Business, Politics, South Africa

Eskom: Molefe returns to the helm of the parastatal

By Jillian Green & Marianne Merten 12 May 2017

Come Monday Brian Molefe will return to his position as CEO of Eskom following a dispute over his pension payout. This means that Molefe will no longer be a Member of Parliament. And while the Speaker of the National Assembly, Baleka Mbete wished him well, the ANC condemned the board of Eskom's decision to reinstate him saying it was “tone deaf to (the) public's absolute exasperation and anger at what seems to be government's lacklustre and lackadaisical approach to dealing decisively with corruption”. By JILLIAN GREEN AND MARIANNE MERTEN.

Brian Molefe’s return to head Eskom has the stamp of approval from Public Enterprises Minister Lynne Brown because it “ultimately presents a better value proposition to the South African fiscus”. Last month it emerged Molefe was due R30-million in pension monies following his 18-month stint as Eskom Chief Executive, which ended when he announced he would “step down” in the wake of damning findings in the public protector’s State of Capture report. “There is no other solution than paying Mr Molefe R30-million or going to court,” Brown told journalists on Friday amid widespread public outrage.

In a surprise development on Friday morning, it was revealed that Brian Molefe would be resuming his duties as chief executive officer from Monday following a dispute over his pension payout.

“All this is happening on the basis of what the minister requested. The minister had already made her intentions very clear that she wasn’t happy with this payout,” Eskom’s Khulani Qoma told Talk Radio 702.

Brown last month objected to Eskom’s payment of a R30-million pension payout to Molefe.

Molefe resigned as CEO last year after former Public Protector, Thuli Madonsela released her State of Capture report which revealed that he had a close relationship with members of the Gupta family or executives in Gupta-linked companies.

Revelations included that Molefe had been taking and making calls to Gupta family members and Gupta company executives. Included among the calls were 58 to Ajay Gupta, one of the three Gupta brothers who are friends with President Jacob Zuma. In addition, cellphone records also placed him in the  Saxonwold area 19 times. The Gupta’s live in Saxonwold. The family is also linked to Tegeta, a company that at the time of Madonsela’s investigation was in the process of negotiating the purchase of Optimum Coal Holdings and its Optimum Coal Mine, which supplies Eskom with coal.

Madonsela recommended a judicial commission of inquiry into her findings. Molefe announced his resignation saying he was doing so in the interest of “good corporate governance”.

Following his resignation, the board recommended that he be paid a pension payout of R30-million but Brown said: “I found the argument presented by the board on why the pension arrangement was conceived lacking in legal rationale and it cannot be substantiated as a performance reward because Mr Molefe has already been granted a performance bonus for his contribution to the turnaround of Eskom.”

Speaking to Business Report, Eskom chairperson Ben Ngubane said on Friday that the board was acting in accordance with the minister’s instructions. The parties attempted to find a mutually acceptable pension proposal, but were unable to reach such an arrangement. “The board, therefore, rescinded Molefe’s early retirement application,” Ngubane said. He added that with Brown’s consent, the utility had reinstated Molefe’s contract of employment, which ends in September 2020. “The board was required to rescind its decision having regard to the minister’s concerns,” he said.

Despite the Eskom Board informing Brown that the decision was valid and legal, court challenges were in the making. Aside from opposition party leaders, who hosted a media conference on Monday’s Constitutional Court hearing on a secret ballot in motions of no confidence, Outa in a letter to Brown said it would head to court unless she explained this decision as Molefe was not entitled to early retirement.

But Brown indicated that in terms of the 2008 to 2015 Memorandum on Incorporation (MOI) between Eskom and the Public Enterprises Ministry, the state-owned entity had been entitled to determine its own settlements. This had changed in the renegotiated MOI she had signed off on. However, Molefe was appointed in 2015 on a five-year contract.

As part of the agreement to return to Eskom to serve out the remainder of his term, Molefe would return monies already paid to him and renegotiate the terms of his contract.

While Brown said she would welcome any investigations to clear the clouds over state-owned entities, right now Molefe was innocent. “Until the president exercises his prerogative and calls a commission of inquiry (as the State of Capture report recommends) Mr Molefe is not guilty of anything,” Brown said. “When Mr Molefe is found guilty, or not, then we can take a decision on his return”.

