Eskom Inquiry: Tsholofelo Molefe; Suzanne Daniels

Public Enterprises

08 November 2017

Chairperson: Ms L Mnganga-Gcabashe (ANC)

Audio
Eskom corporate governance inquiry: former executives: Tsholofelo Molefe; Suzanne Daniels 2
Eskom corporate governance inquiry: former executives: Tsholofelo Molefe; Suzanne Daniels 1

Documents
Submission prepared by: Suzanne Margaret Daniels
Public Protector State of Capture Report
Article By Bianca Goodson‚Äč

Meeting Summary

Documents Handed Out: Submission prepared by: Tsholofelo Molefe [awaited]

The Committee heard from its first witness for the day, Tsholofelo Molefe, who was the former Director of Finance at Eskom. She was suspended by the board of Eskom in 2014 along with three other executives. The evidence leader took the Committee through the testimony of Ms Molefe in relation to her working relations at Eskom during her tenure, challenges at Eskom during her tenure, her role in procurement and refusing to sign contracts and how she new Mr Salim Essa – a known Gupta associate.
 
The Committee then questioned Ms Molefe on unscrupulous communication between executives and the board and tension amongst the board itself, her suspension and if she was fighting it in any way such as reaching out to the Minister, value for money from certain contracts and whether she had any contact with members of the Gupta or Zuma families.
 
Members were concerned by the fact that there were clearly greater issues at play than just the suspensions, the culture of not adhering to correct corporate management and the rapid change n the board. They questioned Ms Molefe on The New Age breakfast deal, vetting procedures linked to procurement, learners passing trade tests at Eskom but then not being absorbed despite promises made by the utility to do so and diesel contracts.
 
There was also discussion on the steam generation project, financial challenges at Eskom during the tenure of the witness, cost escalation at Medupi, robustness of the financial sustainability plan, serious problems of compliance to the Public Finance Management Act and core business being neglected for “managing procurement”.

The Committee then heard from Ms Suzanne Daniels, former Company Secretary and now suspended Eskom Head of Legal. The evidence leader for the Committee asked Ms Daniels to inform the Committee of the purchase and sale of rights to Optimum Coal Holding by Tegeta – Ms Daniels provided evidence on the prepayment, an urgent meeting called by the board tender committee the night of 11 April 2016, the guarantee and the fine levied against Glencore. The Committee also heard about Ms Daniels concerns in this case, what she was aware of, delegation of authority and if the decisions take had legal basis. Also discussed were monies paid to Trillian, the concept of Others Peoples Money at plan and conflicted board members.

Ms Daniels then took the Committee through the pension payout to Mr Brian Molefe and the circumstances around this in relation to governance failures, board resolutions, proposals to the Minister and amendment of the rules pertaining to the pension payout by the people and governance committee of the board.

The evidence leader then guided Ms Daniels testimony of the relationship between Eskom, Trillian and McKinsey, namely, the payment made to Trillian where no work was rendered, the fact that there was no contract between Trillian and Eskom, the message this sent to the poorest of the poor South Africans and action taken by the board and Minister against the “brazen theft”, to use the words of the witness.

Ms Daniels was took the Committee through her thoughts on the disciplinary process against Mr Koko, circumstances surrounding her suspension and her meetings with members of the Gupta family.

The Committee was blown away and outraged by the testimony of Ms Daniels. It asked if she reported what happened to any state agencies, if the Department of Public Enterprises requested her to implement any unscrupulous activity, if there were any threats against her and why the Guptas were present at a meeting discussing Mr Molefe – Members were incensed and asked why Ms Daniels did not question what Ajay Gupta was doing there and why she did not tell them to get lost.

Members questioned if Ms Daniels advised the board on the irregularity of Mr Molefe’s early retirement, if the Minister knew about this pension payout and the Eskom-Trillian relationship, her opinion on the different version relating to the pension of Mr Molefe and the process of prepayment to suppliers. Further discussion was had on the favouring of Tegeta, Ms Daniels role in flouting the law (because Members felt as Company Secretary part of her job was to ensure the board was compliant with legal prescripts), why she should be believed when she was part of the meeting where the Eskom board tried to convince Members the pension payout to Mr Molefe was in order and reasons for her suspension.

Ms Daniels was asked how Mr Koko escaped suspension, the relationship between Mr Koko and the current chair of the board, if the board was influenced by the Guptas, if Mr Khoza was a Gupta conduit and the fact that the name of Mr Gouden weaved through the testimony of Ms Daniels – this called into question integrity of board members and whether they could be declared delinquent directors. Members also wanted to know which issues were discussed in the report Ms Daniels prepared for the Minister. It was recommended the Committee write to the office of the Gauteng Judge President to inform him of the Committee’s discussions today and that he was aware of the abuse relating to state capture. 

Meeting report

The Chairperson read the oath to Ms Tsholofelo Molefe, who was the former Director of Finance at Eskom.
 
Ms Molefe took the oath.

Adv Ntuthuzelo Vanara led the evidence collection.

Witness: Ms Tsholofelo Molefe
Adv. Vanara: Can you just give the Committee a brief background of your academic and working experience.
 
Ms Molefe: I am a chartered accountant by profession. I started my articles with Coopers and Lybrand having completed a BA in Accounting and Finance in the United Kingdom through the British Council’s scholarship. I then went through to complete the qualifying examination of the accounting board which qualified me to become a charted accountant. Following my articles, I then moved to IBM as an internal auditor for three years. I then moved to Liberty Group, as a senior internal auditor, I then joined ABSA, before the Barclays' merger, in 2001 as a senior manager in audit and risk management. I then moved to FNB as a CEO in the personal banking segment for a very short while after which I joined Eskom in 2005 as a financial manager in the transmission division. I then moved to become a general manager of finance and business services in the same division for five years after which I was appointed as the head of customer services for the Eskom Group. I was then appointed as a finance director in Eskom in January 2014. So, I spent three years as head of customer services, two and half to three years in customer services, and then I moved over to being the finance director of the company.

Adv Vanara: We are going to focus this discussion on your role as the finance director. By virtue of your position, you became an executive director serving at board – is that correct?

Ms Molefe: That’s correct

Adv Vanara: Can you just explain to the Committee, after you became the finance director, who was the Group Chief Executive that you served under?

Ms Molefe: When I was appointed in January 2014, Mr Brian Dames was still the CEO. He then resigned from the company and left in March 2014 after which an interim CEO was appointed, Mr Collin Matjila, for six months, effective 1st of October 2014. Mr Tshediso Matona was then appointed as the CEO of the company until both of us were suspended from the company in March 2015.

Adv Vanara: Can you share your working relations with the then acting Group Chief Executive, Mr Matjila.

Ms Molefe: I had known Mr Matjila for several years before he was the acting CEO because he had been a member of the board of the company but, in addition to that, he was also chairperson of the board tender committee and, obviously with me being appointed the financial director of the company, I was also chairing the EXCO procurement of the company so therefore I had several engagements with him in preparation for the board tender committees on various occasions so my relationship with him was about discussing what would be presented before the board tender committee, on recommendation from the EXCO procurement committees, and therefore I continued the relationship with him going forward. I think suffice to say that during that time, when I was the procurement chairperson and he was the board tender chairperson, the relationship was fair, really, there were no issues when he became the acting CEO, to my knowledge.

Adv Vanara: When you became a member of the board, the non-executive director, who was the chair of the board?

Ms Molefe: The chairperson of the board was Zola Tsotsi.

Adv Vanara: We heard yesterday, amongst challenges that Eskom faced in and around 2014, related to the financial position of the company and you were appointed in the midst of that challenge – what was your responsibility?

