Eskom suspends CEO, other top execs amid three-month inquiry

 

CREAMER MEDIA’S MINING WEEKLY

By: Terence Creamer 12th March 2015

Eskom chairperson Zola Tsotsi announced the shock suspension on Thursday of four senior executives, including CEO Tshediso Matona and FD Tsholofelo Molefe, following a board decision to institute a three-month inquiry into the state of the troubled business.

Executive for group capital Dan Marokane and acting group executive for commercial and technology Matshela Koko were also suspended.

Eskom nonexecutive director Zethembe Khoza would step in as acting CEO. He would be supported by acting FD Nonkululeko Veleti, acting executive for group capital Abram Masango and acting executive for commercial and technology Edwin Mabelane.

Tsotsi said the inquiry, which had the blessing of the shareholder, would be led by independent advisers, who would be appointed within a week – lawyer Nick Linnell had already been selected to coordinate the intervention and that board audit and risk committee would oversee the process.

Eskom indicated that the inquiry would look into the current state of the business and offer an independent view on the poor performance of the generation fleet, delays to capital projects, the high cost of primary energy and the utility’s cash-flow challenges.

“We have asked these [four] executives – in the interest of achieving a result that we believe can only be achieved through a very unfettered and transparent process – to step aside so that they can allow this process . . .to proceed. And even though we have invoked the word suspension, there is no suspicion of wrongdoing – so there are no charges,” Tsotsi outlined.

Public Enterprises Minister Lynne Brown immediately welcomed the board’s decision to launch “a comprehensive and holistic audit”.

FACT FINDING VS DEEP DIVE?

But while Tsotsi framed the probe as a “fact-finding” exercise, Brown argued that it should be “deeper than a mere fact-finding exercise and it should be a deep-dive into the company to tell us what is wrong and how it should be fixed”.

“As shareholder representative, I am concerned about the instability at power plants; the financial liquidity of the utility; the lack of credible information; the unreliable supply of electricity and its dire impact on our economy; progress with the build programme; overruns at Medupi and Kusile; delays of the investigation into incidents at Majuba and Duvha; and the issue of coal and diesel pricing,” she said in a statement, which indicated that the inquiry might be broadened beyond the four areas outlined in Eskom’s communiqué.

Her statement also stood in stark contrast to Tsotsi’s argument that “the [word] investigation is a misnomer”.

“This is a fact-finding inquiry,” Tsotsi said at a hastily convened media conference at Megawatt Park. “But if, in the process . . . we encounter things that are either improper or seem to suggest, or are alluding to, improper conduct, then obviously we have to attend to those things,” he added, while stressing that the inquiry was “not setting out with that objective in mind”.

He also indicated that he did not anticipate, given the limited duration of the inquiry, that it would be a “deep dive” into the specific areas of concerns with regards the performance of the coal-fired fleet. “But it will create a platform for us . . . to [possibly] doing an audit of all the generation units.”

But even Brown’s extended list dealt with well-known problems, for which diagnoses and remedies had been canvassed at various Eskom and non-Eskom forums, including the newly launched electricity war room. Brown had also never before contradicted either Eskom management’s analysis of the problems, nor management’s proposed remedies.

All of the problems also predated the appointment of all four suspended executives to their current roles.

In fact, Matona only took up the position of CEO on October 1, 2014, following a board-led and Cabinet-endorsed process to find a successor to Brian Dames. Of the three other suspended executives, only Molefe, who took over as FD from Paul O’Flaherty in January last year, had occupied her current position ahead of Matona’s appointment.

Despite the fact that the underperformance of the generation fleet would be probed, group executive for generation, Mongezi Ntsokolo, who was also only appointed to his current position after Matona’s October appointment, had not been suspended. His predecessor Thava Govender, who switched portfolios with Ntsokolo and is currently group executive for transmission and customer services, was also not suspended.

The suspension decision was made during a board meeting on Wednesday March 11, which was attended by the full complement of the new board.

