Herbst: Eskom – a snouting chronology. The key players.

If one searched Ed Herbst in the English dictionary, it’d likely be defined as the walking, talking encyclopedia of South African history. And while the now retired SABC journalist has access to streams of data online, it’s how he strings the pieces together with such detail that makes it novelesque. In his latest instalment, Herbst was prompted to pull together the threads that make up Eskom’s snouting timeline. His intrigue was sparked by three key events – Jimmy Manyi calling on the Public Protector to investigate Pravin Gordhan (and former finance ministers) for their alleged role in Eskom debacle; decision by two institutions to cut loans to parastatals; and the fact that the UK might pull plug on Hinkley nuclear plant. Another must read. – Stuart Lowman

By Ed Herbst*

Eskom paid R24.4-million to its three senior executives last year, and rewarded its top brass with R62.8-million in performance bonuses since load-shedding first shut down South Africa’s gold mines in January 2008. – Eskom rewards bosses for fine job Mail & Guardian 30/1/2015

Former government spin doctor Mzwanele “Jimmy” Manyi has asked the Public Protector to investigate whether Trevor Manuel, Pravin Gordhan and Nhlanhla Nene had been derelict in their duty as finance ministers over what he claimed was billions of rands lost to Eskom. – Manyi calls on Public Protector to probe Manuel, Gordhan and Nene City Press 1/9/2016

Veteran journalist Ed Herbst
Veteran journalist Ed Herbst

It was, even by ANC standards, a truly astonishing somersault. On 27 August Mzwanele “Jimmy” Manyi, the founder of the Decolonisation Foundation and advocate of Coloured migration from the Western Cape, laid charges against Public Protector Thuli Madonsela, accusing her of bias.

A few days later he approached this allegedly biased woman and asked her to investigate Trevor Manuel, Pravin Gordhan and Nhlanhla Nene – all of whom (by startling coincidence) are known to be concerned about the machinations of the Guptas. He asked her to investigate the multibillion-rand tender issued for the construction of two power stations, Medupi at Lephalale and Kusile at Witbank in 2007. Both projects are way over budget and about four years beyond the initial deadline date.

He could just as well have mentioned the Ingula Pump Storage project near Harrismith which was revealed in a Carte Blanche exposé a fortnight ago to also be four years late – but only R27 billion over budget.

A billion here and a billion there and, pretty soon, you are talking serious money but, for once, the ANC cannot claim it was worse under apartheid.

Back then, in those bad old days, the stoere boere, with their grey ostrich skin shoes, built power stations like Taaibos, Highveld, Komati, Camden, Hendrina, Grootvlei and Kriel without a whiff of scandal, without labour unrest, on time and on budget and we had more cheap electricity than we could use.

Fast forward to 2016 and executives from Futuregrowth Asset Management and Denmark’s Jyske Bank are scuttling for the exit while holding their noses.

Was anyone surprised besides Lynne Brown who seems not have noticed the orgy of snouting at Eskom for more than decade and, it seems, does not watch Carte Blanche?

‘Good story to tell’

The ANC has been working assiduously towards this moment for nigh on 20 years and, they’ll have you know, it’s a ‘good story to tell.’ What we are seeing though is parastatal plundering by a deeply entrenched patronage machine which has a work ethic that would put the Duracell Bunny to shame.

I call it snouting but R W Johnson, more refined than me, calls it peculating.

There’s a telling passage pointing towards this moment in the chapter ‘Feeding at the trough’ in R W’s stellar 2009 book, South Africa’s brave new world – The beloved country since the end of apartheid:

Modise was transparently intent on using his tenure at the Ministry as a springboard to becoming seriously rich, showing almost no interest in doing his ministerial job. He would not even read departmental or cabinet papers, left the job of integrating the old South African Defence Force and MK into the new South African National Defence Force to his deputy, Ronnie Kasrils and concentrated entirely on the Arms Deal.

