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Explosive new accusations dog Molefe's Eskom return

Publish date: 18 May 2017
Issue Number: 116
Diary: Legalbrief Forensic
Category: Governance

The fallout from Brian Molefe’s move back to Eskom continues, with explosive new details emerging from an investigation by the amaBhungane Centre for Investigative Journalism into the Gupta family allegedly using political influence to bag the prized Optimum Coal mine in late 2015, writes Legalbrief. He’s only been back on the job for two days, but, says a Bloomberg report, the newly reinstated head of SA’s power utility has been accused of attempting to influence a former minister, reversed plans to close power plants that his predecessor claimed weren’t needed, and set the country’s ruling party against its president. ‘Politically and ethically the reinstatement stinks to high heaven,’ Aubrey Matshiqi, a political analyst, said. ‘It seems to me that power has become so dispersed – that some power lies in the state, some power lies in the government, some power lies in powerful economic actors, some power lies in powerful families.’ The report says Molefe’s reinstatement has exposed widening rifts within the ANC and between some party leaders and Zuma’s government. It’s revived scrutiny of the influence wielded by the Guptas, who are in business with the President’s son, Duduzane, and means investors must digest yet another surprise appointment, less than two months after Zuma replaced Finance Minister Pravin Gordhan in a sweeping late-night cabinet overhaul.

Full Bloomberg report

Former Mineral Resources Minister Ngoako Ramatlhodi revealed  Eskom chair Ben Ngubane and Molefe had allegedly pressured him to terminate Optimum owners Glencore’s mining licences in the run-up to the sale. MSN reports that when asked why he was revealing the information now, Ramatlhodi said in an eNCA interview that it was his duty to be truthful. The former Minister told amaBhungane that Molefe and Ngubane, tried to influence his work. At the time, the company's Optimum Coal Mine was struggling. It placed the mine in business rescue in August, after Molefe refused to renegotiate a long-term supply contract. Molefe also reinstated a disputed penalty of over R2bn that the mine supposedly owed, for supplying substandard coal. Ramatlhodi says Molefe and Ngubane insisted he suspend Glencore's mining licences but refused. He was later fired by President Jacob Zuma.

Full MSN report


The President’s son Duduzane tried to convince Ramatlhodi to meet with a member of the Gupta family‚ a request he refused‚ Ramatlhodi said. The Times reports that speaking to eNCA‚ Ramatlhodi detailed how Duduzane had asked him to meet Ajay Gupta‚ one of his business partners. ‘One thing‚ since I became Minister of Mineral Resources‚ the Guptas tried to have meetings with me. I refused those meetings. I simply told them to bug off‚’ said Ramatlhodi‚ who was minerals minister from 26 May 2014 to 22 September 2015. When asked who was the messenger who tried to arrange the meetings‚ Ramatlhodi said: ‘Duduzane‚ the President’s son.’ Ramatlhodi said Duduzane first complained that he had heard rumours that Ramatlhodi was accusing him of being involved in crime. Ramatlhodi said he had informed Zuma of the meeting. ‘I went back to the President and said I have had this discussion and that I refused to meet with this guy.’ Ramatlhodi said there was no further request for a meeting with the Gupta family.

Full report in The Times

Eskom board spokesperson Khulani Qoma has vehemently rejected Ramatlhodi’s allegations, write Sam Sole and Susan Comrie in the amaBhungane report. Qoma is quoted as saying: ‘It makes absolutely no sense that a mere chairman and group chief executive can exert “pressure” on a sitting Minister in an effort to subordinate him to their will. This is a desperate allegation, devoid of logic, and all fair-minded citizens will find it impossible to believe it. In the desperation to drive these outlandish allegations, the president's name will always be used. Did amaBhungane bother to find out why he waited so long before he went public with his allegations or are you interested in the sensational nature of the allegations made?’ However, the reporters note, Ramatlhodi’s allegations add to a growing body of evidence suggesting that the Guptas’ R2bn buyout of Optimum should rank among SA’s most audacious business hijackings. The say that amabhungane has pieced together the claims of how the family used its network of corporate and political pawns to strong-arm Glencore, the world’s toughest commodity trader, into a forced sale – and then syphon off millions in state-owned company contracts to pay the bill. They say the story of the Optimum ‘heist’ goes to the heart of interlocking legal battles that have started to peel back the truth of claims of a grand Gupta conspiracy. It also sets out the case that Molefe, Eskom’s peek-a-boo CEO, must answer.

Full AmaBhungane report

Ngubane labelled the allegations ‘preposterous’. According to an IoL report, Ngubane explained that he only became aware of the allegations after his office told him about Ramatlhodi's interview with 702. The report says following the damning revelation, political parties have lashed out at Ramatlhodi and called for a full-scale investigation into the former minister's claims. The Pan Africanist Congress said Ramatlhodi’s allegations were ‘disappointing’ and slammed the former minister for failing to speak out during his tenure as minister. The DA, meanwhile, called for a parliamentary inquiry into Eskom without delay.

Full IoL report

Ngubane said in a report in The Times that he and Molefe had a number of complex issues to navigate through at the time. ‘It was the same at that time‚ when we were just starting to come out of load shedding‚ there was this bombshell from Optimum which said they had to double or triple their price per tonne because their exports had dropped internationally‚ and so they needed to make it up here. We said we can’t. Our auditors will see that this (is) irresponsible and irregular expenditure.’

