Hansard: Statement by Minister of Public Enterprises on Recent Developments at Eskom

House: National Assembly

Date of Meeting: 11 Nov 2009

Summary

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Minutes

UNREVISED HANSARD

NATIONAL ASSEMBLY

Thursday, 12 November 2009

STATEMENT BY MINISTER OF PUBLIC ENTERPRISES ON RECENT DEVELOPMENTS AT ESKOM

The MINISTER OF PUBLIC ENTERPRISES: Madam Deputy Speaker, I would like to thank the House for the opportunity to account to it as a shareholder for Eskom.

Regrettably, the past 14 days have been a turbulent time for Eskom and the economy, due, unfortunately, to a breakdown in the relationship between the board and its former chief executive officer. Unfortunately, this dispute did not remain an internal matter for the company to resolve in terms of its own corporate governance framework, as it should have but, disturbingly, it entered the public domain through groups with their own political and vociferous campaign in support of one party against another. They provided undue pressure through a never ending stream of public commentary that sometimes had no basis in fact or law, and only served to inflame and exaggerate an already complex and difficult boardroom matter. This is indeed lamentable.

As my colleague, Minister Naledi Pandor, commented yesterday, the boardroom of Eskom was politicised. This has wrongly painted an exaggerated image of a company in crisis. Yes, there was a breakdown in the critical relationship between the board and chief executive officer and this is indeed a serious matter. But the fact of the matter was that Eskom and its operations continued. Lights went on, mines are mined, factories manufacture, the wheels of commerce and industry continued to turn. Our homes were lit, and our food was cooked.

The timing of this debate was potentially damaging, as it happened at a time when the Minister of Finance was abroad, raising funds from investors in our parastatal. Fortunately, the damage done to Eskom's reputation was minimal, as investors are well acquainted with Eskom's performance, but those who want to make a political crusade out of boardroom politics need to reflect on the potential damaging consequences for a company such as Eskom and for the economy of South Africa. As one frustrated board person said to me this process: Minister, how can it be that one person can be so important and override completely the interests of this country and its economy?

It is very disturbing to note that this matter also became a racial football, targeting certain individuals who I believe have integrity and only the best interests of the country at heart. Such racial slur, particularly directed at Mr Bobby Godsell, the former chair of the board, goes against what we fought for and codified in Kliptown and is also against the core values of our society and our Constitution, especially the value and importance of nonracialism and building a united, nonracial and nonsexist South Africa. I want to thank Mr Godsell for his exemplary leadership in this moment and for his leadership in the last 15 months.

In the midst of all of this, I am very grateful for the sanity and sobriety that prevailed in important sectors of our country. Madam Deputy Speaker, let me say thank you to Cosatu, to the ANC and to the National Union of Mineworkers, NUM, and those people and forces in our country who chose not to publicly enter this fray but to maintain their discretion in the interests of Eskom and the country in these trying two weeks. They have served this country well. They have also served this country well in speaking out on principles that we all love and adhere to. I also look forward to further constructive engagement with the trade unions, especially NUM and the National Union of Metal Workers of South Africa, Numsa, and Solidarity on matters relating to Eskom. Eskom is probably the most important company and parastatal in our country. We do not deny that Eskom has problems, but we cannot allow Eskom to be fundamentally upset by forces who are just trying to push a political agenda that has no relations to the actual issues that Eskom are trying to address.

In this highly charged and volatile environment, I felt it wise to maintain a prudent silence and to refrain from making public commentary, which would only serve to heighten tensions and embroil government itself in that debate. Instead, the Deputy Minister and I, together with the board, busied ourselves, tirelessly trying to reach an amicable settlement. Days of long hours and complex negotiations ensued. Our aim was to try and reach an amicable settlement that would resolve the matter in the best interests of Eskom and the country. Madam Deputy Speaker, I wish to acknowledge my colleague in the House here, the Deputy Minister, Enoch Godongwana, for his unflagging support, energy and effort in this matter. I also wish to thank the staff at the Department of Public Enterprises and in particular the directors-general for their unstinting and invaluable support.