The board itself was only appointed on December 10 last year and, besides Tsotsi, who was reappointed chairperson, it comprised: Chwayita Mabude, Norman Tinyiko Baloyi; Dr Pathmanathan Naidoo; Venete Klein; Nazia Carrim; Romeo Kumalo; Mark Pamensky; Zethembe Khoza; Dr Baldwin Ngubane; and Viroshini Naidoo.

Tsotsi indicated that it had been a long meeting, which had involved much “soul-searching”. The intention was to offer the board an independent view and to establish a “base line” for better decision-making.

“There is no sinister, hidden agenda on the part of the board. You need to appreciate that the board has just come on board and it needs to establish a benchmark base line of where the organisation is at, independently.”

MIXED REACTION

There was mixed reaction to the news, with one key Eskom trade union welcoming the move, another questioning it and a leading analyst warning that the news added “further negativity to the Eskom bond story and sovereign credit”.

Trade union Solidarity, which had 7 000 members working at the utility, welcomed the suspensions and expressed hope that the independent inquiry would pave the way for changes to Eskom’s “management style”, which its energy industry head Deon Reyneke identified as a key reason for the exodus of “highly skilled and experienced individuals”.

Reyneke said he hoped the inquiry would lead to Eskom appointing skilled and experienced persons instead of individuals with political connections. “The time has come for Eskom to be run like a business and not a state department.”

But another key Eskom union, the National Union of Mineworkers (NUM), said it was “surprised and shocked” by  the suspensions.

“It means that there is a collapse of governance. We would have expected the chairperson of the board to be fired. We did raise a concern about the reinstatement of this chairperson when the new board [had] been established.We reject the suspensions of the four executive because we were never consulted. We think that there is a bigger picture rather than to gun for these four executives,” NUM general-secretary Frans Baleni said in a statement.

“The timing is also bad because we had just made a call for Save Eskom Campaign doing things differently including the involvement of labour. Couldn’t there be a better approach to dealing with the concerns they are having. Nobody is saying somebody is corrupt or abused the resources. Government must also take responsibility rather than penalise certain individuals,” Baleni added.

Nomura’s Peter Attard Montalto also questioned the need for an inquiry and suggested the move did not indicate that the crisis at Eskom was being sorted out or dealt with. Instead, he argued that it was doing the “exact opposite”.

“[The inquiry] is an unnecessary distraction at a time when Eskom needs decisive, stable and strong leadership,” he wrote in a note, while also suggesting that the move might be motivated by unhappiness by Congress of South African Trade Unions-aligned unions with Matona’s leadership style.

“Overall, we still do not believe the government fully understands the crisis that is occurring on energy security – as evidenced by the delays in providing an equity injection and this announcement.”

The South African Communist Party (SACP), offered a different take, arguing that Eskom was a “national asset that now requires tough love”.

“While in the middle technical ranks there are many committed professionals doing excellent work, in the senior technical and especially managerial levels there have been many weaknesses and even complacency. There are many indications that Eskom has been treated as a milk-cow by private sector rent-seekers. The pricing and procurement of coal supplies to Eskom power-stations, and indications of serious manipulation of procurement of diesel for the open cycle turbines must be dealt with,” the SACP said.

Meanwhile, the National Union of Metalworkers of South Africa’s emerging political movement United Front called for a judicial enquiry into the management of the electricity utility, as well as for an urgent civil society conference on the electricity crisis.

“The United Front is not convinced that team that the chairperson of Eskom’s board of directors Zola Tsotsi announced will be able to get to the bottom of the problems at the State-owned electricity company. The Eskom audit and risk committee may be implicated in the mismanagement within Eskom. It is for this reason that the United Front is calling for an independent judicial commission of enquiry.”

Edited by: Creamer Media Reporter

Photo by Duane Daws
Eskom chairperson Zola Tsotsi

‘Set up inquiry into how Eskom is run’

IOL Business Report

February 12 2015 at 09:00am
By Marianne Merten

Cape Town – Eskom cannot be allowed to be privatised, not even partially, but the running of the power utility must come under scrutiny of a commission of inquiry, the United Front (UF) said on Wednesday.