Ms Molefe: My responsibility obviously, having taken over from the predecessors because the issues of the company’s financial challenges had been ongoing since we had obviously applied for a tariff application and we received lower than what we had anticipated and the operational challenges were becoming more and more and therefore because of that we had some financial issues we had to deal with, so my first, obviously my first initiative was to make sure that we put in place a long term sustainability plan in place, present it to the board strategy session, which took place around April 2014, and then present it to the shareholder for consideration and it really contained issues around how do we make sure that as a company we got support from government, really indicating that the tariff increases that we had received were not sustainable, but secondly, that we had challenges from an operational perspective side which in themselves were creating some financial issues and I think it has been said publicly around issues of generation maintenance and so forth and we had to put in place, as a company, a programme that we called the business productivity programme for cost saving initiatives so that we were able to survive and make sure the company’s sustainable. So we presented the plan to the board strategy session in April, under the chairmanship of Mr Zola Tsotsi, and the committee then obviously looked at the plan and there were concerns it was not adequate enough to get us out of trouble – in their view, from the chairman himself, said we need a more robust plan which we need to give to the Minister of Public Enterprises in three months time, which would have been around June 2014. I then, the chairman of the, well CEO, then requested we be allowed time to work together and review our plan and we then had a meeting with him to discuss the way forward. He then requested that we should actually bring people in to come and help us with the financial sustainability plan and we then had a meeting over the weekend, because clearly it was urgent, there was no time to waste, so that we could then on Monday provide the chairman with a plan going forward. What in fact struck me was that in the meeting we had over the weekend, he suggested that we, he knows people that can come help us with our financial sustainability plan. In my questions around what sort of help would they give us, he indicated that they had done some work in Transnet, in SAA and, I think the City of Johannesburg or City Power, if I’m not mistaken, regarding balance sheet optimisation. We were sitting there and a gentleman joined us who I didn’t know I had actually met him before and was introduced to me again and his name is Salim Essa and the question of how we then take the matter forward, in terms of the financial sustainability plan, was discussed. He, Salim was then asked to tell us which company would help us and he indicated that Regiments Capital would be the company that had done good work in Transnet, in SAA previously in terms of balance sheet optimisation. So I listened to obviously what would be the way forward. We were then asked to have a meeting with Regiments Capital as soon as possible, and having not met Regiments Capital before, we had worked with various financial services advisers even before my time, my predecessors, I had not heard of Regiments before, so we were open to everyone that comes to us and want to help. So, this was on a Sunday we met, a meeting was then convened for the following day to have a discussion with Regiments in terms of how they could help Eskom sort out the financial sustainability plan. In the meeting, Mr Eric Wood, who was the CEO of Regiments Capital, came to the meeting himself, I can’t remember if he had anyone else, I think he had one other official with him. Representing Eskom was myself, Dr Steve Lennon, who had been asked by Collin Matjila to join us. We then had a meeting with them and really the purpose of the meeting was first to establish what does the company do, how do they think they can help us and do they understand the challenges that the company is facing and how big the balance sheet of Eskom is. We then asked them if they had done any work for Eskom previously and they did say they had previously worked on a Eurobond in 2005 with Goldman Sachs for Eskom which both myself and Steve Lennon were not aware of. We then asked them, given the size and magnitude of the Eskom balance sheet, do they think they have the capacity to be able to assist us. They then indicated that they do not normally work alone, they would actually partner with McKinsey in most of the contracts that they had done. We then, Mr Matjila then asked them to prepare a proposal for us which we could then consider and come back to us. After the meeting I then went to Steve Lennon to ask him what do you make of this, have you heard of these people, this company and he said no and we talked about the procurement process and I said no, we are going to have to follow procurement process and I will speak to Mr Matjila on that. I then went to Mr Matjila’s office immediately and I said to him that we have to follow our procurement process, I do accept that we probably need a robust financial plan, if that’s what the board requires, if that’s what the Minister requires, however there are other financial services companies that have been lining up for work at Eskom and that we would have to follow a very fair and transparent process. He then in his response said to me that unfortunately we are not going to do that, we are going to go with Regiments Capital because Eskom is known to have appointed a financial services advisory in the past and whatever efforts has been put in place has not yielded results and he said to me that it is an emergency, as we heard from the board the board would like a plan presented to the Minister in a few months time. I said it is an emergency, we need to check the emergency procurement process of Eskom, it’s clearly defined what an emergency is, I believe that it is an urgent matter however there are ways of taking it through a modernised procurement process so that it is fair and transparent. He then said I can see you’re uncomfortable with this matter, if you’re not comfortable I will sign the agreement with Regiments. And that was when my meeting with him stopped.

Adv Vanara: Who introduced you to Mr Salim Essa? Is it Mr Tsotsi or Mr Matjila?

Ms Molefe: I actually met, as I indicated, I met Mr Salim Essa, but at that time I didn’t know who he was as well, very early after my appointment I was called by the Chief of Staff, I think yes, of the Minister at the time (Mr Malusi Gigaba), Mr Thamsanqa Msomi, where had had asked to speak to me having been appointed as the finance director of the company. He had indicated to me that there had been complaints previously about Eskom not transforming from a procurement perspective and that they hope that, obviously with me being appointed, I understand the transformational objectives of the company and Eskom as a state-owned entity needs to make sure that it accelerates transformation. I indicated to him that it’s always been a strategy of the board that we will obviously drive transformation in the company and it has been the case for a while. He indicated to me that there are suppliers currently that are complaining that Eskom, black suppliers that are complaining that Eskom is not providing them with contracts and they would like to meet and just lay their complaints. I indicated to him that I no longer chair the procurement committee – we do have a Chief Procurement Officer and I believe that those issues should be directed there however I do not have issues dealing with people and directing them to the right levels. He then said to me that he would make arrangements for me to meet the suppliers that were complaining – when I met the supplier it was Salim Essa and when I asked him what company he works for he did not divulge the company, he said there are various companies that have been trying to do business with Eskom and they were turned back. He in fact complained about my predecessors that they always went for white companies and he said in their case they had seen results and they always work with McKinsey, that’s what he said to me. So when I met him for the second time I was being introduced to him then by Collin Matjila, that’s when I realised I have met him before.

Adv Vanara: The meeting in April of the board, which was not happy with your financial sustainability plan, where suggestion for an external service provider to assist you with the plan came about – had it ever served before the then Minister for his or her consideration?

Ms Molefe: It was, remember at that time we were going through a transition, we had, I think at that time Minister Lynne Brown was being appointed as the Minister of Public Enterprises but my predecessors had previously presented strategies to the board which then the board presented to the Minister of Public Enterprises which would have been Malusi Gigaba previously. So I guess the issue was the transition into the new Minister that the board needed to appraise him of what was happening in terms of what was happening from a financial sustainability but also what was happening with operational challenges as well.

Adv Vanara: So in your understanding, the individual, or individuals, were unhappy with your financial sustainability plan, was your board?

Ms Molefe: So the discussion was around is it robust enough, the chairman, Zola Tsotsi himself, said that he believes we need a more robust plan and the Minister is not going to be happy if we cannot provide that plan in three months time so we need to go back and look at what else needs to be done. There were rigorous debates in the board around what the challenges were and really I think the board was trying to apply its mind as well because you had various other members of the board other than Mr Tsotsi and Mr Matjila.

Adv Vanara: What was urgent about procuring these services?

Ms Molefe: The issue that we were faced with, and it’s really about the urgency of procuring the services, but we had been saying for a while that we had financial challenges, it was important for us to settle those issues because those issues had been going on for a while since the MYPD3, the tariff determination application of 2012/2013 so it was important for us that we have an engagement with government on how we move forward in terms of the funding requirements of the company. One of the challenges we had was that we are obviously highly geared as a company for us to be able to go out on to the market to see borrowing, we obviously need to have cost-reflective tariffs which would obviously back up our revenues so what was important was that, because we knew that we did not have very good financial matrix, we needed support from government to understand what are some of the options that we have – are we going to have equity or do we have additional guarantees from government so that we can go out to the market, is there any possibility of any additional tariff adjustment so that we could be able to meet the operational requirements. And of course we have quite a huge build programme which obviously was one of the reasons why we needed to make sure that we have the funding needed.

Adv Vanara: The Monday meeting you left each other where Regiments was supposed to furnish you guys with a proposal – what happens then?

Ms Molefe: They, after we left, they obviously said that we would put together a proposal on what it is they believe they can help us with. In my discussion with Collin I said if it’s an emergency you have to tell them to give to us in less than five days and, however, what happened is that they came back to us within 14 days, if I remember very well, because of the things I raised when they sent their proposal, in fact they did not send the proposal, they sent a draft agreement of the, what the nature of the services they would provide is, what the pricing and the terms would be and that was sent within 14 days. I then went and I actually wrote an email to Mr Matjila because they sent me the agreement and I said to him that it is on this basis it does not constitute an emergency, they have taken 14 days. In terms of our procurement process, if I recall we could request suppliers or service providers to give us responses within 14 days on an urgent basis and therefore this did not constitute an emergency. He then, I sent him an email, and copied the head of legal then, and I said I suggest the legal head give us his opinion on how we move on this matter – I then forwarded the agreement to them. He then called me in the evening and reprimanded me for putting such messages on email and asked for a meeting. We then had a meeting the following day and he felt that he was not being supported, he had a mandate from the shareholder and the board, there were certain things that need to happen urgently and we don’t have time to waste with our long-winded procurement processes and I said to him as the CEO, or acting CEO, of the company, he was within his every right to go back to the board and ask them to amend the delegation of authority if he felt that it was impeding on us to deliver on time. He then said that he would do no such thing. I then gave him the agreement. After I had given him the agreement, legal looked at it, legal did not make any major changes to it, they then printed it for signature. I then left it in his office for his signature as he indicated that he was going to sign the agreement. After I had done that I remembered I had a meeting with my team, a strategic session at our Eskom Academy of Learning, he called me and said to me I need to sign the agreement. I said to him I am not going to sign the agreement based on our previous discussions. If he feels we need to do this work, having not followed process, he has to sign the agreement. He then threatened to say he is going to bring a driver over to me so that I can sign the agreement – I said I will do no such thing. He asked me to put it in writing and give my reasons why I would not sign the agreement. I did that, I put it in writing, and what I did is that when I sent it back I sent it back to him as well as the chairman of the board as well as three other members of the committee of the board who were chairman’s of subcommittee members –I think if I recall it would have been the chairman of the investment committee, it would have been the chairman of the social ethics and sustainability committee and I think the chairman of the audit committee. A couple of days later Mr Tsotsi then called a meeting based on the email I had sent wherein I provided why I was not comfortable signing the Regiments deal because we had not followed process and in the meeting I got support from other board members that because we had not followed process because when you looked at these agreement, the pricing terms was not competitive, it would appear that we should have followed process and although this is urgent for the Minister, it appeared we would not have defined clearly what the financial sustainability programme would constitute and would be part of the definition of an emergency. The chairman of the board, if I remember vividly, was actually not happy with me as well – he said that we are busy wasting time with long-winded procurement processes and heads are going to roll if the Minister does not receive the financial sustainability plan in June.