We tried to pursue options of facilitation, mediation and arbitration, even a negotiated settlement. During this difficult period, a demand arose that the Minister must provide "leadership". As we were to discover, the subtext of this demand was much more sinister. It was, in actual, fact a demand that I, as Minister, override the board and confirm a person in his position as chief executive officer, against the wishes of that board and against all corporate governance principles. As Minister, I refused to override the principles of corporate governance by using my political authority to impose a person in the position of chief executive officer without the authority of the law. The type of leadership I preferred to exercise was rather to work indefatigably behind the scenes to resolve the matter and within the confines of good corporate governance.

At a certain stage, the President's office offered its assistance to break the deadlock, and the board was approached to delay its processes in a final attempt to resolve the matter. This intervention, I must stress, was not taken lightly and was not done to undermine the board but rather to lend it support to resolve the dispute. Government's overriding concern was the strategic importance of Eskom to the economy and to the country, and addressing the highly charged political environment that was infusing this debate and dispute and that was, indeed, creating the false notion that Eskom's operations were being compromised.

Let me say upfront, that this government is completely committed to abiding by the principles of proper corporate governance in all of our relationships with our state-owned enterprises, SOEs. As a shareholder, the Articles of Association of Eskom allow me to appoint a chief executive officer, after consultation with the board. The chief executive officer then enters into a contract of employment with the board, which is governed by company and labour law. Included in that contract are the terms for termination of that employment relationship. It would have been inappropriate and entirely illegal for a Minister to interfere in that contractual relationship and, might I add, I am not a signatory to that contract.

The right of either party to that contract can be asserted in a court of law, a right that this progressive government entrenched.
Madam Deputy Speaker, I am constitutionally obligated to operate within this legal framework, one which has due regard for our country's labour laws and the Companies Act. As a shareholder, I am already attending to ensuring that we align our SOE with the King-III report and the new Companies Act, which is due to be implemented in mid 2010.

Let me stress that the integrity of a board is paramount. Boards are appointed by government and, by law, are obligated to govern the company with the support of senior management. The shareholder oversees the functioning of the board, to ensure that the board and the company give effect to the strategic intent and objectives of government.

I am now pleased to say to this House the board has moved decisively in the last few days, and in the interests of the company and the country, to finally resolve this matter in the following manner.

A press conference was held earlier this afternoon, in which the board announced the measures that are being taken. The following facts are relevant: Mr Maroga is no longer the chief executive officer of Eskom. The search for a new chief executive officer will now commence. [Applause.] Mpho Makwana – You know, just the very thing that I have been speaking about of people using political agendas to drive comment on the chief executive officers of boards is just unacceptable. [Interjections.] Mr Makwana will act as the executive chair of Exco until a permanent chief executive officer is appointed, and he will be appointed by two senior managers...

The DEPUTY SPEAKER: Minister, what is the point of order?

The CHIEF WHIP OF THE OPPOSITION: I don't understand the point that the Minister hon Minister just made. [Interjections.] All that we were doing was expressing opinion that corporate governance has been upheld. That is all, the very point that she made.

The MINISTER OF PUBLIC ENTERPRISES: I find it difficult, Madam Deputy Speaker, that you don't applaud the clauses when I spoke about commitment to corporate governance. You only applauded when I spoke that Mr Maroga is no longer the chief executive officer. It is required that a certain amount of dignity be retained in this House and I...

The DEPUTY SPEAKER: Order, hon members! Can we allow the Minister to finish?

The MINISTER OF PUBLIC ENTERPRISES: Furthermore, a search for a new chief executive officer will now commence. Mr Mpho Makwana, a longstanding member of the board and a seasoned and experienced director and manager will act as an executive chairperson of Exco until a permanent chief executive officer is appointed, and he will be supported by two senior managers in the execution of the chief executive officer's functions. He will also act as an interim chair. In addition, the board is attending to the realignment of board committees and composition thereof, as well as the necessary delegations of executive functions.

