The Committee met for an urgent engagement with the Minister and Deputy Minister of the Department of Public Enterprises and the Board of Eskom on the apparent reappointment of Mr Brian Molefe as CEO of the power utility after it was said he had resigned and then became a Member of Parliament. The Minister began by outlining what was broadly contained in her affidavit on the matter. The Committee was unanimous in stating the principle of sub-judice would not be used as a means to prevent key matters from being discussed – while the merits of the case would not be discussed, as it was due to be heard in court soon, the Committee expected a full account and engagement to ensure its mandate of oversight and accountability was carried out.
The Committee, with its new Member, former Minister of Finance Pravin Gordhan, directly question how it was possible for someone to become a Member of Parliament while that person was still in the employment of the state – this amounted to a breach of the Constitution, could be considered perjury and could mean the ANC was implicit in the illegality. The Members questioned why the post of CEO was advertised, and people were interviewed therefore, if Mr Molefe had not resigned – there was also proof of an internal memo sent to Eskom employees detailing that Mr Molefe resigned. There were further questions about the Minister being summoned to Luthuli House, understanding the basis for the reappointment of Mr Molefe and exposed in the public interest, if the case was winnable in court and if the Minister, as shareholder, should not have put the reinstatement on hold until everything was sorted out. Members remarked that the situation had gone from the “sublime to the ridiculous” and the Committee, and the public, would not accept what it was being told as it was not truthful as it was clear someone was lying. There were numerous appeals for the Minister to be truthful, open, honest and frank with the Committee as her personal credibility was on the line – anything less than the truth could mean the Minister was held ethically liable by Parliament and criminally liable in court. The Committee was concerned by the lack of good governance in Eskom especially as this was at the heart of the matter, and the effect of this on the credibility and reputation of the Enterprise. There were also concerns about the salaries earned by CEOs of State Owned Enterprises (SOEs) and the fact that people were using the Enterprises as personal cash cows and ATMs at taxpayers’ expense. Members asked the Minister pointedly if she was under any pressure or was acting under instruction of the President, or anyone else. There were questions marks hanging over the head of Mr Molefe and the fact that he had not taken the State of Capture report on review, in an attempt to clear his name, revealed some level of guilt on the part of Mr Molefe. The Committee made it clear it would not be fooled into believing Mr Molefe did not resign when all the evidence said otherwise.
The Committee was unanimous in finding there should be an inquiry in the Eskom Board to asses if it was suitable to continue leading the Enterprise – this would be similar to the parliamentary inquiry into the South African Broadcasting Corporation. The Committee was empowered to conduct such in inquiry in terms of rule 167 of the National Assembly and could summon people to fulfil such function. Members said it was clear the Eskom Board was not upholding its fiduciary responsibility by appointing someone linked to the Guptas as closely as Mr Molefe was – this amounted to reckless behaviour. The Board also unwittingly, and wittingly, captured Eskom for the benefit of a few. The Board thus either needed to be dismissed in its entirely or should voluntarily step down as it let SA down more often than not – the Board was not serving the country well. The fact that the Minister supported a commission of inquiry into Eskom proved all was not well.
Members spoke about the clear steering of Eskom business towards Gupta-owned companies and the importance of context and “connecting the dots” in this regard. Members could not understand how Mr Molefe was in a parliamentary sitting on Thursday and then was back at work at Eskom on Monday like “papa action”. It was clear the best interests of state and taxpayer money was not taken into account and that answers provided lacked credibility. There was concern that a stage was being reached where those looting and abusing state resources did not care who produced which report – these people were now taking billions and no longer millions of Rand as it was not enough. Discussion emphasised the huge economic importance of Eskom, its role in job creation and pertinent role in the developmental state. The approach of the Committee, going forward, would be crucial in either giving Parliament credibility or acting as co-conspirators. The Committee also questioned why the Minister did not litigate.
There were questions about the relationship between Board members and Oakbay, in their personal capacity. Members demanded the Committee have access to the former and current employment contract of Mr Molefe, Board minutes, recordings and documentation relating to the decision to reappointment Mr Molefe. The Committee was concerned about the lack of care of the effect of Mr Molefe on the reputation of Eskom and that the only concern of the Board seemed to be balance sheets and financial performance – the Committee was not interested in this but about good governance and stewardship of public funds. The Minister was not exercising her oversight role in terms of Eskom, it was telling that the legal opinion used by Eskom differed from all other legal opinion, it was clear the Minister was being kept in the dark and it was shameful and disgraceful that each Board member professed that nothing was wrong with Eskom – this was further impetus for the Board to be suspended. A Member raised the fact that she was being sued by Eskom by the same firm investigating the former acting Eskom CEO – this was a direct conflict of interest. The spin by the Board was very embarrassing when it was clear now that Mr Molefe resigned (and that the Minister and Committee was lied to), no confidence was instilled by today’s interaction, it was telling that there was no litigation against any of the media houses for the revelations reported and it was clear Eskom was captured – Mr Molefe was reappointed to continue looting after his appointment as Finance Minister did not go according to plan. The Committee welcomed the pending introduction of a Shareholder Management Bill (even though the current legislative agenda of Parliament was packed) but was disappointed by the answers received to pertinent questions today. The Committee was not encouraged by the apparent naivety and blasé attitude of the Board to shortcomings and felt a full investigation was the only way to get truthful answers. Members suggested the CEO of the Eskom pension fund be called before the Committee and said that governance of the SOEs was the concern of all three credit ratings agencies.
The Committee said all documentation requested was to be provided to it within 14 days for the inquiry to get underway in the next 21 days. This would mean the programme of the Committee would change. Members were to apply their minds to who would be subpoenaed because the full picture would only emerge if the correct people were called. The Committee would see legal advice on the scope of the inquiry. The Committee applauded the acting Chairperson for her leadership and effective way in which she chaired today’s important engagement.
Opening Comments of the Chairperson
The Acting Chairperson outlined that the rationale for the urgent meeting stemmed from Members wishing to discuss the recently reappointed CEO of Eskom, Mr Brian Molefe. Mr Molefe had been a Member of Parliament for the past few weeks but had recently returned to become the CEO of Eskom again. There was unanimous agreement in last week’s Committee meeting that an urgent engagement was required with the Minister, Eskom Board and Department of Public Enterprises to explain to Members what was happening in Eskom regarding Mr Molefe’s reappointment. Members were unclear on why Mr Molefe was reappointed when the post of CEO of Eskom was advertised, if Mr Molefe retired, was retrenched, if he resigned or stepped down.
Apologies were noted from Mr M Dlamini (EFF) and Mr E Marais (DA).
Minister of Public Enterprises
Ms Lynne Brown, Minister of the Department of Public Enterprises, began by outlining she submitted her affidavit to court with regard to the Mr Molefe matter. She instructed her legal team to withdraw her opposition to Part A of the relief sought i.e. she set aside her appointment of Mr Molefe. She nonetheless deposed an affidavit as she believed the information she had will assist the court in determining its decision. Her initial advice was to oppose Part A on the basis that she neither appointed nor reinstated Mr Molefe, as well as on the basis of advice from Eskom’s Board that it obtained an opinion from a Senior Counsel Advocate on its handling of the matter.
The Minister, having had the opportunity to properly appraise the issues, decided to abide by the court’s decision on the legality of Mr Molefe’s return to Eskom. When the Eskom’s Board approached her to inform her of its decision to bring Mr Molefe back, she said she would support it on the proviso that it was legal. She also made this point repeatedly when addressing media on the matter, though, curiously, none of them thought it worthy of reporting.
With regard to Part B of the motion, which sought to stop Mr Molefe from conducting any work at Eskom, she reserved her rights. One of the issues that the court will have to decide was a technical one relating to Eskom’s Memoranda of Incorporation (MOI). Eskom is governed by various pieces of legislation, including the Eskom Conversion Act, 13 of 2001. Section 6 (2) of the Act required the Minister, from time to time, to publish memoranda and articles of association. Two different MOIs were relevant to Mr Molefe’s situation - one passed and adopted before his arrival at Eskom and the other during his tenure. Material differences between the two documents included that the 2014 version did not require the Minister to be noted as a party to the employment agreement of the Group Chief Executive (noting the Minister was required in the 2016 version) and the 2014 document did not provide the Minister with the power to remove the Chief Executive (as the 2016 version did).
