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Who will take power at Eskom?

Nov 20 2016 06:00
Dewald van Rensburg

Johannesburg - Eskom’s next CEO is likely to be another outside appointment because the most obvious successor runs the risk of inviting more scandals.

The utility’s outspoken head of generation, Matshela Koko, has been flagged as a natural choice, which would see Eskom resume a tradition of internal promotion to the top.

He and outgoing CEO Brian Molefe have presented a common front in their increasingly vociferous arguments against Eskom’s obligation to buy renewable energy from private producers.

Molefe announced his resignation late last week after the release of former public protector Thuli Madonsela’s State of Capture report.

Molefe’s alleged interventions to favour the Gupta family’s coal business, along with his apparently close relationship to Ajay Gupta, left a cloud hanging over his head, despite the report making no definitive findings.

He formally steps down at the end of the year.

However, Eskom watcher and investigative editor at EE Publishers Chris Yelland says that Koko is unlikely to replace Molefe, except perhaps as an interim CEO.

“[Koko] heads generation, which is by far the biggest division. He would be a natural fit under normal circumstances,” said Yelland.

Promoting Koko would, however, be risky because he could face legal trouble on two fronts in the near future, said Yelland.

On the one hand, he might be implicated in wrongdoing in the coal contracts given to the Gupta family’s coal mining company, Tegeta, when the judicial inquiry gets off the ground.

On the other, he could soon face an adverse Constitutional Court ruling on Eskom’s awarding of a contract at the Koeberg nuclear power station to French vendor Areva.

Rival Westinghouse took that contract award to court and Eskom took it to the Constitutional Court.

If the highest court in the country found Eskom did wrong, the blame would fall squarely on Koko, said Yelland.

Eskom and its government shareholder representative, Public Enterprises Minister Lynne Brown, would probably want to avoid the risk of another CEO facing a public investigation, he said.

“It is unlikely that the CEO will be from the Eskom board or the executive committee.”

Thava Govender, currently head of transmission, is another candidate with the requisite experience who would earlier have been on track to the top.

He was head of generation before Koko, but “in effect got demoted” to a lessor position after having presided over a period of disastrous load shedding, said Yelland.

Molefe and Koko had encouraged a public narrative where they saved Eskom from ruin and South Africa from power shortages, said Yelland.

In this narrative, Govender was one of the villains of the piece, he said.

Brenda Martin, newly appointed CEO of the SA Wind Energy Association (Sawea), would not hazard a guess about who will lead Eskom.

Sawea is locked in a battle with the power monopoly about its antipathy towards connecting any more projects under the Renewable Energy Independent Power Producer Procurement (REIPPP) programme.

“You would like to think that the leadership does not have that massive an impact on long-term investment decisions, but we have seen that they are quite influential,” Martin told City Press.

Molefe and Koko, in particular, have forced the REIPPP to a halt by simply refusing to sign off on otherwise “shovel-ready” projects. They complained that the projects were too expensive and did not provide reliable base load energy.

Eskom has put on hold more than 30 power purchase agreements with renewable independent power producers, which in essence means it has intervened in the energy policy imposed on it by the government.

“I don’t think you want someone who will disregard ministerial determinations or a CEO that will flout the law and be afraid of energy diversification,” said Martin.

The way the REIPPP works is that preferred bidders are selected in windows. They then sign a 20-year power purchase agreement with Eskom.

Projects had been stalled by Eskom simply not signing off on quotations from the preferred bidders, said Martin.

Projects announced as preferred bidders in March and August 2014 are still not signed off, even though the entire process for earlier bidding rounds took only a year.

A lobby group representing Eskom’s major customers, the Energy Intensive Users’ Group, says it barely matters.

“It’s not even something we are concerned about. Our concern is with the energy coming out. Who drives Eskom is a small part of that,” said spokesperson
Shaun Nel.

“The issue is the energy plan going ahead and what that will do to pricing.”

TRADITION

Molefe had been the third Eskom CEO parachuted in from the outside. Up to the resignation of Brian Dames in 2014, Eskom CEOs tended to be longtime Eskom staffers who worked their way up the ladder.

Dames spent 26 years at Eskom and, like Koko today, was head of generation before becoming CEO in 2010.

Before Dames, Jacob Maroga served two and a half years as CEO following more than a decade elsewhere in the company.

Thulani Gcabashe, Eskom CEO from 2000 up to 2007, had likewise been an insider. So was Allen Morgan, CEO from 1994 to 2000 and Eskom’s first CEO after it got turned into a corporation.

From 2014 onwards, however, Eskom had a public enterprises director-general, Tshediso Matona, a Nersa chair, Collin Matjila, and a “seconded” Transnet CEO Molefe put in charge.

SECOND SCALP

Mark Pamensky this week became the second Eskom board member to resign in the wake of the State of Capture report.

The relatively little-known nonexecutive director had links to the Guptas through four different companies.

Although Pamensky had apparently not taken part in the meetings okaying deals with the Guptas, he was at the meeting where one key decision was taken.

READ: Gupta-linked Eskom board member named in probe resigns

This was on April 23 last year when the board decided to not sign off on a revised coal deal with Glencore, but instead sent it to Molefe, who had been “seconded” from Transnet less than a week before.

Molefe scrapped the deal, allegedly to enable the Guptas to swoop in and buy the Optimum mine, a decision that sits at the heart of Madonsela’s observations about Eskom.

Even if Pamensky were not on the board committee making subsequent decisions in favour of the Guptas, he “would have or could have access to privileged or sensitive information regarding [Optimum] and various Eskom contracts”, wrote Madonsela.

“Such information, coupled with a personal economic interest, would give Tegeta an unfair advantage over other interested buyers. It would be important to understand the role of this individual,” she said.

ALL GONE

Most of the Eskom board members who are accused of Gupta-related conflicts of interest in Madonsela’s report have left Eskom already.

All of them had joined the board at the same time, in December 2014.

. Nonexecutive director Nazia Carrim’s alleged conflict was that she is married to a family member of Salim Essa, the face of many Gupta family business ventures.

She left Eskom in July this year.

Eskom said her alleged conflict of interest was not material and that she had no obligation to report it because the indirect familial relationship
was not covered by Eskom’s policy on conflicting
interests.

. Nonexecutive director Devapushpum Naidoo resigned on the same day as Carrim.

Naidoo’s conflict arose from her marriage to Kubentheran Moodley – an adviser to Mineral Resources Minister Mosebenzi Zwane, who is separately accused of doing the Gupta family’s bidding.

More importantly, Moodley is the sole director of a company called Albatime, which co-funded the Guptas’ acquisition of the Optimum coal mine.

This means that an Eskom director’s husband is a co-investor in the mine that the Eskom board is alleged to have handed to the Guptas on a silver platter.

Naidoo left the Eskom board on July 1 this year.

. Romeo Khumalo, another nonexecutive director, had in 2013 joined a company called Uriji Technologies.

The ever-present Essa joined him there at the same time.

Khumalo quit the Eskom board in April this year.

. Mariam Cassim, another nonexecutive director of Eskom, had one of the more tenuous Gupta links – she had allegedly worked for one of their companies, Sahara Computers, in the past.

She also left the Eskom board in April this year.

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