I would like to firmly assure this House that we are on track to ensure that Eskom and all state-owned enterprises have the capacity and support to carry out government's strategic intent, and that I, as shareholder, together with the SOE management and boards, will always act within the law and sound corporate governance principles.
Yes, Eskom is on track. The lights are on, and its most urgent priority – the revised multi year price determination application, the electricity tariff application, due to be submitted to the Regulator on 30 November 2009 has and is feverishly being attended to.

Madam Deputy Speaker, if there are any concerns about governance of parastatals in the country, let me assure everyone in the House that this Ministry and the boards of state-owned enterprises have full authority to govern their companies without unlawful or inappropriate interference and, might I add, without feeling the pressures of people who make political crusades out of board appointments or board matters. We say to the boards of these companies, hell yes, you must govern. So let us get back to the business of building our economy and back to the business of Eskom doing the work that it has to do, providing energy to this country.

Afrikaans:

Dr S M VAN DYK: Adjunkspeaker, ek wil graag die Minister bedank en gelukwens dat sy die Eskom-raad ondersteun dat mnr Maroga nie meer die hoof uitvoerende beampte is nie.

Die belangrike rol van Eskom as die suurstof van ekonomiese ontwikkeling is sedert die negentigs oor die hoof gesien. Die ANC-regering het die waarskuwing van die komende krisis van die destydse departement van mineraal- en energiesake reeds in 1998 geïgnoreer. Asof dit nie genoeg was nie, het die voormalige Minister, minister Alec Erwin, hierdie Parlement in 2006 die versekering gegee dat daar nie 'n krisis op hande is nie.

Dit is opgevolg met versekerings van mnr Maroga met sy aanstelling in 2007 dat die raad in beheer is, maar hy het vinnig sy mening verander toe Suid-Afrika in 2008 in donkerte verval het, en toe is die skuld gepak op steenkool wat te nat is, te lae elektrisiteitstariewe en dat onafhanklike kragvoorsieners nie na vore tree nie. Die daaropvolgende beurtkrag en besparings in Suid-Afrika het die ekonomiese groeikoers help afdruk na 'n verwagte 1,5% per jaar.

Benewens die agterstand en die onderhoud van kragsentrales en die feit dat die bou van nuwe sentrales agterweë gelaat is, het die steenkoolkrisis met betrekking tot laegehaltesteenkool en die leemte van kontinue verskaffing daarvan Eskom se steenkoolreserwes afgedwing en ook die energiereserwes tot 'n laagtepunt beperk.

Wat kommerwekkend is, is dat mnr Maroga sedert 2007 oor die steenkoolkrisis ingelig was deur die Olson-verslag, maar dat hy dit blykbaar nie met sy raad gedeel het nie. Daarbenewens het mnr Godsell op 23 Oktober vanjaar – 'n paar dae terug – 'n memorandum geskryf aan Eskom se raad oor 41 aangeleenthede soos deur die Mail & Guardian geopenbaar is.

Hier het ek 'n afskrif van mnr Godsell se dokument in my hande; die sogenaamde "41 points of unfinished business" waaraan onvoldoende aandag geskenk is ten opsigte van raadsbesluite die afgelope twee jaar. Dit het 'n vertrouensbreuk gebring tussen die hoof van die bestuur en die raad. Hierdie 41 punte kom basies daarop neer dat daar groot ontevredenheid by Eskom is oor die werksomstandighede van die werkers.

Die hele kwessie van gehaltesteenkool teen haalbare pryse en die kontinue verskaffing daarvan aan Eskom word ook in die dokument vervat. Ook die herbesinning van langtermynkontrakte met elektrisiteitsverbruikers, die behoorlike bestuur en invordering van agterstallige skuld, die voorsiening van langtermynsteenkoolkontrakte ...

English:

The MINISTER IN THE PRESIDENCY: NATIONAL PLANNING COMMISSION: May I rise on a point of order, Madam Deputy Speaker? The document that the hon Van Dyk has: Is it a public document or is it a document that was stolen from the board room of Eskom? That is my question, because if it is, then there is a fundamental breach of confidence that should be dealt with in terms of the rules of Parliament. Thank you. [Applause.]