The executive employment contract concluded by Mr Molefe and Dr Ben Ngubane (Chairperson of the Eskom Board) in March 2016 was concluded in terms of the 2014 agreement – this contract did not have to be shown to the Minister.
Minister Brown said that when Mr Molefe quit Eskom in November 2016, she was under the impression he resigned – she wished him well and was sorry to hear he resigned. She was not aware that he applied for early retirement – this she only learned in April 2017 after reading in the media, that Mr Molefe was receiving a R30 million pay-out from Eskom, and asking Eskom’s Board to make a more prudent deal. Again, on Eskom’s legal argument that Mr Molefe was appointed under the terms of the 2014 MOI, the early retirement agreement did not have to be shown to the Minister.
On 11 May 2017, after taking advice from a senior counsel, the Eskom Board reverted to the Minister with options on the proposed R30 million payout to Mr Molefe. As a courtesy, the Board indicated to her its preference was for consensual rescission of Mr Molefe’s early retirement and that it was willing to accept Mr Molefe back as Group Chief Executive. She said she would support the Board’s decision providing it was legal. As she told the media, she believed Eskom would obtain more value from having Mr Molefe at work than simply paying out R30 million.
The Minister did not expect that society would universally welcome news of Mr Molefe’s return to Eskom following allegations levelled against him in the Public Protector’s State of Capture report. But nor did she anticipate the level of vitriol. She expected that his achievements as a technocrat, the fact that he would be under enormous scrutiny, and the presumption of innocence until proven guilty, would bring some balance to the debate. But there was a presumption of guilt, despite the Public Protector’s report being taken on review. As a society, as politicians, as media, we must beware of criminalisation by association, particularly in the absence of anyone having been convicted of a crime.
There was almost a climate of hostility presently surrounding state-owned companies that, incidentally, belied their actual performance. It was an environment complicated by strident voices ahead of the ruling party’s policy and elective conferences later this year and by Members of the opposition who viewed the State of Capture report as their ticket to nirvana. The Minister was not trying to make anyone feel sympathetic towards Brian Molefe, Dr Ngubane or Eskom – she was telling the truth. Dr Ngubane would be able to answer any operational or technical questions of the Committee together with other members of the Board.
In the presence of Dr Ngubane, the Minister concerns raised about the Board’s performance, to the extent that some have called for its dissolution. She did not think it would be fair to jump to any conclusions while there was an important matter before court. Ahead of Eskom’s Annual General Meeting (AGM) in July 2017, the Minister already started a process to externally evaluate the Board, as happened annually. She had taken legal advice on the process to follow to rotate the Board, if appropriate, while a discussion was underway in government currently as well.
The country’s giant state-owned companies, including Eskom, were critical levers of the developmental, transformative state. Where they erred, we must fix them. But we must be very careful we did not allow our discourse to break them. Later this week, when Deputy Minister Ben Martins and the Minister presented the Department’s budget vote, she will provide a progress report on the State Owned Companies Reform Project and development of a shareholder policy. Suffice to say, now, the project will directly address some of the governance issues under discussion today, including appointment of chief executive officers and creation of remuneration and pension standards. She would try to answer the questions of the Committee as best she could and Dr Ngubane would do the same.
Address by Eskom Board Chairperson
Dr Ben Ngubane, Chairperson of the Eskom Board, said he was with counsel yesterday where he was informed the affidavit he signed was submitted and the matter could not be debated anywhere other than a court of law. In all fairness, he had no choice but to listen to the opinion of his counsel as counsel would be representing him on the matter in court – his hands were thus tied. The process as outlined by the Minister was exactly what happened.
On a point of order, Mr J Steenhuisen (DA) said legal advice was obtained in terms of Parliament’s own procedures on the sub-judice rule – the rule would not be the convenient shield it was expected to be to Eskom and its board. The institution and its board remained accountable to Parliament – it was the duty of the institution and board to give a full account. The sub-judice rule was regarded as archaic and not applicable – Dr Ngubane was accountable to Parliament as Members were elected to do. The sub-judice rule did not apply and could not be used as an excuse to give a full and proper account to Parliament and the people of SA for shenanigans at Eskom.
The Chairperson said the legal opinion of Parliament was circulated to Members.
Mr Z Luyenge (ANC) made it categorically clear that the same legal advice received by the Committee went further to say as long as the exercise would not delve deeper into the details of the case, the Committee had the right and responsibility to hold the Executive and Board accountable, individually and collectively. Members did not want to get into the merits of the case concerned.
Mr N Singh (IFP) agreed noting it would also be appropriate for the Committee to have parliamentary legal advice present in case Members steered off course. Despite the comments of the Minister, he was no where nearer to understanding what happened. He requested the Minister provide the Committee with the documents she referred to and affidavit submitted to court as it was public information – this would assist the process.
Mr Ben Martins, Deputy Minister of the Department of Public Enterprises, thought the most proficient thing to do under the circumstances was to take cognisance of the fact that the Committee was within its right to ask questions in regard to what the Minister articulated. The Committee could be provided with the requisite information.
Ms N Mazzone (DA) noted that when the Committee heard Mr Molefe had been reappointed, it also heard the Minister had been summoned to Luthuli House by the ANC for a discussion on the issue – who was the Minister summoned by and why? Was it because of the meeting that the Minister withdrew her application from the DA’s court papers? The DA continuously asked for the former and current employment contract of Mr Molefe to be made public – she wanted the Minister to make a declaration that the Committee would see the document. She thought the whole situation had gone from the sublime to the ridiculous – for the Minister and Dr Ngubane to expect that the SA public would simply sit back and accept what was brought before the Committee today was simply unacceptable and was a slap in the face of good governance which was ironic as good governance was exactly the reason for Mr Molefe announcing his resignation. The Member had in her possession the resignation letter of Mr Molefe along with an internal memorandum sent to 48 000 Eskom employees from the head of HR informing them that Mr Molefe had in fact resigned. She also had Whatsapp correspondence where some of the power station managers aired discontent with the fact that Mr Molefe resigned but Mr Molefe answered them to say his decision was final. She found it difficult, along with SA, to accept and read that Mr Molefe resigned, then to hear he took early retirement and was retrenched the next minute – it was unacceptable that Members were treated as if they were to accept what it was being told today. The name Molefe was moving from a noun to a verb where people would soon be telling their children not to tell “Molefe’s”.
The Committee could not accept what it as being told as it just could not be truthful. She found it difficult to believe Minister Brown, as the stakeholder and chief overseer of Eskom, would not have know Mr Molefe applied for early retirement – there must be some kind of relationship between the Minister and Dr Ngubane and so she failed to understand or believe that the Minister did not know Mr Molefe took early retirement, if that was in fact what he did. The entire country understood that Mr Molefe resigned and then became a Member of Parliament – one could not be sworn in as a Member of Parliament if still a CEO of a state company and was simply on unpaid leave. These things did not make sense and SA had every right to be furious of the situation it found itself in.
Ms Mazzone said R30 million was a lot of money to be paid out to anyone – in fact it was an obscene amount of money. R7.7 million annual salary was an obscene salary to be paid. How much of the R30 million was paid to Mr Molefe? Would the Minister provide the document detailing the payment of the R30 million, how it was brought about and how it was calculated? Actuaries doing their own assessment on how much should be paid for 18 months employment, even given Mr Molefe’s previous employment, said the amount should be around R2.8 million.
She appealed for the Minister to be open and frank with the SA public as someone to look up to with a fairly good track record– did she think it was right and fair to hold the entire country to ransom for a sum of R30 million? This was to say if the story of the Minister was correct and that it was better to employ Mr Molefe than pay out R30 million. She was surprised the Minister would have allowed herself to be bullied into this compromising situation. It was clear the left tongue did not know what the right tongue was lying about – someone was telling a fib. It was now up to the Minister today to clear her name in the Committee by telling the truth, the whole truth and nothing but the truth. The Minister was involved in a court process, was now appearing before Parliament and was obliged to tell Members the truth – anything less than the truth would mean the Minister could be held ethically liable to Parliament and criminally liable in court. She appealed for the Minister to come clean with the Committee and tell it who was lying – this was the opportunity for the Minister to tell the Committee about what the true situation was. The Member had before her the advert Eskom released for the position of CEO – if in fact Mr Molefe was on unpaid leave but remained CEO all that time, why was the position advertised? She knew people who were interviewed for the job and willing to file affidavits to say they were advertised for the job. If Mr Molefe was simply on leave, why was the position advertised and people interviewed for it?
