Heads roll in Eskom clean-up

The clean-up at scandal-ridden Eskom – which reportedly needs R20bn to stay afloat – has seen the appointment of a new board and the resignation of two key executives, writes Legalbrief. The new era for the power utility started over the weekend when a new board was put in place by Deputy President Cyril Ramaphosa. The high-profile resignations of chief financial officer Anoj Singh and acting head of group capital Prish Govender this week came amid a parliamentary hearing into allegations of state capture at Eskom (see reports below). A Fin24 report notes the resignations follow businessman Jabu Mabuza's appointment as chair of a new Eskom board.

Ramaphosa at last effectively sidelined Public Enterprises Minister Lynne Brown by taking charge of an Eskom oversight of a team of Ministers, comprising Brown, Energy Minister David Mahlobo and Finance Minister Malusi Gigaba. A Sunday Times report says the radical changes are further evidence of a loss of confidence in Brown, who has been accused in some quarters of assisting in the capture of Eskom for the benefit of the Gupta family and their associates. Ramaphosa named Mabuza, now at Telkom, as the new chair of the struggling power utility, and appointed former Land Bank CEO and Absa Capital executive Phakamani Hadebe as a new interim CEO. The changes – regarded as essential in saving SA from embarrassment at the World Economic Forum in Davos – were thrashed out during talks attended by Brown, Ramaphosa, Gigaba and President Jacob Zuma on Friday night. It was the first Brown had heard of the changes, which a government source reportedly told the newspaper had been proposed by Gigaba. ‘Gigaba has been having meetings with Ramaphosa from the start of the week because he is really worried about Eskom,’ the source said. It is a very real risk to the economy . . . The Minister feels that Minister Brown does not appreciate how serious this is.’ The Sunday Times says it understands that Gigaba proposed Mabuza and former Finance Minister Nhlanhla Nene as candidates for the Eskom chairmanship. However, Brown raised reservations about Nene at Friday’s meeting.

Mabuza has taken a firm hold of the reins and begun tackling the crisis that threatens to sink the utility, says a Business Day report. He met the entire Eskom executive team on Monday. That night, the utility said: ‘Eskom has today received through Anoj Singh’s attorneys a formal letter of resignation by Singh from his position as chief financial officer, in line with the terms of his employment contract.’ The Eskom board, through its chairperson, ‘has accepted the resignation’, which ‘is with immediate effect’. Mabuza cancelled his trip to the World Economic Forum at Davos – which he was due to attend along with Cabinet Ministers and other business leaders – so that he and the board could get down to business.

The board has been directed to appoint a permanent CEO and CFO within three months, says a Fin24 report. Government also wants all Eskom executives who are facing ‘allegations of corruption’ to be removed immediately. Mabuza who is also the president of Business Unity South Africa will be joined by 12 other board members, Sifiso Dabengwa, Sindi Mabaso-Koyana, Mark Lamberti, Professor Tshepo Mongalo, Professor Malegapuru Makgoba, Busisiwe Mavuso, Nelisiwe Magubane, Dr Rod Crompton, George Sebulela, Dr Pulane Molokwane, Dr Banothile Makhubela, Jacky Molisane. In a statement, Brown said: ‘Fast-tracking the appointment of Eskom’s new Board was (necessitated) by the company’s precarious liquidity position and the previous board’s perceived prevarication in dealing with executives facing serious allegations of impropriety.'

Singh was placed on special leave in July amid mounting allegations of improper financial dealings with companies in the Gupta stable. A report on the IoL site notes he was suspended pending a disciplinary hearing. He is alleged to have accepted trips abroad from the Gupta family after signing off on a deal with Tegeta and is facing questions about the payment of hundreds of millions of rand from the power utility to Trillian without any clear benefit.

Former Finance Minister Pravin Gordhan questioned Singh’s ethics during a grilling at the Eskom Inquiry on Tuesday evening. A Fin24 report says Gordhan took aim at Singh for being evasive and not taking responsibility for the mismanagement of funds at the power utility. The inquiry resumed after more than a month’s break, with Singh presenting evidence on his role at the power utility. He covered the purchase of Optimum Coal Mine by Tegeta, from Glencore, the R1.6bn prepayment agreement for Tegeta, corporate governance at Eskom and the relationship between McKinsey and Trillian. But Singh’s testimony was dominated with ‘I don’t knows,’ as Gordhan put it. ‘Is self-preservation trumping conscience and ethics?,’ Gordhan asked Singh. ‘In other words, do you have to survive at any costs, including lying and misleading?’ Gordhan pointed out to Singh that South Africans following his testimony could even tell that he was not being honest. In response Singh said all the information he presented was fact-based, supported by evidence he had. Gordhan however said that at no point in his testimony did Singh take responsibility for what has happened at Eskom.

A Business Day report notes the state-owned company needs to raise R20bn over the next few weeks to persuade its auditors that it is a going concern. This will enable it to publish interim financial statements and allow access to foreign debt capital markets. If the World Bank issues a default letter during a scheduled meeting with Ramaphosa at the World Economic Forum in Davos, Switzerland, this week, it will trigger a 14-day recall on its $3.75bn loan, which could trigger a recall on Eskom’s R350bn debt mountain. ‘The main issue for the banks were the governance issues. The Treasury DG, Dondo Mogajane, is preparing as of today to raise money; we think lenders will be open to us again,’ Gigaba said. Eskom said that it was in a position to make interest repayments in January and to pay salaries as it continued to raise revenue through electricity sales. However, in terms of its funding plan, if it were unable to raise R14bn in February and R6bn in March, it would run into liquidity problems on every front from salaries to the repayment of short-term debt. A solution would allow it to raise a $1bn bond on the international market that has been scheduled for February.