Adv Vanara: Just give us the name of the chair and the chairpersons of the various committees that served in the task team.

Ms Molefe: The chairman of the board was Mr Zola Tsotsi, the chairman of the investment committee, who served also as a member of the task team, was Mr Mafika Mkhwanazi, the chairman of social ethics and sustainability was Dr Boni Mehlomakulu and the chairman of the audit committee was Ms Bajabulile Luthuli.

Adv Vanara: As a finance director you must be familiar with the regulatory framework around procurement. Let me remind you, it is the Constitution, Section 217, it is the PFMA, Treasury regulations and the policies of an institution – is that correct?

Ms Molefe: That is correct.

Adv Vanara: In your testimony you have referred to both the then chairperson, Mr Tsotsi, and the then acting CEO, Mr Matjila, as people who have absolute disregard for the laws governing procurement processes – is that understanding correct?

Ms Molefe: I would say yes and one of the reasons for that is when I sought legal opinion from the head of legal, Ms Neo Lesela, on the specific matter, she actually quoted section 217 in the memo that we, that I had presented indicating what the requirements of section 217 are and under what circumstances could one be exempted from following section 217. That memo itself said, in my memo I quoted his legal opinion and I sent it through to Mr Tsotsi, Mr Matjila and the three board members that I mentioned and because, having received that in writing, the chairman, Zola Tsotsi, indicated that we are wasting time with long-winded procurement processes, suggest to me that he had no regard of those procurement regulations.

Adv Vanara: The proposal that you got from Regiments, you said there was a fee structure, how much were they going to charge Eskom?

Ms Molefe: So maybe just to step back, in their proposed agreement, what they were proposing to do was a number of initiatives for the company in terms of how we unlock cash on the balance sheet, such as the sale of non-core assets, the sale and lease back as a possibility and how, one of the very big initiatives they had suggested was monetisation of coal contracts and they had made certain assumptions about what the value of the coal contracts that we have as Eskom was, they had made certain assumptions around what the expected tonnes of coal would be required over the next 50 years and therefore came to the conclusion that the present value of those contracts was really essentially undervalued and they believed that we could work with one of the financial services providers, through themselves, to actually seek funding through those contracts and we were opposed to that because, first of all, the contracts do not necessarily belong to Eskom, it’s a contract between ourselves and coal miners – that’s the first thing. The second thing is that we could not attest to the assumptions that they had made in terms of the price of coal, the current price of coal, and what the future price of coal would be and also what the volumes that Eskom would require in the future. When we looked at it with the primary energy department we felt that it did not make sense. They had suggested that out of that we would probably save the company R10 billion and their fee structure was on a escalating basis such that, even if they were able to, though it was a risk-based fee structure, they were quite confident that they would be able to save us R10 billion and the fees that they would obviously charge would be up to 250 basis points which, when we looked at it, was quite substantial and close to about R500 million if my calculation is correct.

Adv Vanara: I just want us to conclude on this agreement or this proposal, where does it end? What transpires of it? Do you eventually get to approve that they render this service and, if so, who authorises that you could enter into agreement with Regiments?

Ms Molefe: What we did is that in the end we did not, the board did not, authorise the agreement, after I had sent the memo to them. They however said that we need to do a high level desk top exercise to understand whether the initiatives they were presenting to us, that Regiments was presenting to us, were viable or not. So a high level desk top exercise was done on the basis that we had run out of time, the Minister was asking for a plan in a few weeks time and we had not even done that other than the plan that I had prepared with my finance team and therefore the board felt that we could probably do a high level desk top exercise which actually cost us about R800 000. I then insisted that the board should actually approve that based on the fact that we had not gone through a commercial process on the basis that if that’s how the board felt, it’s urgent, it’s understandable, I still need a mandate in writing. So we then prepared the document and the board was happy to approve that on the basis that, let’s do a high level desk top exercise and understand what are these initiatives because it could be that they are coming up with initiatives that we have no explored previously and could benefit us.

Adv Vanara: As a finance director, having done the desktop, or allowed them to do this desktop exercise, you sat with a product that had come from Regiments, what value, if any, was that result to Eskom?

Ms Molefe: I would say very little. The reason for that is that they would have to show us how this initiative would work in practical terms. We went through, I think if I recall there must have been 10 or 15 initiatives that they put on the table. Just a number of them we said were not viable and they would not be unlockable, one of them being the coal contract monetisation. Some of them, such as the sale and lease back, we had already explored in the past and therefore felt we could not continue with them. Others we were already doing because, even before my time I indicated my predecessor had started a process of looking at what initiatives could we do to unlock cash on the balance sheet and on recommendations that had been done previously, some of the initiatives that they had suggested were already in progress by the team in finance. So there were was very little that we took over from them – it was really an issue of, let’s confirm whether we’re not missing anything, let’s make sure that everything that has been presented here and if I recall back, I probably don’t remember everything, but there was probably one or two that we probably overlooked but you had to take it through a process to see if its implementable or not and practical for business to do. So the high level desktop exercise was really just a high level initiative –for each one of those you actually had to unpack them within the business and obviously do a risk assessment of each one of them and see if they could be done or not. At the end, after that had been done, we found very little could be done from what they proposed.

Adv Vanara: My second last question relates to the New Age deal – I think there’s evidence before the Committee, and I wouldn’t want to burden you further with evidence that is before the Committee, you did not sign the New Age deal, you refused – I want you to just assist the Committee in understanding why you wouldn’t sign that deal. Secondly, I’d like you to take the Committee through how the board dealt with Gobodo Report.

Ms Molefe: In terms of the New Age deal, it was under the ambit of our corporate affairs department led by an employee who reported to Erica Johnson. When the matter came to their attention they obviously had to look at whether we had budget for that or not, whether there was a need in the company to do such a deal. They had a direct discussion with me to say we’ve been asked to do this, we think we don’t have budget for this and one of the problems is that we did not have a policy in the past on this matter – we were in the process of drafting a policy for the board to approve so that we could decide from a sponsorship and others perspective what it is that the company could do and not do. When we looked at the budget, we found that we had very little budget. In fact we had cut budget quite extensively and probably had, if I recall, R12 million left of the budget for the year and thereafter decided that we would not do any more sponsorship given the financial challenges that the company was going through. We then agreed on that basis with Erica Johnson, as my colleague, and that’s where I left it. The next time I saw it was where I was sent an email with the contract when it had already been signed and it had been signed by Mr Matjila himself and it had been witnessed by two of our executives and in fact it had already been signed on the other side by the third party, the TNA officials. So when I then received it, I sent an email, a response to them to say we, I’m not sure if you’re aware that Mr Matjila cannot sign the contract of R43 million on his own because what happened was that it should have gone through a process of approval as the Chief Executive, obviously he was acting and I copied Mr Matjila on the matter to say that I think you have advised him that in terms of our delegation of authority, he does not have the delegation to sign this contract. Mr Matjila then called me to say I’m aware of what I have signed, I have a mandate, the same story that he told me with Regiments Capital and I said to him look, you do not have the delegation of authority as the chief executive to sign a contract of this size – my suggestion is that we present this to the board so that the board can decide whether they want to ratify the contract or not. He said to me that he is not going to do anything like that. I then spoke to our legal counsel at the time, Mr Mohamed Adam, regarding it and he had informed that he was aware of it, he had been pushing back on it simply also because the contract was signed in such a way that it had no exit clause – it was a three year contract for R43 million with no exit clause so he was concerned about the legal implication for Eskom as well and he already had a discussion with the chairperson of the audit committee on the matter. On the same day I happened to have a meeting with the chairperson of the investment committee, Mr Mkhwanazi, he did not sit in the audit committee, if I recall, but he did indicate that he’s aware of it and the bard will be starting an investigation and has requested that the company secretary consult with Gobodo forensic investigation to start the investigation on the matter. The matter was investigated and during that time we were also preparing for our half year interim results and our auditors were Sizwe Ntsaluba Gobodo so obviously the Gobodo forensic report indicated that there was obviously wrong doing on the part of Mr Matjila, when they look at our procurement processes he should not have signed a contract of this nature on his own without taking it through the proper governance structures. They then started to seek legal action on the matter and by the time that happened I think Mr Matjila obviously stepped down as the acting CEO and Mr Matona came in and he obviously reverted, Mr Matjila reverted to being a board member. So the legal opinion, if I recall, indicated that, gave some options to the board, in terms of what they could do, because Mr Matjila was no longer a member of the executive committee there was very little recourse in terms of disciplinary measures and therefore they needed to explore whether they wanted to take criminal charges against him or whether they wanted to claim the amount that had been procured with TNA or even, and also report the matter to the Minister. I’m aware that the chairman of the audit committee tried on several occasions to engage with the Minister of Public Enterprises but I’m not sure what transpired after that – it was a matter that the board was seized with many times in terms of reporting it to the board. To my knowledge she said that all attempts with the Minister had failed, that’s all that she said. Our auditors at the time when they picked up that there was a material irregularity by one of the executives or by an accounting authority, they felt that they need to put a matter of emphasis statement in their audit report that they were preparing for the financial statements. What was important for this financial statement was that we needed them for our prospectors and due diligence that we needed to do for us to be able to go and raise international bond overseas and this was around October. So it was very important that the board sign up on the financial statements, we would obviously then have a public announcement on the results and then we would go out to the international market to raise funding. The board then decided that they would take the advice of the internal auditors that obviously as the board they would like to make sure that the right things is done and they had been seized with the matter of how do they deal with this material irregularity. So they did put measures in place, it was approved by the board and in fact a meeting was called to approve the financial statements with this matter of emphasis statement. However what happened on the day of the committee, which was a few days before the results announcement, Mr Zola Tsotsi called me to say that he is going to cancel the meeting, the meeting can no longer happen and I asked him why because he knows that we need to go out to sign this results so that we can go out to the market, he said it’s because of pressure from outside but he did not divulge what pressure that was. I then called all the board members and explained to them how important it was that they signed off on these financials before the results announcement because we cannot have the results announcement if the auditors had not signed off and therefore they must approve the financials. So the board members aligned with my thinking, they supported me and they said they would continue to have a board meeting without Mr Zola Tsotsi. The meeting did take place, without Mr Zola Tsotsi, the board then decided they would select an alternative chairperson at the meeting, which they did, and the financial statements were then approved by the board at the time however what happened is that I think, in terms of how the meeting was convened, after Mr Zola Tsotsi had cancelled the meeting – remember that he had convened the meeting as the chairperson of the board but then he called me to say that he is going to cancel the meeting and he did cancel the meeting but the board then decided that they would continue with the meeting. Unfortunately there was a technicality from a process perspective in terms of how the second meeting was called and it would appear that that meeting was null and void and therefore Mr Zola Tsotsi called me to inform me that the meeting that we had to approve the financials was null and void and that he was having a discussion with the Minister on the results announcement, the results announcement would be cancelled but he was not aware that I was having a meeting with the Minister myself at the time and he wasn’t at the meeting. So I then called the board members, I said look this is what has happened, the board then decided no we will meet tonight, which was on a Monday, and they did approve the financials. So essentially that took place.