Dr S M VAN DYK: Deputy Speaker, I don't know whether he accused me of being a thief, but I will give you a copy of the document after the meeting, Mr Manuel.

The MINISTER IN THE PRESIDENCY: NATIONAL PLANNING COMMISSION: He didn't answer the question.

The DEPUTY SPEAKER: Hon member, the question is whether it is a public document: Yes or no?

Afrikaans:

Dr S M VAN DYK: Agbare Adjunkspeaker, ek dink nie ek hoef daarop te reageer nie. Ek sit met 'n dokument in my hande. Hoe dit in my hande beland het, dink ek nie is ter sprake vir minister Manuel nie.

Mag ek voortgaan?

English:

The DEPUTY SPEAKER: Continue, hon member.

Afrikaans:

Dr S M VAN DYK: Dankie, Adjunkspeaker. Verder verwys hierdie document ook na 'n langtermynenergie-aanbodprogram wat benodig word en 'n langtermynenergiefinansieringsprogram waaraan die Departement van Finansies in die verlede nie genoeg aandag geskenk het nie, mnr Manuel.

Feit is dat die raad Godsell se benadering om Eskom reg te ruk aanvaar het en Maroga bereid was om te bedank. Die res is geskiedenis, maar ek dink dit dien gemeld te word dat die Swart Bestuursforum se opmerking in die media dat openbare ondernemings 'n slagpale vir swart bestuurders geword het nie waar is nie, en dat die ANC Jeugliga se kommentaar dat mnr Godsell rassistiese motiewe gehad het met Maroga se vertrek ook van alle waarheid ontbloot is.

Dit blyk tog of dit 'n invloed gehad het op die politieke burokrasie van die ANC in Luthuli-huis, wat die aankondiging van Maroga se bedanking vertraag het omdat die regering nie die raad van Eskom se besluit wou aanvaar nie. Die ANC het dus ingemeng sonder 'n mandaat van die staat as aandeelhouer ten spyte daarvan dat dit die raad se verantwoordelikheid is om die bestuur se prestasie te evalueer.

Die aankondiging deur die waarnemende voorsitter van Eskom, mnr Makwana, vandag dat mnr Maroga se bedanking van 28 Oktober aanvaar is en dat hy nie meer die hoof uitvoerende beampte is nie, word deur die DA verwelkom. Die vertrouensbreuk tussen mnr Maroga en die raad sou Eskom se geloofwaardigheid net verder in gedrang bring en dit moeiliker maak om die R400 miljard te bekom wat nodig is vir uitbreiding.

English:

The DEPUTY SPEAKER: Hon member, your time has expired.

Dr S M VAN DYK: You wasted my time, Mr Manuel. [Applause.]

Mr L RAMATLAKANE: Deputy Speaker, let me say from the onset, from Cope, that we wish the Minister well in a difficult portfolio. However, we agree with the Minister about the statement that has been made in the House that the problem of Eskom cannot only be placed on one individual. What the Minister did not say, however, is that government must take responsibility for the collective failures of Eskom, because government had been warned long ago about it, but did not heed that warning. The Minister was therefore sure to say that, as government, we take a collective responsibility for the failure of Eskom, and that it will not all be placed on an individual only.

Minister, we do agree with you on the issue of a co-operate governance, but we worry when a co-operative governance is taken to the extent that it makes or seems as if the Minister is a lame duck. We are worried about that and we worry when the Minister does not say a word when other Ministers are making policy decisions for that Minister in parastatal management. We worry about where that co-operative governance is that you are speaking of.

We wonder whether this is in fact the wake-up call. Regarding the problems we have in parastatal management, including the issue around the call that the pressure has been put on you, but we have not seen anything so far. We wonder whether that is going to be only when Malema is speaking about something that the Minister does something else.

I want to say that we must see that independency of the executive in action in order for us to give support for resolving the problems in South Africa. Thank you.