Mr Luyenge thought the time had arrived that South Africans were waiting for since news broke that Mr Molefe would be returning to Eskom. As the lead shareholder of Eskom, and recognising the experience and expertise that existed in Mr Molefe, on receipt on the news that Mr Molefe was contemplating leaving the power utility, what did the Minister do to ensure the investment of Eskom in the expertise of Mr Molefe was maintained in the entity? When did the Minister receive the application for early retirement? On receipt of that, what did the Minister do in collaboration, perhaps, with Dr Ngubane? The Board had a responsibility to conduct oversight over Eskom as a governance structure – the Board could not have regarded the early retirement, stepping down or resignation of Mr Molefe as a normal issue. What did the Board do then, especially the chairperson, in collaboration with the Minister as the political head of the Department? In terms of sound governance in Eskom, did the Minister think such a senior individual as Mr Molefe could one day go to Parliament then the next day return to Eskom without her awareness of the application of the said individual? The salaries of senior executives in State Owned Entities (SOEs) was a thorn in the flesh of everyone – was it correct to have warm bodies earning tripe that of the President? What was the view of the Minister on this aspect? The situation could also not be viewed as one thing going wrong – everything had gone wrong and Eskom was in tatters with its credibility at stake. The Board was now also affected – how would these issues be dealt with in a fair manner?
Mr M Gungubele (ANC) said the credibility of Eskom was essential and good governance contributed to that credibility – this affected the country economically especially in light of junk status. There was a question mark around Mr Molefe and it had not been cleared. The Eskom Board was working on the belief that that question mark might go but it existed. The Public Protector had a view of Mr Molefe – the President applied for review of that view but the view created a question mark around Mr Molefe which had not been cleared. Under what pressure was the Minister to hire someone in such a strategic institution on whose head there was a question mark which had not been cleared? The Minister had been a chair of boards, a leader in government and a track record – with good governance in her system, how could she hire somebody to lead an institution with this question mark which had not been cleared? What about the effect of the credibility of SA of the decision taken by the Minister? The basis of the reappointment of Mr Molefe must be exposed and understood – the basis on which the decision was taken was of public interest. He was curious of the statement made by the Minister that she had an impression that Mr Molefe resigned – how could the Minister be operating on impression with such a strategic person at such a high level? Was due diligence done to test legality of the R30 million payment? If so, the Committee needed to see the agreement for the R30 million. To what extent were the oversight powers of the Minister irrelevant when the Eskom Board acted, apparently, illegally? He was curious to hear the answers to pertinent questions posed by the Committee thus far.
Mr F Shivambu (EFF) highlighted the Powers, Privilege and Immunities of Parliament Act on the implications of those accounting to Parliament and its Committees, making false or misleading statements – such an offence carried with it a fine or period of imprisonment – those lying to or misleading Parliament would be reported to the police and/or court. The undermining of Parliament must come to an end. On 14 October 2016, the Public Protector released the State of Capture report and on 11 November, Mr Molefe resigned as CEO of Eskom citing the report as the reason therefore. The Minister then accepted the resignation of Mr Molefe – the Board nor the Minister never said the headlines were incorrect to say Mr Molefe resigned. On 30 November 2016, the Minister approved Mr Matshela Koko as acting CEO reaffirming this was due to the resignation of Mr Molefe. Again, the Board did not say Mr Molefe had not resigned. In March 2017, adverts were out for Eskom CEO – this advert was due to a vacancy created by the resignation of Mr Molefe, who was by that time sworn in as a Member of Parliament. Section 47 of the Constitution said (1) “every citizen...is eligible to be a member of the Assembly except – (a) anyone who is appointed by, or is in the service, of the state, and receives remuneration of that appointment or service”. It was thus beyond any reasonable doubt that Mr Molefe resigned and the Committee could not be misled on this. The President and not Mr Molefe was appealing the State of Capture report – the President was not appealing the facts of the report such as the communication between Mr Molefe and the Guptas. The Committee could not be taken for a ride – Parliament must be respected. The Committee should out rightly reject the nonsensical explanation by the Minister. The Eskom Board should be subjected to an inquiry to assess if it was suitable to continue as a board of Eskom. He did not think the Board was executing its fiduciary duties in a responsible way particularly because it was appointing an individual who was not refuting he had a comprising relationship with the Guptas, the family which ultimately got contracts from Eskom. An inquiry into the Board would expose the issues related to Mr Molefe’s reappointment and other issues raised in the State of Capture report.
Mr Steenhuisen knew Minister Brown to be a good Minister, a Minister to always be upfront and honest in her dealings and duties and to exercise only the best fiduciary duties over the entities she had control. He found her behaviour today to be a complete outlier to the Minister Brown he witnessed and worked with over the past four years – this made him very suspicious. It was time to dispense of the nonsense – Mr Molefe was not on maternity leave, not on resignation, not on long leave, had not taken temporary unpaid leave but had resigned from Eskom. If Mr Molefe had not furnished the Minister, or anyone else, with a resignation letter or pronouncement that he had resigned, when Mr Molefe raised his right hand in the Speaker’s parlour in Parliament, and swore to uphold the Constitution of RSA as a Member of Parliament, he tacitly resigned from Eskom. Section 47 of the Constitution was very clear that anyone who is appointed by, or is in the service, of the state, and receives remuneration of that appointment or service, is ineligible to become a MP. Mr Molefe therefore either tacitly resigned when he took that that oath of office or committed perjury by swearing a solemn oath before a presiding officer of Parliament to uphold the Constitution that he would have known at the back of his mind he was betraying. The facts were that Mr Molefe resigned which was why Eskom went ahead to advertise the position and start procedures to fill it. The weekly bleeding and exposure of wrongdoing at Eskom under the nose of the Board, either with its knowledge or without, was being dragged out in the newspapers and Sunday television programmes where very serious questions were being asked of Mr Koko and other issues related to coal contracts which appeared to be steered towards Gupta- owned mines – the behaviour of people within Eskom, who fell under the duty of the Minister, were destroying Eskom and not public disclosure. It was very interesting to hear the Minister say the opposition saw the situation as a “nirvana”. He did not see enough fiduciary responsibility and commitment from the side of the Minister and the Board to reverse the trends being set – what he was seeing was the outlying behaviour. Mr Molefe presented no evidence of clearing his name from the Public Protector’s report and no explanation of the calls between him and Atul Gupta – there was no explanation for the clear steering of business towards Gupta-owned companies. Mr Molefe had not come forward to clean his name as he said he wanted to do. Given these circumstances, the Board itself behaved recklessly by appointing Mr Molefe as CEO again given he still faced huge allegations –why on Earth would an individual who lied to Parliament be reappointed to head a parastatal? Someone who committed perjury by taking an oath he knew was not truthful? Someone with huge allegations hanging over his head which certainly had not been cleared. The best interests of state money and SA taxpayers were not taken into account. The behaviour of the Minister was not what the Member knew – this made him question whether President Zuma had a conversation with the Minister and instruct her to reinstate Mr Molefe at Eskom. What was the instruction of the President to the Minister, if any, regarding Mr Molefe? The Member recommended a full parliamentary inquiry into the Board of Eskom because it need the same treatment the SABC had received. The SABC was now in a much better position and the shoots of recovery were emerging – the Eskom Board needed the same treatment from Parliament to begin its disinfection and getting it back on track.
Mr R Tseli (ANC) thought the fact that this meeting was one extraordinarily called for by the Committee as a matter of urgency suggested the issue at hand was a matter of public interest. At the meeting of the Eskom Board toward the end of last year where the leaving of Mr Molefe was raised, what was the situation as accepted by the Board at that meeting? Was it resignation or early retirement? Clarity on this was pertinent. What did the records of the Board show was accepted from Mr Molefe when he left Eskom? Clarity was also required on what was agreed to at the Board meeting when Mr Molefe returned to the entity. If this particular matter was pursued in the courts, was it a winnable case? Based on the explanation provided to the Committee, it would very difficult for Members to be convinced whoever pursued the matter should not be responsible for the cost. Could the Minister tell the Committee if the case was winnable if the matter was pursued? There was an indication Mr Molefe was on unpaid leave while he was a MP – this was something for the Board to clarify. The Committee had the responsibility of conducting oversight over the Board, and needed clarity on the matters at hand, hence this meeting being convened. SA needed answers on the issue which brought everyone together today.