Adv Vanara: Can you just give us, you mentioned two dates where the first was the technically invalid meeting, where Mr Tsotsi was not there, then there was a second meeting which was the successful meeting where the statements, the annual financial statements, were adopted – can you give us those dates please?

Ms Molefe: So the first meeting, if I recall, was around the end of November, forgive me if I don’t remember exactly the date and the results announcement was I think around the 5th of December. So the first meeting with the board members, which was a special board meeting to approve the results with a revised audit opinion, was on a Sunday so that would have been around the 3rd or 2nd of December. The following meeting would have taken place on Monday in the evening which was a day before the results announcement so it was probably around the 4th. I’m not sure of the results announcement was the 4th of 5th of December.

Adv Vanara: There will be minutes of board which would assist us with the dates.

Ms Molefe: There will be.

Adv Vanara: Just one last thing, you paint a picture of Mr Tsotsi as somebody who abuses the law. When it suits what he wants to do, he uses the law. When the law does not suit what he wants to do, including the Constitution which is the highest law in the land, he utterly disregards that - is my observation of that accurate?

Ms Molefe: So I really don’t want to speculate but my sense of what really transpired was that he was under pressure particularly when I asked him why he wants to cancel the board meeting to sign off the financials, he indicated that he was under pressure from people outside. So I would say that it was probably because of pressure. I cannot really comment on whether it is in his nature to be able to you know abdicate the law.

Adv Vanara: You were suspended, finally left Eskom – can you take the Committee through that and that is my last question. Thank you.

Ms Molefe: I was suspended on the 11th of March alongside three other executives. When we were suspended the board had had two meetings – the first meeting was on the 9th of March. I wish to indicate at this point, it was a new board, the board that had been deliberating on matters that I have just presented now to the Committee, had left in December 2014 with the exception of Mr Zola Tsotsi and the exception of Ms Chwayita Mabude, those were the only members that came back and the rest of the board members were new to the board of Eskom. When we were suspended there was supposed to be a meeting on the 26th of February which would have been the first board sitting, formal board sitting, and essentially the board, that board meeting was very important for us as well because we had just concluded our business plan which in terms of regulation also needed to be approved from a PFMA perspective because we were submitting our funding plan and as well as the borrowing programme so that was important for us. However that meeting, without any reason, was cancelled. We then had the next meeting called, if I recall so by SMS, on the night before on the 8th to say there’s an urgent meeting that has been called by the chairman and we had been asked to convene on the 9th of March. That meeting was then a special meeting where Mr Zola Tsotsi informed the committee that he had been requested to do an investigation into the state of affairs of Eskom specifically the financial challenges, the operational challenges, the delay in the build programme and any other matters that the board or the Minister was uncomfortable with. The board then felt that they have just stepped in, they are aware that the executive management is dealing with quite a number of things, they do not support this investigation, it is only going to take time of the executive members when they should be dealing with day to day affairs. They then requested Mr Tsotsi call the Minister and come and explain why it was important to have this inquiry, which was what it was called. The meeting was then adjourned shortly thereafter and we would be informed on when the next meeting would be. The next time we were called by SMS again at night it was on the 10th of March where we were called to a meeting the following day to say that the Minister may be coming to the meeting. We started the meeting with Mr Matona just giving his account of his 150-day plan essentially and shortly thereafter the Minister of Public Enterprises joined the meeting and after she joined the meeting obviously raised issues around the bugs that were in the boardroom, there was a lot of leakages in the media and he’s been asking Mr Matuna to deal with those matters and he’s not happy that they were not being dealt with decisively. We were then asked to recuse ourselves after that, it must have been after 30 minutes, around 10 o’clock in the morning, and the next time we were called in was later in the afternoon. Mr Matuna was called first and he was then told that he would be suspended and I then was called after him and I was informed that I would be suspended. I was actually issued with a letter of suspension that indicated that Eskom has decided to do, the board of Eskom has on instruction of the Minister, had decided to do an inquiry into the state of affairs and because I’m the executive that is responsible for one of the matters that would be investigated, I’m being asked to step aside so that I do not interfere with the investigation process. What was interesting however was that they did say we had done nothing however should we not provide our laptop devices and so forth, further disciplinary measures would be taken against us. So it was quite confusing at that time to say that we have not done anything wrong, you’re asking us to step aside however there would be further disciplinary measures against us for not complying. So we then signed the letters, it was then very clear on the following day when Mr Tsotsi was on the news that there was an inquiry. We were informed the inquiry would take three months but two months into the suspensions we had still not heard from the board on whether the inquiry had started, what were the terms of reference because we were informed that we should be, we would actually be called to testify into the inquiry so I think one can understand we needed to know, we two months into the process, the inquiry hasn’t started, you said to us we would be called back in three months time but we haven’t started. Shortly thereafter I started engaging my lawyers, I started asking questions around what are the terms of reference of these inquiry, when do we expect to be called and I was getting responses intermittently and I kept on writing to them. Eventually they called me to have a discussion with me around an amicable exit from the organisation. In that view they felt that we probably had reached a point where we could no longer be able to work together considering the fact that the investigation would also take some time so it was probably best for us to part ways and that I continued my career. And that’s what essentially happened.

Discussion
Dr Z Luyenge (ANC) appreciated the testimony. He asked Ms Molefe when she realised the directives or communication between the acting Group Chief Executive and the board were in any way unscrupulous. What was the general norm or what was the normal communication channel between the board and management? With the meeting of the 8th convened by Mr Tsotsi through SMS outlining the inquiry to be held, he wanted to know when Ms Molefe became unsettled by such an investigation. Who was meant to be the champion of this investigation – management or the board?
He asked if it was normal to get suspended in a meeting or if it was something open for dialogue. Was the Minister part of the meeting that resolved the suspension? If this was the case, would this be normal or appropriate? He asked Ms Molefe if she made any appeal or communicated with the Department pertaining to the suspension before the lawyers were engaged. If so, was the response satisfactory for Ms Molefe?

Ms Molefe replid that since the board came in, there were always questions and suspiciousness about what the board was coming to do especially given how the previous board was removed. For a while there was an element of mistrust between board and executives – the board probably felt it was informed management should step up or it was uncomfortable with how things were done. On the other hand, management did not understand what the issue was. Less than two years into his role, the new chief executive requested a strategy review of the company to ensure the company was turned around. The strategy review process was a thorough one and management was ready for implementation. This was halted because the new board felt it needed to socialise itself with what management was doing – this caused some discomfort on the side of the executives. For almost five months the strategy could not be implemented because the board was new and needed to familiarise itself with what was being done and go through new approvals. One of the perceptions was that executives were resisting transformation – she always provided assurance that there were plans in place and an enterprise supply development programme in place to ensure transformation was taken seriously. Board and management questioned each other’s intentions – it was that kind of relationship for a while. The various resignations took her by surprise such as that of Mr Dames – she questioned what was going on and left her unsettled especially as no one was talking. The executives themselves probably did not know who to trust or speak to - it was becoming toxic at some point because of this. There was little talking of the “soft health” issues in the organisation and this created much tension between the board and the executives and among the executives themselves.

Dr Luyenge, having gone through the academic qualifications of Ms Molefe, especially public administration background, noted that one of the principles of public administration was a politically accredited dichotomy that required the doctrine and phenomenon of working together – he asked if Ms Molefe thought that existed in Eskom.