Mr N SINGH: Deputy Speaker, now you see me, now you don't. Is the CEO gone, or is he still around? We don't know, but thank you, hon Minister, for clearing that up.

The dismal state of affairs at Eskom has impacted negatively on the image of our country, while it has deterred international investment in our economy. The latest Eskom crisis proves that Eskom's problems cannot be dealt with by Eskom alone. Eskom's problems have to become the country's problems and all of us who have been forced to pay up to solve them have not had a say in the matter. What we need from government is a clear commitment to turn around Eskom's ongoing management crisis and we rely on you, Minister, with your bold and courageous leadership to see that that happens.

The IFP calls on government to present to this House a detailed Eskom turnaround plan. We also repeat our calls that public hearings must be held in Parliament to receive both public and expert inputs to determine whether there is an alternative way to fund Eskom's huge expansion programme. [Time expired.] I thank you. [Applause.]

Mr L W GREYLING: Deputy Speaker, hon Minister, the public did not deserve this. Our most important public enterprise has been treated like a children's playground, with each spin of the merry-go-round revealing a different person in charge. We simply cannot afford this kind of power vacuum at Eskom at a time when it is asking the public for exponential tariff increases and the government is having to guarantee loans of up to R300 billion for it.

Government should have come out in support of the board at the very outset of this debacle and not allowed the CEO and organisations like the ANC Youth League to turn this tragedy into a farce. The worst aspect of this though is how the public and indeed Parliament was kept in the dark about these developments with no one in government providing the much-needed political leadership. Whoever ends up running Eskom, it is clear that a major overhaul of the governance of this institution is required if the public is to regain trust in Eskom and its ability to provide energy security for our nation. I thank you.

Afrikaans:

Mnr P J GROENEWALD: Adjunkspeaker, ek wil vir die Minister sê, u moet nie hier kom staan soos 'n Pontius Pilatus en u handjies in onskuld was nie. [Gelag.] U is net so skuldig. U kom vertel vir ons in die opposisie dat ons nie moet verpolitiseer nie. Wat het u met u eie lid, Julius Malema, gemaak? Het u hom aangespreek? [Applous.] Het u hom weggejaag? Nee, u moet nie vir ons kom preek nie. Ek wil vandag vir u sê, u het te lank getalm. Hierdie verleentheid van Eskom is nie net 'n verleentheid vir Eskom en vir die agb Minister nie, dit is 'n verleentheid vir Suid-Afrika en die verbruiker moet opdok daarvoor – dit is total onaanvaarbaar.

Die VF Plus verwelkom die afdanking, of dan die bedanking, van mnr Jacob Maroga en ek wil vir die agb Minister vra om te verseker dat die nuwe hoofuitvoerendebeampte 'n bevoegde persoon is wat in belang van Suid-Afrika en die verbruiker sal optree, want Jacob Maroga het bewys dat hy onbevoeg is vir die pos, ongeag politieke inmenging. Ek dank u. [Applous.]

Ms C DUDLEY: Deputy Speaker, thank you, hon Minister, for your frank explanation which has brought clarity around the Eskom saga. This debacle has undermined confidence in South Africa, negatively impacting on South Africans and the world in general.

Minister Hogan, it was our understanding that you had said that government did not see it as its role to interfere and of course the ACDP is encouraged by your explanation and we are relieved that decisions have been taken to put in place leadership that can inspire confidence. We congratulate you on your decisive and rational leadership in this matter, which is critical to the economy of South Africa and our future development. The demand for power is of course rising faster and faster and a capable captain is required at the helm. Thank you. [Applause.]

Mr R B BHOOLA: Deputy Speaker, government's programme is based on infrastructure development and if one of the key institutions, Eskom, doesn't have its house in order, with all the infighting, it is basically holding the country at ransom. What do you say for our strategy of economic and social development?

It is important that we bear in mind the consequences of this type of conflict for institutions for delivery and workers. We don't want the behaviour to spread to other parastatals. South Africa is now getting a dismal record on parastatals. It is very important that our country does not lose outstanding personalities because of race. Furthermore, there should be no political meddling.