Mr Singh was pleased to see the parliamentary legal advisors arrived. The whole issue went beyond the matter of a court case, beyond Mr Molefe and beyond Eskom – at the heart of the matter was good governance in the country. In so saying, he was in no way clearer on an explanation for the situation at hand. There were so many simple unanswered questions such as, did Mr Molefe resign? Was he on unpaid leave? Who accepted his resignation? Was HR present? Why was the position of CEO advertised if Mr Molefe did not resign? Did Mr Molefe commit perjury when sworn in as a MP? Was the ANC implicit in this? Was the party aware Mr Molefe did not resign from Eskom and was receiving benefit from a state organ? These were matters for the Committee to investigate. While there was a norm in SA, as correctly stated by the Minister, that one was innocent until proven guilty, there was no process to test whether Mr Molefe was engaged in any shenanigans while at Eskom. The State of Capture report indicated there was prima facie evidence of wrongdoing with Oakbay and Tegeta but this also went to the heart of the problem of people using SOEs as cash-cows and personal ATMs at the expense of taxpayers. The President had still not presented a case before the Public Protector on whether or not he was contesting, and in which way, the recommendations of the State of Capture report. In a pointed question to the President in Parliament, the President said he would not initiate a commission of inquiry into the on goings at Eskom. The credibility of the Minister was at stake – she needed to tell the Committee if there was any influence of anybody in the matter clouding her judgement? He knew the Minister for a long time having worked as MECs together and therefore knew her not to make the kind of “mistakes” she was making now. He pleaded for the Minister to come clean with SA especially as her credibility was at stake. The Minister was right to call for judicial commission of inquiry –while only the President could institute a judicial commission of inquiry, the Minister was empowered to initiate other kinds of inquiries into a SOE for which she was responsible. The Committee last week decided that if it could not initiate an ad hoc committee of inquiry, it would use Rule 167 which empowered the Committee to summon any person before it and have a full inquiry into what was happening at Eskom including what happened with Mr Molefe. Adequate financial and human resources were required for such an activity. He implored the Minister to tell SA what was going wrong and if she was being unduly influenced by anybody to make the statements she had. It would help everyone to get those answers. The Member was very glad to see Mr Pravin Gordhan, the former Minister of Finance, in the Committee as a Member. Mr Gordhan would be aware of the state of Eskom, and other SOEs, and where there was reluctance to provide answers. The matter went beyond Mr Molefe but concerned good governance – the Committee wanted answers.
The Chairperson welcomed Mr Gungubele and Mr Pravin Gordhan as new Members of the Committee. She humorously remarked the Committee was now dominated by males but this would be worked on.
Ms G Nobanda (ANC) highlighted that in his letter of 11 November 2016, Mr Molefe repeatedly stated he was stepping down in the interests of good corporate governance and was going to take steps to clear his name – did the Minister think the return of Mr Molefe to Eskom was part of good governance? Who reported to whom? Did the Minister report to Eskom or did Eskom report to the Minster? Was Eskom not supposed to have informed the Minister of things happening? Why did the Minister only find things out through the media? With the unpaid leave, somewhere, somehow the Committee was not being given the correct version of events. If Mr Molefe was on unpaid leave he would have still been an employee of Eskom. If Mr Molefe resigned he would have left the entity. If he took early retirement he would have got some of his pension and enjoyed his package at home. No people were talking of maternity leave and retrenchment – somebody was playing with the minds of the Committee. The only way Eskom would come right was if the truth was told – this was all everybody wanted. Members needed to be clarified on stepping down vs. resignation – what did “stepping down” mean in Eskom? Her understanding of stepping down was of an individual resigning. She asked the Minister if it would not have been proper not to accept the reinstatement of Mr Molefe seeing as there were all manner of misunderstandings. It was correct to stop the R30 million payout to Mr Molefe. Mr Molefe left a sitting of Parliament on a Thursday afternoon only to return to Eskom on the Monday like “Papa Action” back at work. As a shareholder, would it not have been proper for the Minister to halt the reinstatement until everything was cleared up?
Mr P Gordhan (ANC) said the questions were plenty but answers were all over the show and lacked credibility both in the public domain and the Committee. Context was important in this matter – he was not sure if the Board was oblivious but the public was connecting the dots particularly about what the Board of Eskom was doing and not doing. The public was aware that state property and resources were being abused in their own names and not in the name of the SA public. There was awareness that the Board was wittingly and unwittingly capturing Eskom for the benefit of a few – this was the reality. Worse, the SA public was worried that managing governance in SA was reaching a stage where a significant number of people, from bureaucracy, the Board and elsewhere, did not care if public resources were being abused or which reports were produced because they were protected. The question was by whom and at what cost. Eskom is a critical institution in the SA economy – when Eskom did not work it had massive impact on economic growth, job creation in SA and enterprises. He did not think SA had fully recovered from troubles in the entity in the past. Context matters – this was not one isolated incidence of hiring, firing, retiring, not retiring, maternity leave or otherwise. This was part of a pattern – last week the SA Council of Churches produced its preliminary report which helped in connecting the dots and understand what was actually happening in this context. Would the Board still do as was done by activists before the security police i.e. keep a straight face notwithstanding the number of days one was in solitary confinement or pressure faced to answer questions of affiliation to banned organisations or not? Straight faces were what he saw today because there was a belief that no one would challenge what was being said in the public domain in a significant one – sometimes this was done with extreme arrogance which was remarkable considering a public institution was meant to be served.
In much of the literature and policy documents of the ANC, institutions like SOEs are a crucial part of the developmental state. Now state resources, assets and procurement were being dealt out to a handful of beneficiaries – the public would not be bluffed. What the Committee now did could either give Parliament credibility or it too would be accused of being “co-conspirators” in the process. How the Committee approached the process would be absolutely critical. If an inquiry took place, it would have to go back to the role of Mr Molefe in Transnet and some of the transactions now coming under public purview and examination – while this was no subject for debate today, dots needed to be connected completely to answer who did what, where and in service of what cause. The Chairperson should guide the Committee on how to take the process further. For parliamentary legal advisors to do their job well in an inquiry into hiring of Mr Molefe, to when the Board met and decided to let him go to reinstating him again, documents involved needed to be made available. This would mean certified Board minutes as a truthful representation of what transpired at Board meetings, if need be in an affidavit form – transparency was critical in such an exercise of accountability.
To the Board he asked who instructed it to rehire Mr Molefe. Who made what phone call to whom? Which meeting took place where and with whom which resulted in Mr Molefe being rehired? He did not think a truthful answer would be forthcoming but said the questions needed to be asked nonetheless. In his experience it was a privileged interaction to have between the Committee, Board and Executive Authority. It would be nice to hear from Board members what interactions they had with Oakbay in their individual capacities – in terms of the Powers, Privileges and Immunities of Parliament Act, the truth needed to be heard about what was really going on. Legal advisers would need to inform the Committee of whether the Board was indeed acting recklessly and had been forsaking its fiduciary responsibilities let alone its developmental responsibilities to SA. To the Minister, he asked if a legal opinion was obtained which said what the Minister could do, could not do, should agree with or should not agree with either by herself, the Department or by the Board. Ultimately this was a labour relations issue. Why did the Minister not litigate? R30 million was now considered a drop in the ocean because billions and not millions were being stolen at a time – R100 million was no longer enough in the public domain. Nonetheless, R30 million was a substantial amount of money so why was it not litigated on? Why did the Minister just give in to somebody’s demands? While a judicial commission of inquiry was the constitutional prerogative of the President, anybody could hire a retired judge to look into a particular matter – why could the Minister not hire a retired judge, or senior counsel, respected by all, to look into all the facts and do the necessary in order to establish what really happened and what the facts were? The Committee could also decide on a parliamentary inquiry but this should be supported by a thorough forensic audit of how decisions are made in Eskom. Eskom was far too important of an entity for it to become a personal toy of a few individuals – it was a massive entity. Respectfully, a stage was being reached where either the Board in its entirety should be dismissed or it should voluntarily resign as it let SA down, more often than not. While he knew Dr Ngubane for a long time, he respectfully did not think the Eskom Board served SA well.