Delivering its alternate state of the nation address on the eve of President Jacob Zuma’s speech on Thursday, the front’s Mazibuko Jara said such an inquiry must closely look at the contracts Eskom signed for its coal and the salary packages, including bonuses, paid to its bosses and board members.

“There is a need for an urgent conference of civil society to deal with the energy crisis,” said Jara, adding the drive would be towards a “socially-owned renewable energy sector” as current government policy on independent power producers did not remove the profit motive.

It recently emerged Eskom paid R24.4 million to its three top executives last year, less than eight months after the DA demanded Eskom executives repay the R31m they received in bonuses the year before.

In recent months Eskom repeatedly blamed the poor quality of coal as contributing to the the load-shedding, which it said would be reality for the next two years.

“Eskom’s long-delayed renewable energy strategies can deliver electricity much more quickly and cheaply than supposedly reliable coal,” Jara said. “As with coal, the ANC government’s commitment to fracking (hydraulic fracturing for shale gas in the Karoo) is cause for great concern. Stories of environmental devastation from fracking operations continue to emerge from around the world.”

Instead the UF was looking at proposals for “a socially-owned renewable energy sector” as proposed by groups like Earth Africa.

The UF is a coalition of leftist and activist groups and individuals brought together following metalworkers’ union Numsa’s 2013 special congress resolution to co-ordinate grassroots and workplace issues.

The UF yesterday delivered a scathing critique of the government’s failure to deliver on its undertakings to citizens.

Expecting little but “misdiagnosis and tokenistic solutions” from Zuma’s State of the Nation address despite what it called a deepening socio-economic and political crisis, the UF believed “an increasing number of people are recognising the South Africa of today is not the country we deserve and demand”.

Political Bureau

Photo: ongoing construction of Eskom’s new build coal-fired power station Medupi.

Numsa, UF urge state to make Eskom implement renewable power

BusinessDay

BY PAUL VECCHIATTO, 11 FEBRUARY 2015, 16:42

THE National Union of Metalworkers of SA (Numsa) and its ally, the United Front (UF), have called on the government to make Eskom urgently implement sustainable and renewable power generation.

Speaking at an alternative state of the nation address on Wednesday, UF interim national secretary Mazibuko Jara said: “The irony is that Eskom’s long-delayed renewable energy strategies can deliver electricity much more quickly and cheaply than supposedly reliable coal, whose generators gum up with filth and require longer maintenance downtime; whose coal dust becomes wet like soup during the more intense rains associated with climate change; and whose silos crack.”

Numsa was expelled from its parent organisation, the Congress of South African Trade Unions (Cosatu), in November following its decision not to support the ruling African National Congress (ANC), which is a close ally of Cosatu, in the May national elections.

The UF was formed, with Numsa as its major partner, in December with the aim of building a left-wing movement. The alliance aims to officially launch in June.

The alternative state of the nation address was among the first public analysis and policy documents delivered by the Numsa and UF that begin to articulate the new movement’s policy positions.

President Jacob Zuma is scheduled to deliver his state of the nation address on Thursday evening.

Mr Jara said what was clear to the UF was that during the past 20 years little had changed in the electricity industry aside from a paltry amount of electricity going to 50% of households previously denied connections by the apartheid government.

He claimed that capital-intensive multinational corporations and rich individuals were consuming too much electricity while poor people were consuming too little.

“The repeated claim by President Jacob Zuma and ANC leader Gwede Mantashe that the reason for load-shedding is the generosity of the ANC government in providing electricity connections to poor black people after apartheid ended defies logic,” Mr Jara said.

Numsa deputy general secretary Karl Cloete said that his union and the UF were opposed to the government’s policy of using independent power producers.

“Rather we want government to make Eskom implement these renewable power strategies,” he said.

The UF attacked the government’s commitment to shale gas hydraulic fracturing (fracking) saying that it was cause for “great concern” as stories of environmental devastation by fracking continue to emerge from around the world.

“The intense use of scarce water resources represents an environmental and social disaster. The enthusiasm for fracking in SA has more to do with possibilities for enrichment under the guise of black economic empowerment, once again at the expense of our natural environment and water resources, which are already under strain,” Mr Jara said.