Ms Molefe responded that Eskom had a number of challenges – she was always mindful of this and there were initiatives for everyone to work together for the good of the company. There could be personality issues, trust issues etc but it was important to understand why this was the case. the chairman and the CEO at the time initiated interventions to assist the board and EXCO at the time to go through some of the issues creating tension and how to then move forward – these sessions were professionally facilitated. There were issues but efforts were made which did result in change in management and the board.

Ms N Mazzone (DA) thanked Ms Molefe for being present today. She thought that fundamentally there was a bigger problem at play than just the suspension – it seemed from the testimony of Ms Molefe that there were inherent and pre-existing problems that were simply exasperated by the fact that Ms Molefe had a problem with signing contracts that were not, in her opinion, procedurally and legally sound. It seemed there was a behavioural pattern at Eskom that if someone did not like the way something was done, there was a way to push the matter forward.

She asked Ms Molefe if there was such a culture of not adhering to strict and correct corporate management at the Eskom board. There is agreement that bureaucratic processes can be long-winded but in many instances these processes were long-winded for a reason especially when dealing with public funds, as Eskom was. She was of the opinion that Ms Molefe did the right thing by not signing something she was uncomfortable with – the backlash against Ms Molefe was because people realised that what she was doing was correct and the things others were seeking to do was incorrect. She asked at what point, if any, did Ms Molefe write to a Minister, perhaps someone in an administrative position in government, to warn anyone outside the Eskom ambit that things were happening that she felt were unsound for the company as well as procedurally incorrect.

She was most concerned to hear about Chiefs of Staff of Ministers getting involved in the administration of state-owned entities – a Chief of Staff is a very political appointment and it is made for a reason but they should not be involved in the running of state-owned entities. She asked Ms Molefe to elaborate on her meeting with Mr Essa and describe if she was uncomfortable, thought it was a normal practice, if she was concerned that a Minister’s Chief of Staff had asked her to meet someone. She was surprised that Mr Essa would not tell Ms Molefe who he represented – she found this very strange as it was unusual behaviour and sounded like a conspiracy theory one would see on TV. A sound witness had told the Committee that there was enough internal capacity in Eskom not to require the services of either Regiments or Trillian, and certainly not McKinsey, and value for money would not be given to the company by acquiring the services of these agencies – she asked the opinion of Ms Molefe on this as someone, who was experienced in the field of financial management and public administration, if she thought internal capacity in Eskom would have sufficed.

Ms Mazzone was greatly worried by the rapid change in the board of Eskom – she was also not the first witness to point this out to the Committee. When the rapid change happened, the modus operandi of the business went in a certain direction. Ms Molefe was called into a completely new board that had been overhauled, virtually overnight, institutional knowledge lost, a new set of ears, not well versed on what was going on with Eskom at the time, and very shortly thereafter, Ms Molefe was suspended – did she think there was a bad intent requiring the massive and rapid change in the board? She then asked Ms Molefe what date she met with the Minister’s Chief of Staff and Mr Essa – this was important for connecting the dots. It was highly irregular for a company of the size and importance of Eskom to send out SMSs during the night calling for meetings because Minister’s were due to attend – this was not correct corporate governance. No company the size of Eskom anywhere in the world would be allowed to be run like this. Which Minister called for “heads to roll”? It was disturbing for a Minister or CEO to make such a threat – on what basis would heads roll?
The suspension of Ms Molefe was not executed in the correct fashion and did not follow the rules of a company the size of Eskom especially given the position of Ms Molefe – did she feel threatened or concerned which explained why the matter was not pursued further? She sought more information on the suspension and how Ms Molefe felt about it. Since the suspension and knowledge of testifying before the Committee, had Ms Molefe been threatened in any way by any existing member of Eskom in any way or a previous member of Eskom? Had contact been made by Mr Essa? She asked if Ms Molefe, in her employ or now, had been contacted, or had any contact with any of the Gupta family, any of the Zuma family or any other Minister of government.

Ms Molefe addressed the matter of her suspension by saying it was a difficult one because to a large extent she would be speculating – she had been informed by people in various areas that there was news out there that some of the executives were going to be suspended because they were not playing ball or did not understand the mandate. When she thought about what she had done to warrant suspension, she knew exactly what she had said no to. A couple of days before the suspension she was tipped off about the board meeting which would result in suspension. Because it was a rumour she had no factual evidence and ignored it. She remembered vividly that the day before the suspension there was a strategic session of the finance team and one of the team members told her in a panic that she had been called by Matshela Koko to come to Melrose Arch and she asked her why she did not go – the answer was hat she did not know what was going on at Melrose Arch but the finance team had work to do and if he wanted someone at Melrose Arch he must phone her and explain this to her. The following day she found out that the four people who would act in place of the suspended executives were called to Melrose Arch.

She was informed that she was being suspended because of financial challenges however external people knew about the suspensions beforehand because they were not playing ball in terms of what some of the board members wanted. She highlighted that in the board Mr Tsotsi chaired and with the TNA matter, the audit committee decided to investigate it and this really created tension in the board among the members particularly between the chairman and members of the investment and audit committees – it was clear the board was divided because some were trying to do the right thing while others were obviously doing something else. There were good board members in the board that left in December 2014 where one would have expected some members to remain for continuity – she did not know why only two members remained. She did not know the mandate of the new board – they had not had a single full board sitting, other than subcommittee meetings regarding investments audit committee approvals. The first meeting the new board had with them was to suspend them because of an inquiry into the state of affairs when in fact in the first meeting the majority of the board had said no to that without first hearing from the Minister. In the second meeting two days later, the board unanimously, if Ms Molefe recalled very well, maybe with the exception of one or two members, sat in the meeting announcing her suspension. She looked at each member in the eye.

Ms Molefe did not know what transpired in the meeting with the Minister because she was asked to recuse herself before being called back in the meeting much later in the day. The investigation was done by the board and not by management – an independent investigator and consultant would be assisting. This ended up being Denton’s – those suspended were never called to testify despite being told so. She did consider legal action – in the previous board chaired by Mr Tsotsi, there were good members in the board which management could always speak to hence the TNA matter being investigated and the Regiments deal not being signed. It was interesting that the good board members were removed. She did not know the new board or where the members came from other than Mr Pat Naidoo who was an ex-employee of Eskom. The Minister was there but she did not know if the Minister instructed the suspensions or instructed the conduction of the inquiry. Ms Molefe was of the opinion that she was suspended because she said did not sign many things asked of her.
In terms of value from consultants, Eskom had used consultants for a number of years and it depended on what they were used for –as a utility, some of the best practice for Eskom resided with its global peers. Because the performance of the company had deteriorated, the company needed to look at what it could do differently which other utilities, of its size and magnitude, were doing. This was why advisory services or consulting firms would be requested, to look at best practice. This was however subject to abuse – a department was then created to look at investments. Each and every request for consulting services would go through this department to be rigorously scrutinised to ensure value – if this was not established, it would not be approved. She could not say what happened with this process after she left. She was aware the general manager of the department had since left so it was possible this process was not really followed with discipline. In terms of ensuring the company was financially sustainable, her predecessor took steps to look at what levers could be pulled to ensure the company was financially sustainable – given the size, magnitude and materiality of the financial matters being dealt with, it was important to get credible assistance – Regiments was asked it had done such work before and had the capacity. It said it used McKinsey – she was not aware McKinsey had a financial services department.

The meeting she had with the Minister’s Chief of Staff was portrayed as an introductory meeting where challenges with ways of working with predecessors were outlined and to ensure she had the support she required. There were challenges with suppliers complaining Eskom did not give them work. In the 15–minute meeting with Mr Essa, he said he worked with various black-owned companies who complained. He also said he worked with McKinsey and could assist. The Chief of Staff asked for repeated meetings but she refused and requested Mr Tsotsi talk with the Chief of Staff to stop harassing her.

Mr T Rawula (EFF) noted the Committee was conducting the inquiry under prima facie public allegations that the Guptas have captured, exerted pressure and were looting Eskom by using politicians and executive managers. Ms Molefe stated that she thought Mr Tsotsi and Mr Matjila were under serious pressure, particularly Mr Tsotsi. Yesterday the Committee received evidence and a report that R1.2 million was given for a breakfast show to be hosted by the New Age – a Gupta-led newspaper. The person that provided that evidence indicated that this decision was taken by Mr Matjila and that executives were under pressure to find rationale to cook the books – he asked Ms Molefe to speak to this because at this time she was the financial director. How did hosting a breakfast enhance the business of Eskom as a power utility?

