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EDINBURGH — A move to overhaul corruption-wracked power utility Eskom is a sign that although corrupt President Jacob Zuma is still in power, the sands are shifting below him. After ignoring widespread evidence of state capture and irregularities at the utility, the South African government has finally cleaned up the Eskom board of Zuma-Gupta acolytes and is urging steps to strengthen governance. This is only a month after Zuma was replaced by Cyril Ramaphosa as the new ANC leader, an appointment likely to lead to Ramaphosa becoming the country’s next president. Ramaphosa pledged a clean up on corruption and the wheels have been set in motion. The new Eskom board will have to move fast as there is a danger the state entity could default on debt, according to a credit ratings agency, which in turn would dent confidence in South Africa. – Jackie Cameron
South Africa appointed a new board at struggling utility Eskom Holdings SOC Ltd., with Jabu Mabuza becoming chairman, and ordered a new permanent chief executive officer to be named within three months.
As well as the appointment of Telkom SA SOC Ltd. Chairman Mabuza, the government recommended former Land Bank chief Phakamani Hadebe as the acting CEO, it said in a statement. The move, designed to strengthen governance and management, follows a meeting between President Jacob Zuma and other key ministers on Friday to address urgent challenges at the firm.
The utility, which is the biggest recipient of state guarantees, has been in talks with the government to improve its finances, with Finance Minister Malusi Gigaba describing it as his “biggest worry” as a collapse could potentially drag down the country. The utility’s woes have worsened as domestic power demand is the lowest in more than a decade and as South Africa’s finances buckle under lower tax revenue and rising debt.
“The company has been facing several challenges, including a weak financial position, declining revenues and governance failures, which are threatening the sustainability of the company going forward,” the government said in the statement.
S&P Global Ratings this week said there was a “ clear danger” of Eskom defaulting on its debt. Governance is among the issues that lenders have said the company needs to resolve before they make additional funds available.
“It’s really important in the short term to win back the confidence of the financial community,” Chris Yelland, an energy analyst and managing director of EE Publishers, said by phone. Particularly “in order to release funds, to roll over debt, for new bond issues that have really been delayed because of these governance problems.”
In addition to the board appointments and acting CEO recommendation, which will be ratified by the cabinet at its next meeting, the government also asked that a new permanent chief financial officer be named within three months.
The ruling party said it expects the board to immediately remove all Eskom executives who are facing allegations of corruption and other acts of impropriety. That includes Matshela Koko, who faced disciplinary charges related to conflicts of interest for payments made to a company linked to friends of Zuma. It also includes Anoj Singh, who was suspended following allegations of corruption.
Eskom’s Zethembe Khoza confirmed that he resigned chairman on Friday, Fin24 reported.
The board appointments “will go a long way towards rebuilding confidence in the leadership in our country and in our economy,” Cas Coovadia, the Banking Association South Africa’s managing director, said in a statement.
New Board gives hope for Eskom turnaround
The appointment of a new Eskom Board with credibility, business acumen and experience provides OUTA with hope that this critical state-owned entity can be salvaged, however a lot has still to be done.
“We welcome the change in leadership and especially the inclusion of experienced business, finance and engineering leaders who will do far more to address the challenges faced by Eskom than any of their predecessors in the past decade,” says Wayne Duvenage, OUTA CEO.
“There are clear indications that the new board has been tasked to rearrange the operational management team and structures, thereby restoring much needed efficiency and cost cutting to prevent the Eskom ship from sinking.
“By replacing the Eskom board, Cyril Ramaphosa has fired another salvo into one of Jacob Zuma’s biggest corruption camps.”
The appointment of the new board and the resumption this week of the inquiry into Eskom by the Portfolio Committee on Public Enterprises signal the start of an entirely new energy and the renewal of Eskom. OUTA would like to see the new board conduct meetings with known whistleblowers and lost talent, so as to lure them back into the organisation.
“OUTA strongly objected to Matshela Koko’s reinstatement after a sham disciplinary hearing exonerated him. We believe the new board’s biggest challenge is not only to get rid of all those who are implicated in massive corruption but also to ensure that criminal charges are brought against them and the evidence in the Eskom files preserved to use against them,” says Duvenage. Those implicated include Koko, suspended CFO Anoj Singh, former CE Brian Molefe, former board chairman Ben Ngubane and former board member Mark Pamensky.
OUTA commends those brave Eskom managers who stood against corruption and wrote to Deputy President Ramaphosa to demand the removal of the corrupt management and board. This is the sort of action needed to rescue these captured entities.
Parliament’s inquiry into Eskom is due to resume and the scheduled appearance of Koko and Singh before the portfolio committee this week is expected to provide interesting insights.
OUTA hopes that these changes have come in time but all indications are that taking back Eskom will be a massive salvage job. The mess lies squarely at the feet of President Zuma, who ought to be removed from his post as soon as possible.