Brown described the public outcry as an “ethical” one related to the State of Capture report. However, the matter also highlighted the need to urgently reform state-owned entities. Presently there was nothing the minister could do. “The (Eskom) board has assured me it’s a legal process. I have accepted Mr Molefe’s return (to Eskom). It’s a better proposition than paying Mr Molefe R30-million,” Brown said.

The ANC, which was instrumental in securing Molefe a position as an MP, has condemned his re-instatement as CEO of the parastatal.

“Molefe left Eskom under a cloud following the release of the Public Protector’s report into State Capture late last year. The report, while still under review, made observations against Mr Molefe which, at the time, he had deemed serious and significant enough to warrant his resignation. Amongst others, he cited the interests of the company, good corporate governance and the interest of the public, as underlying his departure from the utility. None of the observations against Mr Molefe have been conclusively set aside and Mr Molefe’s own commitment to fully clear his name is still pending.

“The decision to reinstate without these matters being resolved is tone deaf to the South African public’s absolute exasperation and anger at what seems to be government’s lacklustre and lackadaisical approach to dealing decisively with corruption – perceived or real.”

The ANC said it would be raising the matter with Brown.

Despite the ANC’s strongly worded statement, the party had gone out of its way to get Molefe into Parliament following his resignation. The controversy over which branch he belonged to, in what province, and his nomination to the national legislature was effectively a sideshow. Because MPs are sent to Parliament in accordance with a party’s list of candidates filed with the Electoral Commission of South Africa (IEC), the ANC had to do much back room work to amend this list to include Molefe as a public representative candidate in order to be able to send him to Parliament.

His appointment to Parliament came amid much speculation that he would head the finance portfolio when President Jacob Zuma reshuffled his cabinet. As it turned out, the midnight Cabinet reshuffle led to a different result in the finance ministry, following reported opposition to Molefe by, among others, the ANC’s tripartite alliance partners.

Molefe has had an extremely chequered and compromised past as Eskom CEO, said IFP spokesperson on Public Enterprises, Narend Singh adding that Brown had even called for a commission of inquiry into the parastatal’s dubious relations with the Guptas and their coal-mining operation Tegeta, which had not complied with any of Eskom’s supply chain management principles.

“That the Eskom Board and the minister could even have considered his reinstatement as CEO as a solution when not finding an agreed-upon pension amount is preposterous. The discussion should not be centred around remuneration but rather about his accountability to the parastatal for all of the suspect transactions that have transpired under his watch.”

The DA described Molefe’s return to the state-owned enterprise as a “monumental disaster”.

“The return of Molefe to Eskom will see the Gupta hand return to the power utility, and most likely to the forthcoming nuclear procurement deal. This is something which South Africa cannot accept,” DA Shadow Minister of Public Enterprise, Natasha Mazzone said.

She said the party would write to the Chair of Chairs, Cederic Frolick, to ask that the Public Enterprises committee launch a full-scale parliamentary inquiry into Eskom.

The impact of these changes at Eskom remains to be seen. Eskom is one of the state-owned entities (SOEs) that regularly raises finances on the international markets. And the power utility also accounts for the lion’s share of government guarantees – R350-billion out of a total R400-billion. Outgoing Finance Director-General Lungisa Fuzile this week told the parliamentary finance committee that Eskom had drawn about two-thirds of this as its new coal power station build is running behind schedule.

Eskom is involved in preparations for a possible nuclear build programme. During Tuesday’s ministerial question time, Energy Minister Mmamoloko Kubayi said the power utility’s request for information on nuclear from interested parties would be finalised this week. On Eskom’s controversial coal deals Minister Brown sidestepped a question on Tegeta, saying this contract was not covered in the DA’s question – four others were – even if an auditor’s report into the multi-billion deal had raised some concerns. The coal deal with Tegeta, a company linked to the Guptas, just hours earlier was under scrutiny at the parliamentary watchdog on spending, the Standing Committee on Public Accounts (Scopa), where MPs heard the contract lacked the required declarations of interests (to avoid conflicts of interest) and did not pass all procurement checks and balances. Scopa is calling Eskom to appear before it. DM



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