Eskom is in a critical period regarding tariff increases and some sound decisions have to be taken. We have demolished power stations and they were bad decisions and government can't keep on bailing out Eskom. The quicker things stabilise, the better it will be for our country. Thank you.

Ms M P MENTOR: Deputy Speaker, the ANC welcomes the statement by the Minister of Public Enterprises, Ms Barbara Hogan, for finally setting the record straight on Eskom and for underlining and explaining to the House the managerial and board conflicts that beleaguered Eskom in the last few weeks.

The Minister has acknowledged that there were problems at Eskom and we hope that they have finally been buried. Although there were problems at Eskom, as the Minister emphasised, the lights kept on burning, and there were no major shutdowns. We have learnt this afternoon from the Minister that not only is an acting chief executive officer and chairperson in place but processes to appoint a fulltime chairperson are under way, as well as processes of finding a new chief executive officer for Eskom.

Eskom went through the squabbles, as is normally the case in a lot of boardrooms, but I think there are also lessons that we need to pick up from their squabbles. One that I will submit as the chairperson of the portfolio committee, would be to tighten oversight mechanisms, because little did we suspect, three weeks ago when Eskom put the annual report before us, that the relational problems between the board and the chief executive officer had deteriorated to that extend. We would submit that we will have to improve our act as Parliament in terms of oversight of state-owned enterprises, SOEs, and we agree with the Minister, in terms of corporate governance issues. We also remind the House that yesterday the Minister of Finance submitted to this House that he and Minister Barbara Hogan and, I guess, that it will be the cluster of Ministers in the economic sector, are reviewing SOEs. When that process of reviewing SOEs is under way, it must be matched in checking whether the oversight those mechanisms are in place are efficient to ensure that boards do what they are supposed to do and management do what they are supposed to do, and the Department of Public Enterprises also do what they are supposed to do.

Accusations have been heaped on government by the media that there is a political interference of some sort and micromanagement of state-owned enterprises. We want to submit that these accusations are unfounded. This morning only, it was announced that government has granted a guarantee for Eskom to borrow an amount of R350 billion from the markets. It would be grossly irresponsible on the part of government, either in the person of the representative member of the shareholder, as Minister of Public Enterprises, or as Cabinet itself just to give these guarantees for loans or to provide equity injections or to give loans to SOEs, without insuring that things are done right amongst those. When things go wrong, it is not political meddling, when the shareholder gives directions and gets involved; otherwise you will be continuing to throw down the money in a bottomless pit, and others will continue to claim bailouts.

The projects of Eskom are well under way. Cabinet has also expressed concerns about the impact that the 45% tariff increase might have, not only on the poor but all South Africans and is looking for ways and means to mitigate the impact of such tariff hikes. But, finally, we know that it is National Energy Regulator of South Africa, Nersa, which will have the last word on this one.

I want to submit that transformation cannot be the monopoly of Blacks or Africans for that reason. All South Africans, Black and White, should participate in the process of transformation and we cannot, just because of the skin colour of a person, drop accusations of racism. We will continue, as Parliament, to demand transformation across all sectors of South Africa, but we will not claim racism only where there are people of a ... in fact, you do find racists and tribalists in all ethnic groups and in all groups. As a result, you cannot just claim the racial track. [Interjections.]

I also to submit that it is not correct that government has not collectively taken the responsibility for failure to heed the call of Eskom of many years to build power stations and to get ready for economic growth. When one administration goes into office, it inherits all the good and the bad things and liabilities of administration before it. [Interjections.] The previous ANC government has collectively apologised to South Africa in the person of former President Thabo Mbeki.

I want to conclude by thanking the Minister for finally clarifying South Africans, in terms of were we stand in terms of Eskom, and we hope that we have drawn lessons that we cannot afford to move from one problem to the other in the state-owned enterprises, and we think that the review of this SOEs, including parastatals that lie across all government departments, should be accelerated. I thank you. [Applause.]

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