The Chairperson asked if the Eskom Board was under obligation to provide documents to the Minister and could sign documents without the knowledge of the Minister. If so, proof of such arrangement needed to be made available to the Committee so it was clear on the issues. She assumed that as CEO, Mr Molefe was the “main man” in terms of running the operations of Eskom – if this main man left the job, how could the Minister only find out about it after the fact? If a CEO left a company, the oversight authority should be the first person to know that individual left. Reasons for resignation were also important to find out especially if it was the CEO. Mr Molefe then became a MP which was a permanent job. Were the processes taken by the Board through this entire saga legal? Were they documented? All documents surrounding the process needed to be provided to the Committee to assess if decisions taken were constitutionally sound. The fact that the Minister said she would support a commission of inquiry into Eskom showed she knew all was not well with the entity which therefore prompted the need for an inquiry – did the Minister still support this? The Committee supported a commission of inquiry. All documents requested by the Committee needed to be provided as soon as possible because the matter would continue to be pursued by the Committee – rule 167 empowered the Committee to summon anyone to it. With these rights, the Committee was expected to serve the people of SA. Members only wanted the truth so that they could face communities on the issue. She worked as a member of the SA Police Service for 48 years, as a Lieutenant, but the money she received was less than R2 million when she retired. How could an individual work for 18 months and receive R30 million? This needed to be explained legally.
The parliamentary legal adviser explained the sub-judice rule was historically to protect courts and juries from being influenced in the administration of justice especially in light of a jury system but in SA, with the introduction of a new constitutional dispensation, there was a great move towards transparency and openness for the people to know what was happening in the country. In light of this the courts ruled on the matter of sub-judice and the Western Cape High Court set very stringent rules with regard to the application of sub-judice. This was in relation to the publication and broadcasting of a criminal case – the Court ruled the right to know and the free flow of information outweighed keeping information under wraps. The Judge said there must be a real prejudice to the administration of justice and the curtailing of information must outweigh the free flow of information. There was now publication and broadcasting of even criminal trials.
In relating the sub-judice rule to Parliament and the National Assembly, the Constitution outlined the need for accountability, transparency and openness. The National Assembly was elected to represent the people and ensure there was oversight and scrutiny of executive actions. The Constitution gave the National Assembly certain powers to ensure this role is met – section 56 said the National Assembly, or any of its committees, may (b) require any person or institution to report to it. Processes in court did not curtail the National Assembly from carrying out its role and responsibility. The National Assembly had its own rule to curtail itself on matters before court – rule 89 was specific and limiting in saying no Member may reflect on the merits of any matter pending judicial decision in a court of law. This rule applied only to Members, when discussing matters, to respect the independence of the judiciary to ensure no negative comments were made on pending cases and to respect the rights of litigants before the court. This did not mean Members could not scrutinise or conduct its oversight. This rule did not apply to members of the public but only Members of the Assembly. The sub-judice rule did not have merit because the Committee was conducting its oversight and accountability mandate. The Committee also had powers when members of the public did not cooperate – summons could be issued and if not adhered to, could result in criminal charges.
The Chairperson was pleased the matter was now clear and called on the Executive Authority and Eskom Board to respond to the matters raised by the Committee.
The Minister asked the Chairperson which commission of inquiry she referred to.
The Chairperson clarified she was referring to the commission of inquiry the Minister said she supported in relation to the State of Capture report.
The Minister began responding to questions posed by Members. The ANC top six usually engaged with deployees and she considered the engagement normal in that respect. She and the Deputy Minister presented to the top six where there was long discussion. The two were then sent back and it was said the matter would have to be sorted out between the Minister, President and Deputy President. A committee was then comprised to look at legal opinions of Eskom and the Department, subject them to an objective legal opinion and then make a decision. The Minister did not make the appointment of Mr Molefe at all – Mr Molefe was appointed in terms of the 2014 MOI. In that MOI, the Minister was not required to be noted as a party to the employment agreement of Group CEO. She reminded the Committee she was appointed Minister in 2014. In the 2016 MOI, it was required the Minister be noted as a party to the contract of employment between Eskom and Group CEO. Her affidavit was done under oath so if she lied in the affidavit it would mean the end of her career as a public representative and personal credibility. She reiterated she believed Mr Molefe resigned – as said earlier in the meeting, she said she was sad to see Mr Molefe go but wished him well. The first time she saw about the R30 million in the newspaper was the first time she learnt about the resignation. This was because Eskom thought it was acting in terms of the 2014 MOI – the issue was that there was about three months difference between the 2014 MOI, Mr Molefe’s resignation, his reappointment and the 2016 MOI. The court would have to address itself to this matter and she would agree with whatever the court decided.
In terms of the process of governance in the Department of Public Enterprises (DPE), she reminded Members the Department was initially established as the Department of Privatisation many years ago. The Department had within its ambit six SOEs. Much of what existed currently came from historical arrangements. The Department had a shareholder compact that was an agreement drawn between the Minister and any one of the SOEs. This compact was reviewed annually externally by the Auditor-General of SA or the audit company for that SOE. There were consequences if less than 60% of the targets were met. This was quite an intensive engagement through which the SOEs were governed. There was also the Companies Act where a MOI for each of the SOEs was drawn up. The MOI also dealt with issues like the appointment of CEOs, other operational matters within the company, significance and materiality and various levels of decision making for the Minister and Board. How SOEs were run was very carefully legislated. All SOEs, except for Denel, had their own legislation. This legislation could be improved but the current process was to deal with governance matters in relation to the State Owned Companies Reform process which was chaired by the Deputy President. There were governance problems within the SOEs along with other problems to be dealt with. The idea was to have an overarching Shareholder Management Bill – it had taken a long time for this Bill to come about but it had just been submitted to Cabinet and all Ministers were now responding to it. The idea was to stop the fragmentation in SOEs seen over the years. It would also standardise procedures. SOEs could do much better in terms of governance. SOEs have been the backbone and hard mettle of the SA economy especially Transnet and Eskom.
There are 42 000 workers in Eskom and the Board appointed Mr Koko and she supported that. Mr Koko had since been asked to take leave while the Cliffe Dekker Hofmeyr investigation, into all the Sunday Times newspapers, was complete – this report was due quite soon. There was currently a leadership gap in Eskom – after Mr Molefe left, that gap was very prominent. In the past seven to eight months there were many occurrences at Eskom – whilst Eskom had incredible technical skills from engineers, nuclear physicists and others, there was no requisite leadership in Eskom and this was her current concern.
CEOs of Eskom and Transnet earn between R7 million and R8 million while the others earned in line with the size of the entity – this was almost half of what the CEOs of Eskom and Transnet earned. The Minister said salaries would be better managed in the State Owned Companies Reform process. There was a strong view in Cabinet that, because SOEs were both commercial and developmental, there should be consciousness to not have salaries much higher than the rest of the public service. She did not know if this meant the salaries would be reduced because these were large SOEs – Eskom had 42 000 workers while Transnet had 67 000 so the correct median would have to be found for the payment of CEOs. She was of the opinion the current salaries were too much but she had to commit herself to a legal process, governed by the labour law.
Eskom is very important to SA because it generated 95% of the country’s electricity. There was a question mark around Mr Molefe – he would never be cleared until there was an investigation into the State of Capture report. Mr Molefe could not however clear himself. The Minister did want an investigation into procurement at Eskom – the Department had already drawn up its terms of reference but this was separate to whatever Parliament decided. There was an agreement for the investigation to involve the Special Investigating Unit (SIU), which had already conducted a number of investigations into Eskom. The investigation would have to include a number of inconclusive investigations conducted over the years and the current matter of Mr Molefe and procurement at Eskom.
The Minister was very conscious of the Powers, Privileges and Immunities of Parliament Act – she was conscious of the fact that she was a Member of Parliament governed by the Powers, Privileges and Immunities of Parliament Act. The Minister was the one to inform the President that Eskom Board would be reinstating Mr Molefe, as was the norm. She also told the ANC top six. The Minister stated that she did not receive any instruction to reinstate Mr Molefe. Perhaps the Minister should have allowed Mr Molefe to litigate on the matter of the R30 million. When the Minister told Eskom to renegotiate, there were four options on the table, (1) alternative pension proposal (not possible because it would change the pension fund rule) (2) settlement payment (the Minister was not happy about this as it would be a golden handshake) (3) Mr Molefe to resign with settlement (if there was no agreement on that, the matter would go to court) (4) rescind based on the fact that the Minster did not want the R30 million paid out and Mr Molefe would then remain CEO of Eskom. The Board preferred the option of rescinding was based on the request of the Minister i.e. Mr Molefe remained CEO of Eskom. The Minister made it clear she would only support this option if it was legal.
