Dirtiest board in SA? Eskom directors must be axed, held personally liable, says economist

In a conference to discuss its latest financial results, the Eskom board pledged its support for CEO Brian Molefe – effectively ignoring dozens of pages in the Public Protector’s #StateCaptureReport released this week that indicate he is a central figure in moves by the Gupta family to capture state assets. The Guptas have described him as a friend and there is evidence that they were in regular contact with Molefe. Also in this report are details of how Eskom may have acted fraudulently by handing over hundreds of millions of rands to Gupta firm Oakbay so that it could pay for a coal mine. But Eskom chairman Ben Ngubane has arrogantly swept those allegations aside, too, saying Madonsela’s report is “highly speculative”. A more comprehensive response to the #StateCaptureReport will be made available later in the week, he said. In the meantime, economists and other analysts are appalled at what they saw contained in the #StateCaptureReport. Iraj Abedian, one of South Africa’s top economists, says the details are such that the board of Eskom should be dissolved. Then steps should be taken to recover money from these individuals, who are liable as directors in their personal capacities. In the absence of police action against Molefe and friends, it makes perfect sense to test the #StateCaptureReport allegations through the Companies Act. At the very least, hitting directors where it matters most – their pockets – will help send the message to others running big businesses and state entities to keep on the straight-and-narrow or there will be very real personal consequences. – Jackie Cameron

By Adiel Ismail

Cape Town – The board of Eskom should be dissolved after former Public Protector Thuli Madonsela’s report into state capture, according to respected economist Iraj Abedian.

Eskom is one of five state-owned enterprises (SOEs) implicated in allegations of impropriety mentioned in Madonsela’s report titled “State of Capture”.

An electricity pylon stands beyond an Eskom sign at the entrance to the Grootvlei power station, operated by Eskom Holdings SOC Ltd., in Grootvlei, South Africa, on Monday, Nov. 3, 2014. Eskom said South Africa's power supply remains strained as it investigates what caused a silo storing coal to collapse, forcing the state-owned utility to cut electricity to customers. Photographer: Dean Hutton/Bloomberg
An electricity pylon stands beyond an Eskom sign at the entrance to the Grootvlei power station, operated by Eskom Holdings SOC Ltd., in Grootvlei, South Africa. Photographer: Dean Hutton/Bloomberg

The report into allegations of improper influence by the wealthy Gupta family over President Jacob Zuma and his family was released on Wednesday following a court ruling.

Eskom’s board has been singled out to appear to be in “severe” violation of the Public Finance Management Act.

“It appears  that  the  Board  at  Eskom  was  improperly  appointed  and  not  in line with the spirit of the King III report on good Corporate Governance.”

Madonsela stated that Ajay Gupta admitted during an interview that Eskom CEO Brain Molefe is his “very good friend” and often visits his home in Saxonwold.


“Even though  certain  conflicts  may  have  arisen  after the  board  was appointed, there should have been a mechanism in place to deal with the conflicts as they arose and managed actual or perceived bias,” Madonsela wrote.

“A board appointed to an SOE is expected to act in the best interests of the Republic of South Africa at all  times and it appears that the board may have failed to do so,” she said.

This referred to the board’s fruitless and wasteful expenditure relating to the Gupta-owned Tegeta Resources & Energy for a coal tender. Madonsela noted that it appears the conduct of the Eskom board was solely to the benefit of Tegeta in awarding contracts to them.

“It appears as though no action was taken on the part of the Minister of Public Enterprise as government  stakeholder to prevent these apparent conflicts.”

The 355-page report states that Public Enterprises Minister Lynne Brown was one of the people issued with notices by the public protector.

Zuma’s interest in Eskom board appointments

While board appointments would be discussed and approved by Cabinet, former minister of public enterprises Barbara Hogan, who was axed in October 2010, told Madonsela that Zuma took special interest in the appointment of board members at Eskom.

Abedian told Fin24 the report highlights Eskom’s failure at many levels.

“This is a fairly straight forward case of corporate governance failure, director failure and shareholder failure.”

He said the the chairperson of Eskom’s board should resign immediately and be subjected to the failure of fiduciary responsibilities. “So should each and every director on that board and be sued for failure as regards to fiduciary responsibilities.”

More importantly, Abedian placed the blame on the shoulders of ministers Brown and her predecessor Malusi Gigaba, who is currently the Minister of Home Affairs.

“Brown failed to exercise her role as the shareholder representative, which is in violation of her oath of office as a minister. Her predecessor likewise.”

What action should be taken?

He said two interventions need to take place immediately:

“The current board should be dissolved and each member subjected to the provisions of the Company Act. They carry personal liability in this regard.

“A new board should be appropriately constituted and should be put in place.”


Meanwhile, Abedian said Parliament should also take actions in line with the provisions of the Executive Members Ethics Act with regard to minister Brown, and possibly before her minister Gigaba.

“It is now time for Parliament and its relevant committees to jump into action to fulfill their responsibilities,” he urged.

Eskom and the public enterprises ministry did not respond to Fin24 for comment.

A closer look at the board

The Eskom Board at the time of the purchase of Optimum Coal Holdings (OCH), as well as the awarding of certain contracts to Tegeta, consisted of twelve individuals:


The report stated that the Board of Eskom appointed in December 2014 consisted predominately of individuals with direct and indirect business or personal relations with President Zuma’s son Duduzane Zuma, the Gupta family and their related associates, including Salim Essa.

It identified the following members as at 1 April 2016 with conflicts of interest:

* Baldwin Ngubane is a director of Gade Oil and Gas (Gade Oil). Essa was a previous director of this entity.
* Mark Pamensky is/was a director of the following entities: ORE, Shiva Uranium, Yellow Star Trading and BIT Information Technology.

“Public records confirm that Mr Pamensky has direct business interests in ORE and Shiva Uranium for which he received economic benefit,” the report said.

“By virtue of officio function and role in Eskom he would have or could have access to privilege or sensitive information regarding OCH (Optimum Coal Holdings) and various Eskom Contracts.”

This information, the report said, coupled with a personal economic interest would give Tegeta an unfair advantage over other interested buyers.

“It would be very important to understand the role of this individual in this transaction in light of a high degree of irregularities that appears to have occurred in Eskom.”

Devapushpum Viroshini Naidoo is the spouse of Moodley, who is the director of Albatime. Albatime contributed to the purchase of OCH.

Nazia Carrim is the spouse of Muhammed Sikander Noor Hussain, is a family member of Essa. Carrim has since resigned from the board of Eskom.

Romeo Khumalo resigned from the board of Eskom in April 2016. Khumalo and Essa were directors of Ujiri Technologies.

Marriam Cassim’s employment background states Sahara Computers, a 90% owned subsidiary of Sahara Holdings, as a previous employer. Cassim has since resigned from the Board of Eskom.

The following was declared by the Eskom board members in relation to the above mentioned conflicts identified:

  • Naidoo, in her declaration made on 19 February 2016, lists her husband as Moodley who is a part time advisor to the Minister of Mineral Resources and declares that this may be a conflict if she is in a forum at Eskom, which seeks to influence the governments mineral policy. Nadioo, lists herself as an employee of Albatime. This is as per her declaration made on 19 February 2016 and 31 May 2016.
  • Ngubane does not list himself as a director of Gade Oil in his declaration made on 31 May 2016.
  • Carrim did not declare her relationship with Essa in her declaration made on 31 May 2016.
  • Cassim does not list Sahara Computers has her previous employers.
  • Pamensky does declare all his directorships held in ORE, Yellow Star Trading and BIT Information Technology. He further states that he does not take part in any HR or procurement related activities.
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