledwaba, chairperson of the Lephalale Business Forum, who spoke to Steyn. His vice chair has stated that Eskom has spent far less than it should have in sourcing goods and services
from Lephalale.

According to Business Times, Lephalale’s GDP is expected to increase by about 95% per year as a result of the construction activities. Increasingly, project managers are expected to show more than growth, given the importance of how inclusive overall growth is when spread across the general population of a given area.

When major projects of the sheer scale of Medupi get under way, commitments under the banner of social responsibility need to be broadly accepted by all contracted parties, with measurable tangibles set to ensure they are met.

In the absence of monitoring mechanisms for subcontractors, companies can experience complaints that those contracted do not meet the social responsibility or development objectives set out by the primary leaders at the helm of a major project.

According to the Mail & Guardian, subcontractors were running the show, with little involvement from Eskom; and they preferred to deal with people they knew – meaning locals had received little work.

Regardless of the exact details or nature of the criticisms, the sentiment points to the necessity of ensuring subcontractors understand any developmental objectives to the same extent as primary contractors do.

With smaller companies and subcontractors less able or willing to undertake commitments for the common good that do not necessarily directly benefit the bottom line, coming to agreement with subcontractors may require giving more attention to non-profit generating commitments than normative goals such as sourcing local content and empowering local communities.

Inevitably, however, local content cannot always be secured, and sometimes there is a need to look offshore.

Hitachi Power Europe is responsible for the offshore scope of the project, including “the design and engineering of the plant, supply of critical components and high-grade materials, and the required supervision in South Africa during the erection and commissioning phase of the project,” as Engineering News’ Jonathan Faurie pointed out.

The boiler and turbine contracts for Medupi are the largest ever contracts Eskom has signed in its 89-year history.

In addition to the integration of local economic development into the project management of the site, delays in the R100-billion project have raised concerns, requiring Medupi management’s extensive fiduciary monitoring of progress.

“Shareholder oversight of the new build programme and its delivery is being stepped up to ensure early intervention, should the need arise,” said Department of Public Enterprises director-general Tshediso Matona at Eskom’s interim results presentation this year.

“Eskom is a very sizeable part of the South African economy in its own right, and its impact on the economy is significant. We know an adequate and reliable supply of electricity is essential for economic growth and investment; and in this sense, Eskom must be a conscious catalyst for this, and not the constraint some perceive it to be,” according to journalist, Sherilee Lakamadas.

As she confirmed in Business Live coverage around the time of the interim results being released, Eskom has needed to push out its target for first power from Medupi by about six months – from the end of 2012 to May 2013. The failure of contractors to fulfil their obligations has been cited as the cause of the delay.

As it stands, South Africans can expect the project to be delivered within one year of the initial deadline.

Medupi is perhaps best located within the wider context of South Africa’s energy realities.

“Medupi is the first of the new build projects that will supply new power to the grid. It will be followed by the R120-billion Kusile coal-fired power station, which is scheduled to come on stream in 2014,” says Lakamadas. “Kusile will add 4 800MW of power to Eskom’s capacity.”

However, the consequence of the delay does have a stark bearing on private sector activity and may be among the most concerning outcomes for the country’s economic activity.

Fin24.com’s Jan de Lange has pointed out that energy-intensive projects have been postponed in anticipation of the completion of the first Medupi unit, “the largest of which is the expansion of Xstrata’s Lion chrome smelter at a cost of R4.9bn, which has been postponed for three years – but for which construction started a year ago”.

The delay is owed to overdue welding on the unit’s pressure vessel built by Hitachi – the most important part of the power station – where steam is generated and sent to the turbine generators, as De Lange points out.

While the bottom-line component dealing with economic fundamentals has occupied project managers in light of the release of Eskom’s latest financials, and the needs of industry for energy security, triple-bottom line matters covering environmental impact have been among the primary areas requiring effective project management on the part of Medupi over the past few years.

The Medupi Power Station units have been scheduled to be commissioned at nine-monthly intervals, in line with international practice, according to Eskom, which argues that it has placed efficiency and sustainability in the intrinsic management approach to the project.

At the outset, it declared that Medupi “would be able to operate at higher temperatures and pressures than previous generation boilers, and operate with greater efficiency.

“As it stands, the supercritical design is a first for Eskom; and with the higher efficiency, will result in better use of natural resources – for example, water and coal – and will have improved environmental performance.”

Eskom has put the planned operational life of the station at 50 years. The site identified was formerly the farm Naauw Ontkomen, purchased from Kumba Coal (Pty) Ltd – now better known as Exxaro Coal (Pty) Ltd.

Given the state-led nature of the project and the needs of governments across the world to ensure sustainability and adherence toward the adoption of binding international agreements on carbon emissions, an “environmental management plan is key to every new build project that Eskom tackles,” says the national utility giant.

In its public commentary on Medupi, it has reiterated that before any major project can be implemented, “Eskom asks an independent consultancy to perform an environmental impact assessment, which involves both the social, historical and natural impact of the project.”

Medupi was approved and signed off on the basis of compliance by the minister of Environmental Affairs and Tourism before construction started in May 2007.

Environmental impact, as reflected in the National Environmental Management Act, is crucial to project managers in South Africa, with demonstrations of environmental management now an essential component.

During the clearing of the Medupi site – some 840 hectares – Eskom highlighted a number of important matters on sustainability; and taking steps in respect of each, it says, was a top priority.

The project management approach to what is usually part of the triple-bottom line considerations included an approach to the environment based on action steps and accompanying education-based programmes for local residents and workers.

Some of the steps were remarkably simple and seemingly common sense, but still reflected some of the high expectations around environmental preservation in a country of such highly acclaimed natural beauty.

For a start, a visual beacon on the site is a baobab tree, believed to be a few hundred years old. Eskom says its team “immediately made plans to preserve the beautiful tree”, saying a “lengthy process was put into place to relocate it and plant it where the entrance to the power station would ultimately be.”

Eskom says that in addition to the case of the baobab, a number of trees were replanted or transported to a special nursery at the adjacent Matimba Power Station.

Of the game that had occupied the land, 30 to 40 were relocated to an Eskom game reserve in the area. Among them were impala, nyala, gemsbok, eland and kudu.

The state power utility approached the project’s environmental angle with the inclusion of a programme to catch and relocate all snakes found on site by a local professional snake catcher, including educational talks to employees.

The moves might have seemed relatively small, but Eskom says accompanying education formed an integral core of the project.

“Local people are constantly given information about the environmental impacts and fauna and flora on site as they work. The Medupi EMC (local Environmental Monitoring Committee) has been involved in monitoring the project, and continues to do so,” it says.

As one of the biggest projects on the go in South Africa, Medupi is on everyone’s lips; and beyond delays and the consequences for the bottom line, the project is intrinsically tied to the country’s development goals and the government’s approach to dealing with ventures tied to state development.

Beyond broader economics, the bottom lines of social awareness through local economic development as well as the environmental components have been overseen by senior policy-makers.

As a consequence, as an effort by the government to put its best foot forward, the project management components of Medupi reveal something of a definition for contemporary project management concerns for professionals operating in this sphere in South Africa. ☑

Garreth Bloor

Garreth Bloor is chair of the economic, environment and spatial planning portfolio in the City of Cape Town. He has contributed to numerous local and international publications and is focused on local government policy with an empasis on job-creation. Garreth can be contacted on This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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