Opinionista Johann Redelinghuys 6 April 2014

The dark side of the Eskom boardroom power struggle

Having chased away a CEO with a twenty-five year track record and at least some understanding of the business, the government’s heavy hand of interference has now put this critical national resource in the hands of a man with a highly suspect background and no credentials for the job.

The Eskom boardroom has once again become a theatre for the staging of an epic power play. Brian Dames leaves the main role, it is said, fed up with the stranglehold of government on decision-making, and the stand-in is Mr Collin Matjila, whose appointment as acting CEO is already being challenged by The National Union of Mineworkers (NUM) – the most powerful union at Eskom.

Matjila is accused of poor governance and a range of suspicious activities as the CEO of Kopano ke Matla, the investment arm of Cosatu. An independent forensic report by accounting firm SizweNtsalubaGobodo confirmed the findings of the Financial Services Board, which indicted that there had been a complete breakdown of governance under the leadership of Mr Matjila while he was in charge of Kopano. The R80-billion honey pot of Eskom is now the preserve of a man known to have defaulted on the trust of his Cosatu employers.

The trouble with the disappointingly frequent appointment of a CEO in an acting capacity in the various state-owned enterprises is not only to do with poor succession planning of the board. It is that through bungled selection and appointment processes acting CEOs inevitably end up getting the job by default.

At Eskom there is also now an acting Chief Financial Officer after the resignation of Mr Paul O’Flaherty. When questioned about these departures and the recruitment of any replacements Mr Zola Tsotsi, the chairman, said in December: “The process to replace Mr Dames is in hand and we expect that it will be concluded timeously.”

Even before this perilous situation developed, the functioning of Eskom was having some serious leadership challenges. We have become used to frequent warnings that we are heading to load shedding and the tribulations of wet coal or some similarly predictable challenge. The ironic situation of customers being implored not to buy the company’s product left consumers on a knife edge every time the alarm sounded. And that was in the good times, when there was a relatively stable leadership.

Eskom has now come a long way in its downward slide. There was a time even before the Bobby Godsell vs Jacob Maroga debacle, when the board had a number of notable international power utility experts as members. The board functioned adequately and provided a sound level of governance. The management team itself did not always get things right, but there was a measure of stability.

Things now seem to be in real disarray. Mr Dames leaves, having given notice of his departure in good time. He has not taken up any other position as yet, and that must indicate that he was not attracted away from Eskom, but simply wanted to get out of it. Mr Matjila’s sloppy appointment is a surprise even to the top management of Eskom, which seems to have been caught unawares. There is much speculation about the next step, and one wonders who would be brave enough to take the poisoned chalice.

The suggestion has been made that if a man with the stature of Mr Trevor Manuel could be appointed as the CEO, he would have the clout to stand up to government interference and not back down in awe of Malusi Gigaba, the minister in charge of state-owned enterprises. Attractive as such a possibility might be, and assuming that Manuel who, it is said, has bigger fish to fry in the international space, would accept such a challenge, it would still be in the hands of government. The question to be asked is, shouldn’t the stumbling Eskom finally admit defeat and be handed over to the private sector?

A listing on the JSE would put it on a different playing field. It would also attract a much more robust governance and a great deal more skilful operational leadership once the government was out of the picture. Listings on the JSE and, say, London, would raise much-needed cash and provide the funds needed for crucial investment in the further generation beyond Medupi and Kusile. This would not only benefit South Africa, but also our neighbours, where we exported our excess capacity before.

Since the days when John Maree was the chairman in the nineties, the possibility of breaking up the Eskom monolith and listing all or part of it has been talked about. Power utilities all over the world are now privatised. Margaret Thatcher in the UK was an early believer in privatisation. Now most countries have privately listed power enterprises or have developed effective public/private partnerships. Even in Africa, our two most dominant competitors for leadership on the African continent, Kenya and Nigeria, are doing it and getting it right. In Kenya there is a public/private partnership, and in Nigeria, ten new power stations are privately owned and operated.

Eskom, expert advisors say, could list an independent generation business or several generation businesses and separate the transmission and distribution functions into two further enterprises. That is if the government had any serious intention of Eskom working as an effective and profitable power generator and not as a government employment agency whose main concern is social distribution.

The dark side of what is going on in the Eskom boardroom now is that the business is not what we think it ought to be; a vital source of energy and power driving an economy that should be expanding energetically. It is a government pawn, and we the consumers are paying for their game. Because of the long lead times that are needed to establish and maintain a significant power distribution network, it is a matter of grave concern that not only our generation but also our future generations will be hostage to the two-bit players that are presently making far-reaching decisions and running the show.

South Africa is blessed with vast natural resources and an expanding upwardly mobile population whose well-being and economic advancement depend very much on the availability of the power that Eskom provides. Is it not exasperating that a function so crucial to our future should be in hands so poorly qualified for the task and of such questionable character? DM

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