Digital

Solving the Es ko m p ro b l e m

with data and maths How the utility’s crisis played a small part in the formulation of an algorithm to help other companies manage organisational riskToby Shapshak

● On a sunny day in Belgrade, sitting at the splendid Kafeterija, Ivor Chipkin was looking over the data from his state capture research, when he and his Serbian wife, Jelena Vidojevic, noticed a pattern.

Despite the romantic setting, the data was prosaic. Charts showed data from Eskom andfrom Russian and Brazilian state power companie s .

Afterwards, in a discussion with Vidojevic’s colleagues at the University of Belgrade, they wondered whether there was a mathematical way to describe some of the regularities in the numbers. There was.

“It was the breakthrough mo me nt ,” Chipkin tells the FM. “If the phenomena we were looking for could be described mathematically, then we were no longer confined by traditional social science methodolo g ie s .”

It would allow different kinds of “evidentiary sources” , such as data from large organisations, to be used in organisational analysis. “It took us on a new, exciting journey.”

At last, something good has come out of those “nine wasted years ” and the financial devastation inflicted on our country, before the social and economic tsunami of the Covid lockdown hit South Africa’s already onits-knees economy.

C h ip k i n ’s research report of 2017, writtenwith several colleagues, was the first major academic study of state capture in South Africa.

The release of the “Bet r ay a l of the Promise: How South Africa is Being Stolen” r ep o r t was like exploding a bomb in this country’s politics. It was a defining moment, showing the Jacob Zuma era’s depravity and the extent of the corruption during his presidency.

Chipkin has since written the book Shadow State: The Politics of State Capture, with Mark Swilling.

That moment in Belgrade became the genesis of not only a new way of interpreting state capture data but also an algorithm that Chipkin and co have created to understand organisational risk in other countries and companies.

“I became preoccupied with the question: ‘Could we have seen this coming?’” C h ip k i n tells the FM.

Vidojevic is also an academic. She met Chipkin while on a fellowship at the University of Cape Town.

“Together we started gathering data on organisations and interpreting it. Jelena lived through the break-up of Yu go s l av i a ,” he says.

After examining the Eskomrelated data that day in Belgrade and later with some academic friends, Chipkin and Vidojevic realised that neither of them had the maths skills or the ability to work with huge d at a s et s .

They partnered with Daniel Saksenberg and Laurence Rau in Joburg and formed a new company, Safe Passage. Chipkin says the company offers a “safe passage through these stormy times” .

Safe Passage has a novel approach to analysing a company, a country or even just a dep a r t me nt .

It looks at a range of data to predict whether that organisation has the capacity, intellectual property and wherewithal to deliver on its business plan and objectives.

“We take and model sources of data from all over the organisation, including financial and human resources data, to produce an overall view of the company or department or o f f ice .

“Most importantly, the combination of data modelling and social science techniques means we can tell the difference between a mere correlation and a causal relation,” he s ay s .

Traditional organisational risk assessment tools largely use financial data. “Yet financials are the fire after the react io n ,” says Chipkin.

“In a nutshell, we have produced a way of monitoring and predicting organisational risk. It may be a world first.”

Safe Passage’s work on Eskom — one of the worst sites of corruption — is an example. The energy supplier battles to keep the lights on and service its debt from its declining r ev e nu e .

Eskom dropped the country to stage 6 rolling blackouts last week and after political pressureCEO André de Ruyter has r e s ig ne d .

“We found a correlation between the deterioration of the technical performance of Eskom — the number and frequency of boiler repairs is a good measure of the performance of a power station, for example — and instability in the senior management. If this sounds obvious, it is not,” s ay s C h ip k i n .

“In Eskom there used to be a saying: ‘There is God and then there is the power station mana ge r .’ With their own manage-