So, while we are indebted to Judge Willie Seriti for the assurance that Modise was purer that a triple-shot of Tanqueray’s finest, let us, for the sake of archival memory, take a trip down memory lane. Let us recall and hallow some of the heroes of the oh-so-typical ANC snouting saga at Eskom, a saga which, with the help of so many selfless deployed cadres, has brought us to the brink of junk status.

If there was one single, defining moment which testified to the enormity of the ANC’s determination to get rid of white skills it was the destruction of a turbine at Eskom’s Duhva Power Station near Witbank in Mpumalanga on 9 February 2011. A City Press report said the electricity loss as a result of gross negligence was 600 MW which was sufficient to power a city the size of Bloemfontein at peak hours.

The damage was extensive – the cost of replacing the turbine was estimated at R3 billion and it was acknowledged that it would be out of action for 18 months – Eskom has never commented on the final outcome.

More magic available at www.zapiro.com.
More magic available at www.zapiro.com.

Dramatis personae

In addition to the ANC which ignored increasingly desperate pleas over years about the looming electricity catastrophe, four key figures need to be noted. The first is former Public Enterprises Minister, Alec Erwin who consistently talked up the Pebble Bed Modular Reactor project which was closed with no return from an R8 billion investment.

Erwin, who was unequivocally called liar by the ANC’s Ben Turok in an interview with Chris Barron of the Sunday Times on 3 March 2014, made his notorious and false claim the day before the March 2006 municipal elections that “sabotage” at the Koeberg power station was the cause of the power outage at the time. Tony Leon sent a press release to SAPA and the SABC in which he said: that … “there might be an element of sabotage involved but incompetence was clearly to blame.” As he was later to point out in his book, “On the Contrary” (Jonathan Ball, 2008): “Yet the only words of mine which the SABC-TV broadcast were: ‘There might be an element of sabotage involved.’” (P467). (And who were the SABC news executives at the time of this typical and characteristic news manipulation? Why, those exemplary “struggle journalists” and ANC acolytes, Snuki Zikalala and Jimi Matthews!)

Erwin has always defended the massive salaries, bonuses, housing loans below the interest rate and share incentives paid by Eskom to the ANC’s deployed cadres there.

Thulani Gcabashe was CEO at Eskom from 2002 to 2007 and it was on his watch that colossal pay packets became the order of the day despite often enormous losses. After Gcabashe took over, the annual pay packets doubled from R4 million to R8million in little more than a decade.

A 2008 article by James Myburgh of Politicsweb provided a portent to the current situation when he highlighted two decisions taken by Gcabashe:

The first of these was to sell off most of Eskom’s coal stockpiles.”

The second decision was to not extend the existing coal procurement regime to meet the expected increase in demand over the following 15 years.”

But, I was told, there was a third contributory factor: Gcabashe allegedly cut back on maintenance to make his bottom line look good and justify the bonuses. As a result Eskom engineers started to cannibalise mothballed power stations such as Arnot, Camden and Grootvlei for spares and, when the time came to re-commission them, there was a major problem and huge delays. He continued to be remunerated by Eskom after his term as CEO ended.

In February 2006 the DA called for Gcabashe to be dismissed after power cuts hit the Western Cape. DA leader Helen Zille said that Gcabashe’s pay package for the 15 months ended in March 2005 amounted to R13 million.

“It is time that the bonuses stopped and someone took responsibility for this mess,” she said.

The third person responsible in huge measure for our current crisis is former Eskom CEO Jacob Maroga who succeeded Thulani Gcabashe on 1 May 2007. Six weeks into his tenure, on 19 July 2007, US consultant Susan Olsen gave Maroga a comprehensive analysis of the crisis ESKOM and the country faced if it did not sort out its coal supply problems.

Maroga’s response was to pass it on to his highly paid subordinates without comment. They, in turn, effectively fired Olsen because her report highlighted their gross incompetence and negligence.