He wanted to believe that Eskom had a vetting process linked to procurement – he asked Ms Molefe to talk to the portfolio of evidence that was linked to the vetting of Regiments and whether the company had capacity or not. It was funny that Mr Essa complained as a supplier that he was not getting work from Eskom but he refused to divulge the name of the company he represented as a complainant – at some point this should have raised alarms with Ms Molefe as a custodian of the finances of Eskom. More detail was needed on the divergence between Ms Molefe and Mr Tsotsi and Mr Matjila regarding the contract – this answer should be tied to the question on vetting. He was also interested in the legal opinion sought by Ms Molefe when she was put under pressure. When Mr Tsotsi said “heads would roll”, was he in fact referring to the suspension of Ms Molefe and Mr Matona? The dates of when this was said and the suspension should be provided so that Members could draw synergy between the statement of “heads rolling” and the irritation of the board. He was interested in the involvement of the Minister – would Ms Molefe say she was suspended by the board or the Minister? Or was the board instructed to carry out the suspension by the Minister? Who produced the financial sustainability plan that was said to not have been robust enough by the board? What were the expected terms of reference for the plan to be determined robust? This morning the Member received a call from learner’s from Eskom who were engaged as apprentices who were told that if they passed their trade test, they would be absorbed as artisans – almost all passed the test but Eskom reneged and subjected the learners to an internship of one year. They were told that Eskom did not have money. Because this was at the time Ms Molefe was financial director, he asked her if this was a result of the money looted from Eskom and its dire state.

Ms Molefe answered that with the learnerships or any other employee course, there would need to be budget. Human Resources would look at what was required from each business unit and whether the learners could be permanently absorbed – this was done before looking at budget. She could not comment on what happened in this case. She remembered there being quite a few targets but that financial prioritisation was also done. Budget was allocated to the learnership programme although it was said not every learner who could be accommodated. A finance director would need to balance the fiduciary responsibilities in terms of spending money the company did not have – a process of prioritisation did take place in terms of what money could and could not be spent on and this was not unique to the learnership programme.

After the board said the financial plan was not robust enough, the team continued to work on the plan and did not wait for the proposal for Regiments. There was capacity in Eskom to deal with the matter – there was a very good Group Treasurer with extensive experience in the field, many years experience in the company and highly qualified and regarded in the country as a Treasurer. There was also a very good Group Financial Controller and Economic and Financial Regulator that helped put together the price determination. This team put together the financial plan after Mr Tsotsi put together an emergency task team to look at these matters. The aim was to put the financial plan in place, accelerate what needs to be done with the build programme and then to continue with generation sustainability – this was the terms of reference for the task team. Various solutions were looked at in terms of what Eskom could do internally to reduce cost over a three to five year period with strict savings by looking at some of the contracts and budget reprioritisation – the consulting budget was cut. Treasury regulations on austerity measures were followed as every cent counted – it was important to not just approach government to increase equity or increase the cost of electricity. The plan was presented to Public Enterprises, the Finance Ministry and other key stakeholders – this culminated in the R23 billion equity injection to Eskom around October 2014 and an adjustment for the tariff increase by an additional 5% above the 8% determined on condition that the company continued with austerity measures. It is important to highlight that Eskom was doing these things on its own even though there was an attempt to get external service providers to assist with balance sheet optimisation – eventually the plan was submitted to government and approved.
There was a delegation of authority approved by the board – it was clear on levels of authority and what the different executives and officers could approve. There was also a detailed procurement policy which aligned with the delegation of authority. There were structures and processes for approval committees so that no one person could sign if there was no delegation to do so. There was always an attempt to do things outside procurement policy – EXCO and the board did not see every transaction as some were at lower level committees. Matters were picked up during audits or when employees blow the whistle on contacts they felt uncomfortable with.

Mr Tsotsi said that “heads would roll” if the Minister said the financial sustainability plan was not ready in time.

Ms Molefe was not aware of a R1.2 million contract – the TNA contract was R43 million over three years. There was budget for sponsorship – this was controlled by the corporate affairs department. Her understanding was that there was budget for the year, for about R14 million but policy approval would need to take place before any further sponsorships could be signed. R12 million was initially requested for the year but this turned into R43 million for a three year period with no exit clause – this was her understanding. Ms Molefe did not sign the contract and she brought to the attention of the chairpersons of the investment and audit committees before being investigated.

The legal opinion highlighted Section 217 of the Constitution which spoke to procurement of goods and services in state-owned enterprises i.e. fair, transparent etc. The opinion said where there were cases of exception and deviation; this needed to be shown as procedurally fair to do so. Her opinion was was, given the facts on the table, she did not believe the Regiments matter was being handled fairly in terms of procedure.

Mr S Swart (ACDP) thanked the witness for the helpful information provided today. He asked if Ms Molefe had read the Denton Report at all.

Ms Molefe said that she had started but decided not to conclude it.

Mr Swart appreciated that load shedding was in the tenure of Ms Molefe along with massive increase in the diesel contracts –while austerity and cutting costs were emphasised, there were many questions around the diesel contracts. Information was needed on these contracts where there were questions on procurement involving billions of Rand. This could also be supplemented to the Committee in writing.

Ms Molefe replied that a rigorous procurement process was followed for diesel contracts. Two suppliers were shortlisted and awarded five-year contracts, if she remembered correctly. The challenge was with emergency situations where the volume from the two shortlisted bidders was not sufficient. Smaller suppliers on a short term, emergency basis was arranged in order to avert load shedding. Diesel was costly, there were logistical issues due to the volume required and premiums were paid over and above the contract – each one served before the board tender committee – usage of diesel was the last resort because it was so expensive.

Mr Swart noted the Denton Report raised many issues with the diesel contracts and this was something for the Committee to look at – it would be helpful if additional information could be provided to the Committee. Was Ms Molefe aware of any tension in the board itself when Mr Matjila was appointed acting CEO? It is understood from the academic’s report that there was dissatisfaction that a board member was appointed in an acting capacity.

Ms Molefe knew that Mr Matjila was not first preference at the time – according to her knowledge, Dr Steve Lennon was going to be the acting CEO. she could not say why this changed and if some board members were uncomfortable with the appointment of Mr Matjila.

Mr Swart asked Ms Molefe if she was aware that there was evidence before the Committee that the Minister Gigaba was instrumental in the appointment. There was also documentation before the Committee that showed Mr Essa forwarded Mr Matjila’s CV to Mr Tony Gupta and Mr Duduzane Zuma. Looking at the appointment of Mr Matjila, one linked the dots i.e. the urgency to finalise Gupta-owned The New Age breakfasts, urgency to finalise the Regiments contract etc – did Ms Molefe think about this?

Ms Molefe found it difficult to comment because she was not privy to the board meetings where Mr Matjila was appointed or the decisions of the Minister on the board members. Through the new CEO, Mr Matona, she knew he was under pressure to appoint Mr Matjila as an executive in the company. She knew the board members that resigned in December 2014 resisted this because they felt due process must be followed and so Mr Matjila should apply like everyone else if he wanted to be appointed.

Mr Swart asked if she thought it was normal for CEOs to be involved in procurement processes. One can now understand, when the dots were connected, why Mr Matjila was appointed – it is fair to assume this was to pursue the business interests of the people that appointed him.

Ms Molefe said that in terms of Eskom processes, CEOs of the company do not sit in neither EXCO procurement committees nor the board tender committee – this was unusual.

Mr Swart said Ms Molefe quite rightly stood up against what was happening as financial director and her fiduciary duties. It paints a picture of certain companies and people benefiting by contracts. Did the change in the board, purge of good board members and suspension of executives standing up against contracts going against process, play into the narrative of certain people playing to the interests of others?

Ms Molefe agreed especially when the chain of events was looked at and how board members, which stood up for the right matters, were all removed. One questioned this motive. She had no dealings whatsoever with any of the new board members. It was only when one looked back at the chain of events and heard what was in the media, by connecting the dots, it was realised there was something bigger at play than one originally thought.

Mr E Marais (DA) sought elaboration on the procurement of the steam generator at Koeberg.
Ms Molefe said procurement of the steam generator project started before her time under the then CEO Mr Dames. She recalled that at some point the process had to stop because the Minister wanted to ensure the right thing was being done. The project continued when she joined as chairman of EXCO procurement. When she joined in 2012/13, the management team at Koeberg were looking at putting a new tender process in place. The important matter was the outage of 2018 and to accelerate the process. EXCO procurement recommended two lots were awarded to two suppliers – EXCO would then make a recommendation to the board to approve but the board was uncomfortable with the recommendation made. The board decided to appoint an independent international consultant that understood the nuclear environment to ensure there was an unfettered opinion on the project – this was fair if the board felt it needed to do this. A lead negotiator was also appointed to work with the team in Koeberg. At some point she stopped down as chairman of the committee but continued to serve as a member. It was difficult to remember some of the facts because this was a while ago but essentially the international consultant reported directly to the board tender committee. The board was clear that the project should go to one supplier given challenges with multiple suppliers experienced in the past – this was fair. The EXCO procurement committee was not privy to these board meetings with the international advisers when the committee was expected to make recommendations to the board – this was a glaring gap and created tension.

Mr Marais asked Ms Molefe if she, in her position as financial director, at any stage, or prior to the position, had any direct interaction with Minister Gigaba or Minister Brown.

Ms Molefe said there was always interaction with Ministers when presentations were made to them. EXCO members met with the Minister in various forums or if the Minister wanted to address the board in a strategic session – this was the nature of the interaction. When she became financial director, Minister Gigaba was on his way out. She had several engagements with Minister Brown together with the acting CEO and other executives to present the financial plan and other technical strategies to transform the company – that was the nature of the engagements which took place.
Mr Marais asked if Ms Molefe, for the record, concurred The New Age breakfast deal was absurd, there was no value for money, no budget and that this was the main reason why she refused to sign the contract.

