Eskom board in free fall

Johannesburg - A second Eskom board member has quit the company, raising concerns that the electricity utility's entire top management structure has become dysfunctional and may crumble.

Allen Morgan, a non-executive director, tendered his resignation following that of chairperson Bobby Godsell. Jacob Maroga, the CEO who is thought to have resigned last week, resumed his duties on Monday. Morgan works at Kumba Iron Ore, owned by Anglo American.

There are nine non-executive board members still serving on Eskom's board and a further two executive directors, of which Maroga is one.

Economists polled by Fin24.com said more resignations could, and should, follow.

"From a governance point of view, the board should resign as the shareholders'(government's) conduct seems to have severe implications for governance," said Econometrix economist Azar Jammine.

"But this will now also have severe implications for Eskom's ability to carry out its infrastructure-building programme," he said.

"You will only see the effects of the current spat in about 10 years' time," said Jammine. He added that the organisation will now have to deal with the current crisis instead of building infrastructure.

Lumkile Mondi, chief economist of the government-owned Industrial Development Corporation (IDC), said government's undermining of the Eskom board presented a serious challenge for remaining board members.

"Boards are given the authority to look after the interests of the company, not individuals," said Mondi. "The board at Eskom has been undermined by the shareholder in the interests of individuals," he said.

Bad news for foreign investment

Mondi said there should be a clear segregation of duties between the shareholder, boards and management. "The shareholder cannot simply interfere in the affairs of boards."

It was a challenge to see how the remaining board members would put up with interference from the government, particularly in the light of the fact that Eskom has to carry on with its build programme, Mondi said.

"The public has lost confidence in Eskom's ability to provide uninterrupted electricity to South Africa," he said. "Interests of the country are being challenged by the actions of the government as far as this is concerned."

Government's focus should be on creating sustainable power supply, he said.

"This will now place a challenge in attracting foreign direct investment into the country as the government is sending a negative message about stability."

- Fin24.com