Six months later the electricity shortages she predicted happened.

An Eskom sign stands outside the headquarters for Eskom Holdings SOC Ltd., South Africa’s state-owned electricity utility at Megawatt Park in Sandton, near Johannesburg, South Africa, on Wednesday, Nov. 11, 2015. A plan to reform state-owned power company Eskom Holdings SOC Ltd. and bring South Africa and its economy out of the dark is starting to show results, according to Chief Executive Officer Brian Molefe. Photographer: Waldo Swiegers/Bloomberg

An Eskom sign stands outside the headquarters for Eskom Holdings SOC Ltd., at Megawatt Park in Sandton, near Johannesburg. Photographer: Waldo Swiegers/Bloomberg

Carte Blanche exposé

Maroga was obsessed with “transforming” Eskom – as defined by the glorious National Democratic Revolution and its “Verwoerdian quotas”. To restrict the number of people from local minority ethnic groups being employed, the parastatal fraudulently recruited black Americans – something which had a devastating impact on their lives – as a subsequent Carte Blanche exposé revealed.

Inevitably the whistle blowers were victimised.

Maroga who, when he was dismissed, bizarrely claimed but did not get an R85m severance package,(which included an annual salary of R1 million for his chauffer) knows who to blame for the Eskom crisis and, in this regard, he differs from Jimmy Manyi who says it’s all the fault of previous and current finance ministers. Maroga avers that the Eskom snouting can be blamed on a conspiracy by whites.

The fourth person is the ANC’s Valli Moosa. In February 2009 a Mail & Guardian exposé of the nefarious role played by Moosa in setting up the Chancellor House/Hitachi Power Africa deal was vindicated by the then Public Protector, Laurence Mushwana. A year earlier the newspaper had revealed that Moosa, while chairman of Eskom “…presided over the parastatal, giving contracts worth billions to ANC funding company Chancellor House – while also serving on the ANC’s fundraising committee”. Mushwana found that, in not recusing himself, Moosa was utterly conflicted.

The cynically corrupt way in the Chancellor House/Hitachi Power Africa deal was set up with Valli Moosa as the facilitator has been well described by advocate Paul Hoffman.

A letter by Sunday Times reader Mike Edwards published on 9 March 2014 succinctly sums up just how dubious this deal was.

“Chancellor House bought 25% of Hitachi Power Africa for R6-million in 2009. Did the ANC actually pay the R6-million?

“Hitachi Power Africa was formed only in 2009 but was “valued” at R24-million even though it had no track record and no projects. It was a serious risk for Chancellor House to put R6-million in a new company with no work, or was it? Luckily, Hitachi won two major contracts from Eskom, making the ANC investment safe;

“In 2010, Hitachi Power Africa advised that Chancellor House stood to be paid up to R50-million in dividends over the eight years of Medupi construction. I find it extraordinary that dividends could have been paid during construction when, for at least the first six years, there was no idea whether the project would generate its targeted profit or even achieve one, and no mention of whether the ANC would need to pay 25% of any loss on the project;

“Things are not looking good for the ANC — ah, luckily the ANC comes to an agreement with Hitachi that it will buy back Chancellor House’s 25%. But wait, Hitachi Power Africa is now valued at R200-million, notwithstanding that the projects are in dire straits with possible huge financial losses and litigation. So Chancellor House pockets R50-million against an investment of R6-million only five years ago — not even Allan Gray is that good. Amazing, a company whose value goes up from R24-million to R200million on the back of project disasters.”

Medupi power station

Substantial profit

You can rest assured that when the news broke on 2 March 2014 that the ANC had sold its Hitachi stake back to the parent company at a substantial profit, the Luthuli House mandarins were doing a frenetic high-five toyi toyi, singing the praises of Valli Moosa and shouting “Give that man a Jack Daniels!”