Ms Molefe replied that it depended on what the sponsorship was used for – strategic importance to the company was assessed i.e. what was the breakfast about. If the breakfast spoke to the public about matters of energy, this was not necessarily wrong. The issue was with the quantum and the process followed in putting the contract together especially the fact that there was no exit clause for a R43 million contract when the company did not have money.

Mr Marais found it clear that Mr Matjila knew he did not have a mandate to sign a contract for R43 million – was there any charge laid against him for overstepping his boundaries?
Ms Molefe said that the challenge was, by the time the board had stepped out in December 2014, they were dealing with the matter, putting recommendations in place after having received a legal opinion around what action could be taken following the investigation. Unfortunately this did not happen because the board was rotated. The rotated board decided to ratify the contract in March 2015.

Mr Marais asked if Mr Matona, in his period, did anything about this.

Ms Molefe pointed out that by that time the matter was with the board. The board was then rotated and the new board ratified it.

Mr R Tseli (ANC) noted that Ms Molefe indicated the financial challenges started when the 2012/13 proposed tariff increase was not accepted – what was the suggested increase? He asked if Ms Molefe thought the financial sustainability plan was sufficient to take Eskom out of these challenges to the extent that an external service provider was not necessarily needed. Were the services of Regiments/McKinsey costed in such a way that one knew how much was needed per service? Did Ms Molefe have a problem with the desktop high level plan commissioned? He then asked Ms Molefe if she challenged her suspension and, if so, what happened.

Ms Molefe responded that Eskom applied for a 16% tariff increase over a five year period and was awarded 8%. It then looked at the revenue shortfall and what it meant in terms of meeting the business requirements of the company over the five year period. A financial plan was then crafted to close this gap created by the tariff determination being lower than expected. There were many moving parts from a technical perspective – generation maintenance was not sorted out but a technical team could provide more insight on the utility’s technical challenges. The financial plan was sufficient at the time to assist Eskom but there were other challenges when looking at the business plan for the next cycle. The team looked at if demand would be met and, if not, what levers could be pulled in terms of diesel, other supply-side options such as short term power purchase arrangements and other demand-side options working with Eskom’s customers. There was also a problem with insurers from a generation perceptive where the insurance premium was increased. The biggest driver behind the challenges was not only the tariff but the delays in the build programme and technical challenges.
The Regiments R500 million was risk-based pricing e.g. if the company saved Eskom R10 billion, Regiments would be paid 2.5% of the saving. This was more than other companies had charged in the past and this was one of the sticking points. Another challenge was that process was not followed – others could have been invited. Ms Molefe did not have a problem with the high level desktop exercise – the issue was around not following process.

With her suspension, it was only when reading newspaper articles thereafter, did she realise there were bigger issues at play. She communicated with the board two months after she was suspended to ask about the way forward. She considered legal action and going to court but it would have been a long-winded process – it was important to consider the outcome such as working with the board despite strained relationships. For her it was the best decision to simply part ways with the board.

Mr Tseli wanted to know exactly what was irregular with the financial sustainability plan – the process or that it came in the form of an agreement instead of just the costs?

Ms Molefe replied that a balance sheet optimisation programme was suggested as part of the financial sustainability plan for Eskom. The challenge was that procurement process was not followed- there could have been other players that provided similar services so the market needed to be tested, look at competitive pricing etc.

Mr P Gordhan (ANC) thanked Ms Molefe for assisting the Committee with various matters. Looking at the financial position of Eskom, when her predecessor left, Eskom was in investment-grade but in 2015/16 it was junk-grade status - what changed during that period?

Ms Molefe pointed to the tariff adjustments and although measures were put in place, technical challenges continued such as cost escalation in the build process and various delays. This meant going back to the market to see if the company could get funding but because it was so highly leveraged this was a fundamental issue. It was decided that maintenance could no longer be postponed so there was a need to balance maintenance and avoiding load shedding – this meant more money for supply side options, diesel and reduction.

Mr Gordhan said that at some stage the evidence leader might want to bring the Committee information on decisions to delay maintenance – this eventually led to operational and financial deterioration and had serious consequences. He asked Ms Molefe what she thought was the root cause of the cost escalation for Medupi.

Ms Molefe responded that there were a number of issues such as protracted labour disputes at Medupi, which lasted over 12 months if she remembered correctly, escalation of incurring costs due to some of the contracts signed, technical issues with suppliers such as Hitachi and delays in the build escalated cost. It was over a number of years. More detailed planning could have been done upfront – there was less planning because of time pressures to bring the plant into commercial operation to meet demand.

Mr Gordhan found it clear that there were serious problems with compliance with the PFMA given the Ms Molefe's experience in terms of the financial sustainability plan, New Age contract and other procurement in Eskom over that period –was this a fair statement?

Ms Molefe said this was correct.

Mr Gordhan noted that in December 2014, three experienced Eskom executives stepped down – what happened?

Ms Molefe did not know if it all happened in December 2014 but she knew an executive, who reported to the head of procurement and technology, was suspended in July. The board had provided a mandate for Ms Maharaj to do certain things in terms of the contract she had placed before them and she did not cay out that mandate. Ms Maharaj would have to speak for herself on the details because it went through a disciplinary process. There was also the CIO – there were procurement governance issues against him which were brought to the attention of his executive manager, Erica Johnson. Ms Johnson was asked to look at that and take it to disciplinary and the CIO was cleared. There was then a change in executives and the CIO then reported to Mr Koko. There was also a general manager in procurement that was suspended.

Mr Gordhan noted that the Committee heard lots of evidence that the core business was increasingly neglected for managing procurement in a way where certain people would benefit particularly around 2014-2016 – he asked if Ms Molefe agreed this was a trend developing at the top level.

Ms Molefe agreed noting that there was a lot of tension and discussion. Executives found themselves in procurement meetings when they needed to be dealing with day-to-day issues. To a large extent there was support from some of the board members but, to her knowledge, there seemed to be tension among the board regarding this matter.

Mr Gordhan asked why Ms Molefe stopped reading the Denton Report.

Ms Molefe wanted to move on – the board did not want her, she could have taken them to court but she considered her options and wanted to move on. Unless the people were brought to book, what was the point? The Denton report just suggested financial and technical challenges were investigated but, given what she and her colleagues went through, it was much more than that.

Mr Gordhan asked if this meant there was a board, and possibly a ministry, that had all the information on misgivings but showed little determination to resolve it.

Ms Molefe agreed – when she was suspended she specifically referred to Mr Tsotsi – she failed to understand that he had been in the board for the past three years but still today did not understand what the issues were when they were repeated so many times. These issues were presented to the board by Ms Molefe’s predecessor when Mr Tsotsi was on the board as well so the issues were not new.

Mr Gordhan asked if it might be a case that it was not that Mr Tsotsi did not understand but did not want to or have the will to resolve those issues.

Ms Molefe said this was possible because the issues were described many times over.
Ms G Nobanda (ANC) asked if there were any other contracts, despite the two she did not sign, that Ms Molefe did not feel comfortable with.

Ms Molefe responded that there was the SGR contract where the issue was in the manner it was done, as opposed to the supplier. She was uncomfortable with how the Chief Executive at the time wanted to deal with it and when the chairperson of the tender board intervened. There was also the T Systems contract when the board seemed to go back on its decision when suppliers for the contract were already shortlisted.

Ms Nobanda asked if Mr Essa was the only Gupta-associate that Ms Molefe had met or if any other Gupta was met after that or before.

Ms Molefe replied that she had only met Mr Essa and not any of the Gupta family, brothers or any other associates. She also met Mr Wood who was the CEO of Regiments Capital.

Ms Nobanda asked if there was any golden handshake, determination, agreement or money payable of some sort.

Ms Molefe explained it was on a negotiation basis – she is still out of a job and did not know how long it would take to find another job. She made it clear there was no golden handshake but she was negotiating based on the fact that she was out of a job and did not know when she would find another job. One needed to comprise and decide if it was really worth taking the matter to court.

Ms Nobanda asked if it was strange that a three month old board would suspend four executives. Could it be said Eskom operated by using bullying and fear tactics to get rid of people it thought were not toeing the line or doing what they were supposed to.

Ms Molefe said it would appear so if she looked at all the suspensions that took place which did not warrant dismissal. It was strange for a board, which had only been around for two and a half months, to execute a mandate of suspensions especially when the board was initially clear it wanted the Minister to explain.

Mr M Gungubele (ANC) noted that there seemed to be a trend among bureaucrats to not confront injustice when it faced them in the workplace particularly when it affected a state institution. Why did bureaucrats chose to instead pack their bags and go? This was an important question when the country was affected.

Ms Molefe’s personal view was that it was an issue of trust and not knowing whether anything will come out of what one was doing or stood for. One considered that, at the end of the day, one had family, parents to look after and, at the end of the day, one was more in jeopardy in that sense.
Mr Gungubele asked if this meant the general commitment to principals was that it was difficult to make a sacrifice in that environment.

Ms Molefe said this was absolutely correct – if one could not trust the board, one would then go to the Minister. Would one go to the President next? She did not believe she had the authority to do so other than by writing to the President.

Mr Gungubele found Ms Molefe to be someone who did not just work in finance for pure employment – he asked which year she got to Eskom to do that work?