The Board assured the Minister, based on the strength of the legal advice received by Eskom, and also communicated with the Minister, which she had no reason to doubt, that the status quo would have to be reverted to once the contract of early retirement was mutually rescinded on the basis of an error – this was contained in the affidavit of the Minister. The Minister, Mr Molefe and Eskom were subjected to court proceedings. The Minister hoped the court process would bring greater clarity on the matters – the court sits on 30 May 2017. In terms of governance processes between the Minister and Eskom Board and who determined, in terms of significance and materiality, at what level decisions were taken, this was a public document like the MOI was. If anyone knew of any untoward behaviour in the SOEs, actively involving any Board members or executives in corrupt activities, this should be reported – there was an obligation to report such matters to the necessary authorities. In terms of the inquiry, the Minister wanted to lift all issues out of Eskom and to know the conclusion of all investigation reports. This process would get all the issues Eskom could possibly have into the public space
Dr Ngubane stated the Board would welcome any type of investigation into Eskom even if it started tomorrow. The company secretary wrote to the Public Protector for information to begin to clear the name of the Board in the State of Capture report. Boxes of information were provided to the Public Protector and anyone could look at this information. Eskom made use of double assurance from the audit and risk committee and assurance and forensic. Additionally there were independent auditors which explained why Eskom had clean audits year after year with minor statements where matters were not fully explained – the record spoke for itself. Eskom was once on the brink of collapse – the CEO and chairperson of the Board at the time, phoned the Minister the day after Christmas to say salaries would not be paid. There was a search for money in all sorts of hidden places, hard work was put in, experts were brought in like McKinsey and many matters were fixed. Mr Molefe then came to Eskom at the height of load shedding. At the beginning of that winter, Glencore came to Eskom to say it wanted R150 per tonne after it was argued exports and the commodity market was down. Mr Molefe correctly told Glencore to fly a kite as the National Energy Regulator of SA (NERSA) would not allow it, as it determined the price of coal, and Eskom’s auditors would consider it irregular and wasteful expenditure. This was when the search for alternative prices for coal began – Glencore clearly said it would stop supply and there would then be a blackout in the country. This was the important context in this regard. He heard phrases such as “Eskom is a mess”, “Eskom is being torn apart” but this was not reflected in the financial state of the entity – there had been much financial improvement, savings, contract management, performance agreements etc. The Eskom Board worked very hard and SA should at least acknowledge that.
Once the Minister expressed reservations about the matters surrounding Mr Molefe, Eskom’s legal team was asked to consult with lawyers and counsel to find the optimal way to resolve the issue. In terms of legal opinion, the ultimate resolve was to cancel the early retirement agreement. When someone retired from an organisation, whether in terms of reaching the age limit or seeking early retirement, that person moved out and on from the organisation and was free to do whatever he or she wanted to do. When one resigned, that person only took their contribution to the provident/pension fund. In the case of Mr Molefe, after an agreement was reached to purchase 10 years to make up for the break in service from the Public Investment Corporation (PIC), then to Transnet and then to Eskom, so that when he reached the age of 55 he could retire with pension benefits/savings. This was done in 2015. This decision was expressed to HR and approved by the Board of Eskom and Board of the pension fund. The calculated payment for pension each month came to a total of R30 million. The shareholder did not agree with this amount. Mr Molefe consulted his lawyers who indicated there was a signed agreement so his rights stood. With much persuasion there was then agreement to rescind the early retirement of Mr Molefe i.e. he returned to work for Eskom, unless he resigned. This sequence of events was contained in documents sent to court and affidavits – it was now for the court to decide on the legality. The Eskom Board acted on the best legal advice and it, and the Minister, was satisfied therewith. Mr Molefe was not being reemployed – the status quo was simply reverted to because the original agreement for early retirement was rescinded. This was not “shenanigans” but an account of what transpired. All minutes and recordings of Board meetings were available for examination and on there judgement of the Board could be made. Dr Ngubane said he would defend the Board because he knew how strenuous work had been. With the new build programme beset by serious problems, such as huge claims by contractors and poor management of contracts, the Board worked very hard to clean this up and targets in this regard would now be met. There were sleepless nights going through documentation and submissions from management – this was a huge amount of work. The Board was not a bunch of idiots who just wanted to be called Board members of Eskom – they were there to work and should be given the benefit of the doubt.
Dr Pathmanathan Naidoo, Eskom Board member, said he grew up in Eskom, did his 27 years at Eskom and had been on the Board for three years. The company was grown to have assets of R700 billion and liabilities, to date, of R450 billion and where the current liability was R78 billion. Owners equity was R180 billion of which share capital was R80 billion, which came from Treasury. Eskom was thus a massive operation and amongst the world’s best utilities. Eskom revenue for the last year was a total of R180 billion – Eskom was Treasury; it made money and printed money. Net profit was R1 billion and R100 billion was spent on primary energy i.e. coal. Wealth distributed was about R80 billion of which R40 billion went to employee benefits and R40 billion to money borrowed on global and domestic markets to fund operations. It was therefore so important to grow the credit rating of Eskom – nothing should be done in the public and governance space to harm the credit rating because this meant it was more expensive to do business for the end customer.
Dr Naidoo pointed out he was elected president of the SA Institute of Electrical Engineers and as custodians of electrical engineers in SA, the organisation was very troubled by the performance of Eskom knowing it was part of growing and building Eskom. With the call for nomination for the various Boards of state enterprises, he put up his hand and this was how he came to feature on the Eskom Board. He was appointed 10 December 2014 for a period of three years which ended December 2017. The new Board began the task of establishing committees of the Board...
Mr Gungubele interrupted to note the Committee was not averse to knowing how great Dr Naidoo was but the issue at hand today was Mr Molefe and Dr Naidoo had said nothing about it.
The Minister assisted by noting the questions posed to Board members included their relationship with Oakbay.
The Chairperson appealed to Dr Naidoo to get to the issue at hand.
Dr Naidoo felt he needed to provide context to how Mr Molefe came into the picture. In his first meeting with Minister Brown, Dr Naidoo appealed for the Minister to appoint some of the Board members as executive directors and not non-executive directors to assist in recovery at Eskom. The Minister clearly said she would not do so. He accepted this. The Board then began to clean up Eskom from leadership level because management was saying load shedding would continue for a long time to come and would not stop...
The Chairperson again urged Dr Naidoo to speak to the reappointment of Mr Molefe as the Committee was running out of time.
Mr Tseli said the Committee should just move on if Dr Naidoo did not have anything to clarify because clarity was what Members were seeking. What Dr Naidoo was currently talking to was not assisting the process and was irrelevant to the reappointment of Mr Molefe.
The Chairperson urged Dr Naidoo to respond to the questions posed by Members and speak to the reinstatement of Mr Molefe.
Mr Shivambu said the question to Board members was their relationship with Oakbay – Members did not need the autobiography of Dr Naidoo.
Dr Naidoo said he would go straight to Mr Molefe’s term when he had resigned and then returned back to Eskom – following the State of Capture report, he heard in the media that Mr Molefe resigned from Eskom and it was understood he left the entity and was gone. Paperwork brought to the Board showed early retirement. When the paperwork was processed by the Eskom pension fund, it was publically stated the value was R30 million which the Minister duly declined. As non-executive director of the Eskom, he made clear the buck stopped with the Board – it was the Board who would make decisions for Eskom as the accountable accounting authority for Eskom. This explained why the Minister only heard of certain matters in the media. There was no communication whatsoever between the shareholder and Board members as all communication went to through the chairperson of the Board –Dr Naidoo only met with Minister Brown at induction as a Board member, at the Eskom AGMs in 2015 and 2016 and today. The chairperson did not sit on any of the committees of the Board of Eskom – all records of the Board were available.