Unheeded in the celebration is the fact that when the first sod for the Medupi project was turned in August 2007, the estimated cost was R69 billion and the projected deadline for bringing all six units on stream was 2013 – it’s now R105 billion and counting and, if we are extremely lucky, the project will be completed in 2019.

The trades union, many aligned to the ANC, played a major role in the cost overruns by holding the project constructors to ransom with pervasive labour unrest including unprotected strikes. Photographs define eras and the photograph which defined this era for me was the one of free lunch packs thrown to the ground by striking workers – all this while many millions of their fellow South Africans, promised “a better life for all” by the ANC in 1994, go hungry. Court interdicts were simply ignored. Property was vandalised and non-striking employees were intimidated. A year ago, 20 buses were torched.

Party on…

The extraordinary levels of mismanagement by the deployed cadres at ANC – controlled parastatals like Eskom was revealed in a Sunday Times article of 9 March 2014, “Blackout spells life or death for some”. According to the article, Eskom was offered 6,000 MW of independently produced power which would have been available to feed into the national energy grid by 2016. It approved only 1,400 MW, choosing instead to run its four emergency peaking stations on diesel. At the Atlantis peaking station alone, the estimated cost of the diesel used was a staggering R4.7 million an hour…

In January 2013 Beeld reported that Eskom’s total salaries for about 45,600 employees at that time would be about R37bn.

But wait, there’s more!

How SA's top cartoonist sees the revolving door of Eskom executives. More at zapiro.com
How SA’s top cartoonist sees the revolving door of Eskom executives. More at zapiro.com

The one thing that the ANC-controlled parastatals know how to do well – besides earning above-average salaries and awarding themselves above-average bonuses – is to party. In 2012 alone, Eskom splurged R36 million on entertainment for its staff and their families at a time when the average staff member was earning R633,000 a year and should, therefore, have been able to pay for their own parties.

As DA leader Helen Zille noted in a press release after the 2014 blackouts, the bonuses awarded by Eskom to its top executives were outrageous given the parastatal’s pathetic performance up till then.

“Eskom executives awarded themselves R17 million in performance bonuses in 2013 and R14 million in 2012 – a total of R31 million in two years. We believe these bonuses are entirely inappropriate and undeserved. As the last week has demonstrated beyond doubt, Eskom has failed in its basic mandate.”

“We have already called on Eskom executives to repay these bonuses, but we also believe that the Public Service Commission should investigate how such bonuses were ever awarded.”

“The DA has also launched a public petition to put pressure on Eskom executives to repay the R31 million bonuses. In just two days this petition already has 6,794 signatures.”

One of the factors which probably caused the executives from Futuregrowth Asset Management and Denmark’s Jyske Bank to cut and run was the Carte Blanche exposé a few weeks back revealing the truly nauseating amounts being given to, among others, Philani Mavundla, the man who once offered to pay President Jacob Zuma’ s Nkandla debt.

Party on – Lynne Brown won’t notice and Alec Erwin would have us believe it’s all above aboard and proudly brought to you by the ANC.

Unfortunately the same can’t be said of Standard & Poor, Fitch and Moody’s.

In closing: If you think the delays, cost overruns and the wanton snouting at the Medupi, Kusile and Ingula Pump Storage projects were and are appalling then I can only say that you ain’t seen nothing yet.

Britain’s Hinkley Point C nuclear power station project now seems likely to join more than 180 similar abandoned nuclear projects in the rest of the world. An executive of the French construction company, EDF, told Skynews he doubts it will ever be completed.

Undeterred, the ANC will press on with the Rosatom project – there is money to be made.

And, if the project goes ahead and then implodes amidst allegations of manic, multi-billion rand snouting, it goes without saying that it will all be the fault of Trevor Manuel, Pravin Gordhan and Nhlanhla Nene – ask Jimmy Manyi, he’ll tell you.

  • Ed Herbst is a pensioner and former reporter who writes in his own capacity.
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