Full report in The Times

The alleged threat to suspend Glencore’s mining licences, which would have forced the closure of 14 coal mines and put 35 000 jobs at risk, risks reviving concerns among international mining investors that South Africa is becoming too unstable politically, says a Financial Times report. It says the Guptas have been at the heart of the factional strife within the ruling ANC over the scandal-hit presidency.

Full Financial Times report

Natasha Mazzone, the DA’s shadow Minister of Public Enterprises says: ‘The damning allegations are astounding and deserve a full-scale investigation as part of the parliamentary inquiry into Eskom which the DA has requested. The DA has already written to Parliament's chair of chairs, Cederic Frolick, to ask that Parliament's Public Enterprises committee launch a full-scale parliamentary inquiry into Eskom, without delay... That Brian Molefe was allegedly prepared to put the jobs and livelihoods of approximately 35 000 Glencore employees at risk, to help the Gupta's essentially hijack Glencore's mines, is simply appalling. This must not be allowed to stand.’

Press release

‘These latest revelations demonstrate dramatically how deep the rot of corruption has seeped into South African society,’ the SA Federation of Trade Unions (Saftu), led by former Cosatu secretary-general Zwelinzima Vavi, said in a News24 report. ‘It shows the extent to which President Zuma, other Ministers, officials in state-owned enterprises and their cronies in the Gupta family have indulged in an orgy of looting of public resources and self-enrichment through the manipulation of tenders in both the state and state-owned enterprises,’ Saftu said. Saftu demanded the removal of the Eskom board and the Cabinet, and for Zuma to withdraw his court challenge to former Public Protector Thuli Madonsela’s State of Capture report. Zuma should instead implement the report’s central recommendation, which was to set up an independent commission to investigate and report on alleged state capture.

Full News24 report

Political analysts say that Ramatlhodi’s allegations may make it difficult for Zuma to refuse an inquiry into the State of the Capture report. Political analyst Somadoda Fikeni says in an Eyewitness News report that Ramatlhodi’s claims are perhaps the most serious allegations that have emerged about a relationship between Molefe and the Guptas. ‘That is going to be an untenable situation for the President to say an inquiry, which was recommended by the Public Protector, should not take place.’ Political commentator Sipho Seepe says this may also be a situation where a disgruntled former Minister is coming forward. ‘People who are now beginning to throw mud or beginning to expose some issues that they were unhappy with, but these are people who do so after they’ve left office.’

Full Eyewitness News report

Eskom is questioning why Ramatlhodi has come forward with information about the deal now – almost two years later, according to an Eyewitness News report. Eskom board spokesperson Khulani Qoma says it's also unclear why the former Minister would raise this issue now. Eskom says it wants to deal with the issues of state capture in a process that is credible and insists it will deal with the consequences if it emerges that the state utility has been corrupt in any way.

Full Eyewitness News report

In a related issue, the ANC’s top leadership has referred Molefe’s return to Eskom to government to resolve. News24 reports that the party has confirmed that its top six met with Public Enterprises Minister Lynne Brown to discuss the matter that had heightened tensions within the party. ANC spokesperson Zizi Kodwa said the party’s leadership had ‘registered its discomfort’ over Molefe’s return. It is understood that some of the top six wanted Brown to reverse the decision, but Kodwa would only say that they had resolved that government must ‘deal’ with it. The report says Brown was summoned to Luthuli House after she announced that she had approved the board’s decision for Molefe to return to the power utility as chief. This move has been seen as a defiance of the ANC. Brown had earlier reversed the board’s decision to give Molefe a R30m pay-out.

Full News24 report

The Huffington Post reports that the party has gone public on its opposition to Molefe's reappointment. ‘The ANC condemns the unfortunate and reckless decision taken by the Board of Directors of Eskom to reinstate Mr Brian Molefe as CEO of the energy utility,’ said the governing party in an unusually strong-worded statement. Ngubane is quoted as saying that Molefe would be instrumental in unblocking coal contracts. But the report says, the ANC had a different view. ‘Mr 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. None of the observations against Mr Molefe, so significant at the time, have been conclusively set aside and Mr Molefe's own commitment to fully clear his name is still pending,' said the ANC.

Full report in The Huffington Post

The EFF, in its reaction, described Molefe’s reinstatement as an ‘illegal, corrupt move’, says a Polity report. ‘Molefe is a spoiled brat of the Guptas,’ the party said. ‘Only in a banana republic can a person resign from a state-owned enterprise as CEO based on strong allegations against them, then become a public representative, and when they are not appointed to cabinet, then return to his CEO job.’ The EFF said it was consulting its lawyers about the decision.

Full Polity report

The National Union of Mineworkers (NUM) described the reappointment as a 'joke'. The union is quoted in Polity as saying that Molefe was returning to Eskom 'under a cloud’. ‘This situation is contributing towards making Eskom one of the weakest organisations in terms of leadership. ‘The NUM would like Eskom to extend its new HR policy to its members and other employees, who can exercise their right to resign or take early pension voluntarily and later return to their previous position without loss of benefits.’

Full Polity report

The National Union of Metalworkers of SA (Numsa) has also noted that ordinary members would never get the same right to return after resigning.We view his reinstatement as an attempt by the power utility to 'dry clean' Molefe of the stench of corruption, which still lingers, following the damning allegations in the Public Protector's State of Capture report,’ said Irvin Jim, according to a News24 report. The union was also dismayed that Brown accepted his reinstatement and pointed out that a former CEO Brian Dames got a R22m pay-out for 20 years' work.

Full News24 report