Once it was understood Mr Molefe was gone, advertisements for Eskom CEO commenced. A recruitment agency was appointed and a shortlist of candidates was received. The process was halted when Minister Brown declined the R30 million pension fund payment to Mr Molefe. The Board then reviewed the payout, as the Minister requested it did, and the choice was then made to rescind the initial decision. This meant Mr Molefe either resigned or returned to work. It was debated and legal and audit advice was sought. Dr Naidoo made it clear he had no relationship with Oakbay. The Glencore discussion started at Eskom long before Mr Molefe arrived. Glencore owned the Optimum contract which supplied ground (essentially coal). The contract expired in 2018 and Glencore indicated it wanted more money for the ground after it invoked the clause in the contract to plead hardship. Eskom said it was also facing hardship and declined their offer. Eskom was all about coal – it converted coal into electrical energy. The price of coal determined the price of electricity to customers and so it was vital to ensure contracts were not on a runaway. Glencore was very smart to ask for a price increase before the contract expired in 2018 as it could then set a new base price for the next 30-year period going forward. Glencore then threw in the towel and declared business rescue – the consequence was loss of jobs and loss of production. Eskom however had contingency plans. There was no relationship with Glencore other than the straight supplier-customer communication.
Mr Zethembe Khoza, Eskom Board member, said the application received from Mr Molefe was for early retirement. Mr Khoza said he had no personal or direct relationship with Oakbay. The Board did support the reinstatement of Mr Molefe as CEO on the basis of his performance, the performance of Eskom, strategy put in place going forward and working off of the legal advice obtained. The Board did look into matters arising from the State of Capture report but the legal opinion obtained said the matters were simply allegations and required further investigation. This was why the Report was not taken on review. The legal opinion said only the findings could be reviewed.
Mr Gungubele thought the response from Dr Naidoo affirmed why a parliamentary inquiry was necessary. It was clear both Dr Ngubane and Dr Naidoo did not care about the effects of Mr Molefe’s reinstatement on the reputation of Eskom. The only concern was about numbers and money as if to say we have money so people should shut up because there was no problem – if the balance sheet was healthy, the public should shut up about the problems of Eskom, was effectively what was being said. Dr Ngubane said the same thing about the SABC but now the broadcaster was struggling to find money. The Committee was not concerned about money. Turning to the 2016 MOI, section 3.6.2 said “the company shall not appoint or remove the chairperson of the Board, the Group Chief Executive...other than as provided for in this MOI”. It also said in section 3.8 “the shareholder may direct the company to take any action specified by the shareholder if the company was in financial difficulty or being mismanaged”. How did this relate to the statement of Dr Naidoo that the buck stopped with the Board? The MOI further said “if the company fails to perform its function, the shareholder has a duty to direct”. Section 14.3.1 said “the shareholder shall, on behalf of the company, have exclusive power in exercising its ownership of control pursuant to the provision of section...to appoint and remove the Chief Executive as an employee of the company”. This meant the Minister was not as powerless as Dr Naidoo explained her to be.
It was said Mr Molefe could not clear himself but the Public Protector’s report made reference to him and his conduct – who then should clear his name? The Member had a sense the Minister did not exercise her role of oversight in directing Eskom. He was concerned about the lack of concern of the general public opinion about the general state of Eskom – Dr Naidoo also stated Mr Molefe did resign. Based on responses received today, a parliamentary inquiry was required.
Ms Mazzone asked if the application to NERSA would no longer be necessary and South Africans would no longer have to panic about increased tariffs because the numbers of Eskom were as good as the Committee was informed today. It was ironic that Eskom always asked for more when today it was heard the financial performance of Eskom was great. It was as if the controversy surrounding Medupi and Kusile, and the Hitachi deal, did not exist. It was shameful for each Board member to profess to the Committee that nothing was wrong with Eskom – keeping the lights on in SA was the only job of Eskom. She could not believe the Board thought it should be congratulated for this one job. She was angry to hear about the acceptance of obviously flawed legal opinion and to hear Dr Ngubane say the Committee treated the Board as idiots – the Board was treating the Committee as if they were idiots. How could it be that every legal opinion in the country differed to the one accepted by the Board? It was clear Minister Brown was being kept in the dark about many happenings in Eskom. The Member pointed out that she was being sued for a total of R80 million – R30 million by Eskom, R20 million by Mr Koko and R50 million by Mr Molefe. Cliffe Dekker Hofmeyr was being used to investigate Mr Koko but was the very same law firm being used to sue the Member – this was a direct conflict of interest because the firm being used to sue her was the very same firm basically being used to investigate its own client. There was unacceptable behaviour from the Board but yet the Minister allowed it to continue. The Committee was being lied to as was the Minister – it was very obvious Mr Molefe resigned from Eskom and the spin by the Board was now very embarrassing. The Board was an embarrassment and disgrace to SA – she urged the Minister to suspend the Board with immediate effect.
Mr Tseli was highly disappointed by the responses received by the Committee on this matter today. There were also so pertinent questions which had not been responded to such as if the case was pursued, was the case winnable? Would personal responsibility be taken if the case failed? State resources could not continuously be used on matters not likely to be won.
Mr Steenhuisen questioned why the 2014 MOI was used instead of the 2016 one. The Shareholder Management Bill would certainly be welcomed but there was very little chance the Bill would see the light of day until early next year because Parliament’s legislative agenda was packed. What immediate steps, outside of the Bill, were being taken to rectify some of the matters viewed as problems? Mr Molefe could clear his name by taking the State of Capture report on review – the fact that Mr Molefe had not done so revealed some degree of guilt on his part. Anyone who was innocent would seek to clear his/her name months ago. When on the SABC parliamentary inquiry, the chairperson of the SABC board, up until the last minute, professed the wonderful performance of the SABC to the Committee, how well managed the Broadcaster was and was a world leader in entertainment – it is now known this was not the truth and the SABC was rotten to the core. The same applied to Eskom – one only needed to open a newspaper on any given day or watch Carte Blanche on a Sunday night to see the devastating destructive nature of people in Eskom. The Member was not encouraged by the apparent naivety and blasé attitude of the Board to the shortcomings. There seemed to be complete focus on the balance sheet of Eskom and not on the governance structure of the organisation. There were people in Eskom who were corrupt and using their position in the SOE for their own benefit and that of others. The behaviour today before the Committee did not instil the Member with confidence that the Board could deal with this – the complete focus on the balance sheet meant the rest of the organisation was neglected. Parliament would hold Eskom accountable for its governance and stewardship of public funds. Once Mr Molefe raised his hand to become a Member of Parliament, he ceased to be an employee of Eskom – one could not be both fish and fowl. Even if Mr Molefe did not furnish Eskom with a formal letter of resignation, the day he was sworn in as a Member of Parliament, took the oath of office and signed it in the presence of a parliamentary official, he became a Member of Parliament and was no longer an employee of Eskom.
Mr Steenhuisen did not buy the argument that the best option was for Mr Molefe to remain at Eskom – it was impossible to remain if one had already left the organisation. Particular focus needed to be given to section 76 of the Companies Act which required members of a board to act in good faith and proper purpose, with diligence and care of service and in the best interests of the company. Hiring someone with significant public charges hanging over one’s head, which had not been cleared, with more charges stemming from one’s time at a previous parastatal (Transnet) and took the Constitution loosely, was not a fit and proper person to be a CEO of a company. The Minister would not get far with her ambitions with the current Board and she would end up being the fall person for wrongdoing and lack of due diligence and fiduciary responsibility.
Mr Singh thanked the Chairperson for the manner in which she chaired the meeting and the programming of the Committee to meet with the Executive Authority and the Board. He hoped the Minister and Board did not leave the meeting today with the attitude of “I came, I saw, I conquered” because the minds of Members were certainly not conquered into thinking all was well with Eskom. There were many more questions to ask. In a previous motion of no confidence debate in Parliament, IFP Leader Mangosuthu Buthulezi asked why the country was being destroyed for one person. Similarly, why was Eskom being destroyed for one person? Did this one person have so much influence over the Board, Minister and other functionaries in Cabinet? He proposed the Committee call the Minister and Board for a follow-up meeting after the Committee applied its mind on the way forward – answers could only be achieved through a full investigation.
Mr Gordhan said financial performance could seem good until paper was shredded as was the history of big financial institutions. Numbers could tell many stories but there was always a flip side. Clean audit reports were seen in municipalities and departments but auditors only checked a sample of transactions and ultimately it was hoped that sample was representative of what was going on. It was fascinating to note there was no litigation against any media about the assertions made against Eskom – if there was good governance, the Board would surely be worried about the allegations made. If these were lies, why was it not being challenged by Dr Ngubane and Dr Naidoo? Part of the problem was that the Committee did not have the time, or skills, to go through all media reports in detail. If there was such a thing a conscious, as the SA National Council of Churches suggested, there would be an unburdening of what was done to undermine public confidence. The faith community was availing itself to any employee or manager to profess what had been done. The world and Africa was watching SA in how it was allowing the decline in governance, management and delivery of SOEs. Governance and management of SOEs was one of the major concerns of all three credit rating agencies – when a body like Eskom had guarantees of R350 billion and was in default in any kind of way, this would have serious consequences for the fiscus.
Mr Gordhan suggested the Committee call the CEO of the Eskom pension fund to hear what he/she had to say about some of the things said to Members. The Minister had significant powers assigned to herself in the 2016 MOI to hire and fire CEOs and members of the Board – in the interests of the public, perhaps some of these powers need to be exercised sooner rather than later.
Mr Shivambu wondered if the Minister could speak more to why she was withdrawing her opposition to part A of the relief sought by court papers of both the DA and EFF and other interested parties.
The Minister said this was because the matter was not sought against her.
Mr Shivambu thought the important issue to be spoken to more clearly was the context of a captured CEO of a SOE - Mr Molefe worked with a Mr Singh in Transnet where the two channelled hundreds of millions of Rands to a company which was owned by directors with links to Gupta companies. This company then received work from Eskom for hundreds of millions when Mr Molefe and Mr Singh moved from Transnet to Eskom. Tegeta, owned by the Guptas and Duduzane Zuma, then received huge coal deals of Eskom. Mr Molefe was found to be in the home of the Guptas 19 times in the space of 4 -5 months. When Ajay Gupta was interviewed by the previous Public Protector, Thuli Madonsela, he said Mr Molefe was a very good friend of his and spent lots of time in the Gupta house. The Companies Act, Public Finance Management Act (PFMA), MOIs and other key directives, which provided guidance on the ethical conduct of directors of companies, prohibited friends benefiting from that company. This was the issue at the heart of the matter today and was the context guiding what should be done. He agreed that the Committee should demand the minutes of the Board meetings. Information should also be provided on the deals Eskom provided to Tegeta and others. The reason why Mr Molefe was reinstated was because the Guptas wanted to continue to loot Eskom. As the SA Communist Party said, Mr Molefe was brought to Parliament in an attempt to appoint him Minister of Finance – this was a common fact which could not be disputed. When this attempt failed, Mr Molefe was reinstated at Eskom to continue with looting – the Committee would not fold its arms and pretend as if this was not known. Decisive leadership needed to be taken to stop this looting by the Guptas who also unfortunately controlled the President and instructed people to do wrong things. Perhaps an instruction should be given that the Minister should not oppose anything in court in relation to Mr Molefe. The Committee should also deal with some of the deals signed by Mr Molefe as CEO who was being used by the Gupta’s for looting.
The Chairperson highlighted the findings of the Public Protector, as a Chapter Nine Institution, were to be respected as the findings of the Auditor-General of SA were.
The Minister said she was always available to meet with the Committee however Wednesdays were difficult because of it being Cabinet day. Reasonably and democratically, the Minister could not be instructed about what she should or should not do in terms of the court matter- she took the decision to not oppose part A of the court proceedings based on legal instruction. In terms of the MOI, these were dynamic documents which could be changed along with significance and materiality. In terms of her affidavit, the 2014 MOI did not require the Minister to be noted as a party to the employment agreement of the Group CEO (the Minister was appointed in May 2014). Paragraph 14.3.4 of the 2016 MOI required the Minister to be noted – the Minister had changed the 2014 MOI in 2016 to give her the power to be noted. On 7 March 2016, Mr Molefe and Dr Ngubane, in his capacity as chair of Eskom’s Board, concluded an executive employment contract, some three months before the adoption of the 2016 MOI – this was a matter which the court would have to rule on.
The Chairperson asked which MOI was currently in use.
The Minister responded that it was the 2016 MOI – this MOI was passed in July 2016.
Mr Gungubele pointed out section 13.3.2 of the 2014 MOI said the shareholder could appoint a Chef Executive from a shortlist of candidates provided by the Board.
An official from the Department said the 2016 MOI required the Minister to be noted on both the contract and employment to be consistent in terms of appointment processes to become a party to the contract. The 2014 MOI did not require the Minister to note the contract.
Mr Gungubele found this confusing – if the 2014 MOI empowered the Minister to make the appointment, it could not be said the Minister had no interest in the contract. There was some serious inconstancy.
The official replied that the MOIs were consistent on employment processes but the inconsistency was in terms of the Minister being a party to the contract –the 2016 MOI had now clarified this. It was correct that the Minister could participate in the appointment process as allowed for in the 2014 MOI. The 2016 MOI took the process one step further by saying the Minister must now also be a party to the contract.
The Minister found the way in which the MOIs were written to be complicated – the 2014 MOI was not as clear the 2016 MOI was. In terms of processes in place to fix the matters beyond the new Bill, there were a number of processes in play such as a six-month review to look at conflicts of interest. Appointments of chief executives in the public sector was slightly different than the private sector in that in the public sector, Cabinet approval was also required especially in terms of schedule two of the PFMA. After the court hearing, the 2016 MOI could also be strengthened. Another mechanism was the external evaluation of Board members which was done for the past two years – the idea was to give the Minister an opportunity to rotate members before the AGM, if needs be. The next Eskom AGM would be in June/July 2017 so this process was already under way. There was a systemic problem in managing SOEs and this was something to fix in the SOE Reform process – this would remove fragmentation and “looseness” in the relationship between the shareholder representative and the SOE.
The Minister hoped to have the investigation into procurement matters underway soon – not everyone held the same opinion but she wanted to see the SOEs performing more optimally than what they were doing now. She and the Deputy Minister had just come from a meeting with a credit rating agency – she cared that Eskom was financial stable and had good, strong governance as it was important. This was also important to the credit ratings agencies. Eskom did have the highest government guarantee in SA and Eskom had not defaulted on its credit rating. She would take all comments made by Members into cognisance. She subjected herself to parliamentary scrutiny. Everyone would be in court on 30 May and hopefully by then there would be more clarity on certain matters.
Deputy Minister Martins said the Committee raised a number of pertinent issues. In terms of procurement of coal at Eskom, Tegeta was named as being closely associated with the name of the Gupta family. The Department could carry out an investigation, as a matter of urgency, into procurement of coal so that there was clarity on the contracts in question. All companies involved could also be identified along with the period of the contract, scope etc. to ensure there was transparency.
The Chairperson summarised the session by noting the Committee was concerned by the state of Eskom and breakdown in communication between the shareholder and Eskom. The Committee was also concerned by the breakdown of corporate governance principles at Eskom – the Committee viewed the reappointment of Mr Molefe with serious concern. The Committee saw the reappointment as an illegal action until the Committee was convinced otherwise. The Committee supported the decision of a parliamentary inquiry, in line with the rules of the National Assembly, to look into the Eskom Board. The Committee must be provided with the documents required in relation to the correspondence and decision taken to reappoint Mr Molefe and other necessary documents required. The Committee was not convinced by what it heard today and so would appreciate any further information.
The way forward
The Committee decided all requested documentation be provided to it within 14 days.
Mr Singh pointed out the outcome of the court case would also be important. The Office of the Speaker would have to provide the Committee with more resources in order to carry out its inquiry.
The Chairperson said all requirements would be placed in the application. The programme of the Committee would have change.
Ms Mazzone emphasised the need to have the documentation in 14 days. The inquiry could then start in 21 days.
Mr Steenhuisen thanked the Chairperson for the way in which she managed the meeting today. The Committee would need to apply its mind on who was subpoenaed – the full picture would only emerge if the right people were called before the Committee. The Committee should consider calling people from the Gupta family, Tegeta and from Eskom itself to begin to unravel the picture.
Mr Gungubele said the Committee would rely on legal advice in this regard also in terms of the scope of the inquiry.
The meeting was adjourned.
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