Ms Molefe took over as finance director in January 2014 after spending three years in customer service looking after Eskom’s consumers, integrated demand management etc. Before that she was in the finance division in transmission – she was not sure if she answered the question.

Mr Gungubele wanted to know what the key aspects were of the total cost structure that was mainly responsible for the financial sustainability problem.

Ms Molefe said as finance director, one would look at everything and understand the operational challenges of the country to support the business. Financials itself was not only important – it was important to balance financial sustainability with operations in the company.

Mr Gungubele thought of the key responsibilities in leading an institution financially was to analyse financial trends, risk etc – before the February 2015 bailout, did Ms Molefe observe the factors threatening this direction other than the tariffs?

Ms Molefe reiterated it was not just about tariffs but other operational challenges requiring funding – generation maintenance was postponed for a very long time for various reasons, there was then the main load shedding event in 2008, strategy for the 2010 World Cup. This meant that while demand was growing, maintenance was deferred. This continued into 2014 where it was recognised this was a risk to generation sustainability.

Mr Gungubele asked if she remembered the diesel intervention era.

Ms Molefe confirmed the diesel intervention era worked in totality with the strategy she referred to because in order to do maintenance, while demand was growing, one had to resort to diesel.

Mr Gungubele asked if she knew how the diesel was sourced and supplied during this period.

Ms Molefe answered that there were two suppliers. In emergency situations, the company would procure from smaller suppliers that it had not contracted with – she could not remember the names.

Mr Gungubele said there was an interim CEO that was not interested in procedure and wanted things done as soon as possible while there was a chair of a board. He understood the concern with Regiments to be that instead of putting a case for itself, it came with an agreement i.e. it did not submit what it was asked to and the interim CEO did not have a problem with this. The board seemed to understand the concern but the chairperson of the board wanted the contract expedited – were the interim CEO and board chair interested in getting things done or were they interested in who was appointed?

Ms Molefe, looking at the contract, was sure the individuals were working together.

Mr Gungubele asked if it was correct to say there were some collaborating efforts with the common denominator being Mr Essa.

Ms Molefe agreed.

Mr Gungubele was curious to find out from the Chief of Staff, of the Minister at the time, how he ended up being in a meeting with Mr Essa – this would be important to look at it if the Chief of Staff was an activist in the office of the Minister in the context of state capture. The Member was interested in finding out what business The New Age deal had in taking Eskom forward.

Ms Molefe said this was why it was important to have an approved sponsorship policy so that it was very clear whether the policy was aligned to the strategy of the company. There were issues with demand and any platform could be used to forward those strategies. The sponsorship was not approved because one felt it could not be prioritised at the time. If the board felt the breakfast was aligned with the policy then it must be approved in the ambit of governance structures. This would also need to be balanced against the financials – it would have been up to the board.

The Chairperson thanked the witness for her time afforded to the Committee. Her information was valuable and would assist the Committee with having a deeper understanding of the going-ons at the company during her tenure. 

The Chairperson read the oath to Ms Suzanne Daniels, who was the former Head of Legal at Eskom. 

 

Ms Daniels took the oath.

Adv Ntuthuzelo Vanara led the evidence collection.

Witness: Ms Suzanne Daniels

Adv Vanara: Ms Daniels, we have time pressures. I’d like us to start with the purchase and sale of the rights in Optimum Coal Holding by Tegeta. I’d like us to deal with firstly the pre-payment, we’d then deal with the guarantee that Eskom instructed ABSA Bank to give to the Bank of Tegeta in relation to the transaction. The third aspect I’d like to deal with in relation to the transaction is the R2.1 billion fine that was levied against Glencore. In respect to the prepayment, there was a meeting at night on the 11th of April 2016 – can you share with the Committee, one, who convened this meeting, at what age of the day was this meeting convened and what was the agenda of this meeting and what was the resolution.

Ms Daniels: Adv Vanara, just as clarification, and Members of the Committee, I was Group Company Secretary at Eskom from the 1st of October 2015 to 27 July 2017 and I was acting Head of Legal and Compliance from the 1st of September 2016 to the 27th of July 2017 when my appointment of Group Executive for Legal and Compliance became permanent. So at the time of convening the meeting I held the position of Group Company Secretary and the responsibility to convene the meeting was mine. So to give you the background, in terms of the administrative requirements, I would have convened the meeting. At what stage did I receive that instruction – it was approximately at half past seven that evening that I received a call from Mr Zethembe Khoza, who was the board tender committee chairperson at the time. I remember the time because I actually had the time to check my telephone records. At that time my phone was in my study and I was having dinner so I was at home. He said to me that...I actually missed the call so I had to call him back, he said to me that I need to arrange a meeting for that evening and the item that was going to be discussed was the emergency coal supply. I actually questioned having a meeting at that late an hour. At the time that he called me, I had actually received no documentation for that meeting if it were to happen that evening and also that barely 48 hours later we were going to have a scheduled board tender committee meeting on the 13th of April. I raised these issues with him, his response was the operations required the meeting because there was an emergency and I actually said to him that to the best of my recollection, as I attend all board committees meetings, to the best of my recollection at the time, the emergency was actually declared about three months ago so there’s was really no...you know...it didn’t really meet the requirements of the emergency. He still persisted and then I arranged the meeting. I received the documentation for the meeting at 1951 that evening from Edwin Mabelane, who was the Chief Procurement Officer, and he requested that I convene the meeting and that I circulate the documentation. What I then did was...now it was around nine o’clock so I confirmed to the chairperson that I received documents and given that members still had to read through the documentation, my suggestion was we do this at nine o’clock. I was actually hoping that the directors would not be available but I called each one of them and I sent an SMS as well which was my practice to...it was the evening. I prepared the document for distribution. There was a submission in the standard prescribed format that we have and there was, what is called, the modification report which is the reason, you know, why the procurement team motivated for modifying those particular contracts. There were two suppliers, one being Tegeta. I sent that out in PDF format, the meeting invite went out at quarter past eight that evening and the invitees were Zethembe Khoza, Nazia Carrim, Viroshini Naidoo, Chwayita Mabude, Edwin Mabelane, Ayanda Nteta, who was the primary energy executive at the time, and Matshela Koko. I followed that up with the SMS messages. Ms Chwayita Mabude was the only one who let me know she would be joining the meeting later. This was a telephonic conference so I set up, you know, the Telkom setup, and then at half past eight that evening I confirmed with the executives namely Mr Mabelane, Ms Nteta and Mr Koko that the meeting would take place at nine o’clock. During that time Ms Viroshini Naidoo sent an email to me which set out a number of questions – I will provide you with that evidence. It was questions regarding the contract, or submission in front, and her closing sentence was “this matter has been in the public domain so I need to know everything possible has been done to get the best deal for Eskom”. I forwarded those questions to the CPO, which is Chief Procurement Officer, please excuse, Eskom has lots of acronyms, to the CPO and Ayanda so that they can answer and the meeting commenced at about four minutes past nine that evening. The resolution from that meeting, if you indulge me two minutes I’ll get my file out...the resolution to that meeting was as follows: “the addenda to the short term coal supply agreements between various suppliers and Eskom to be concluded to extend the supply of coal various sources to Arnot Power Station for up to a further five months and/or such period as may be requested by the supplier but no later than 30 September 2016. The Chief Financial Officer is hereby authorised to approve the basis for prepayment to secure the fixed coal price for the period of extension provided that there is a discount in the price, the supplier offers a guarantee in favour of Eskom and that the CEO can provide assurance to the committee that the transactions are economically viable for Eskom. The Group Executive Generation is hereby authorised to take all the necessary steps to give effect to the above including the signing of any consent or any other documentation necessary or related thereto”. 

Adv Vanara: The prepayment in respect of Tegeta – how much did it amount to? Sorry it’s not the prepayment, it’s the, what do you call it?

Ms Daniels: It was R659 558 079.38.

Adv Vanara: To the best of your knowledge, was this amount of money paid by Eskom to Tegeta?

Ms Daniels: Yes it was. I prepared the security arrangements and the share certificates that were provided for the transaction came from Tegeta.

Adv Vanara: Are you aware that part of that amount of money was paid as part of the purchase price of the Optimum Coal Holding?

Ms Daniels: Yes I became aware of that in the Public Protector’s Report, the previous Public Protector, Advocate Madonsela and what struck me as quite coincidental was that that was the exact amount to the cent that was paid.

Adv Vanara: We received evidence from Mr Piers Marsden, who was one of the business rescue practitioners of Optimum Coal Mine. He...it is on record that the amount that Eskom paid did not go to the business rescue practitioners – are you aware of that?

Ms Daniels: Well based on the agreements that I drew up, yes it did not go to Optimum, it went to Tegeta directly.

Adv Vanara: Is it also correct that on the 11th, or just before the full purchase price got to be paid on the 14th of April 2016, Tegeta were not the owners of Optimum Coal Mine but they had the right to own the mine subject to the payment of the full purchase price but at the time, they were not the owners of the mine?

Ms Daniels: That is correct. The business rescue proceedings were finally wound up around August of that same year so I think the court order was handed down on the 31st of August 2016.

Adv Vanara: In your view as Company Secretary, the payment of Eskom indirectly which went to the purchase price of the mine, did it have any legal basis?

Ms Daniels: I think from our side the legalities were sort of murky. In the primary energy environment there is usually this practice among suppliers who had more than one source that they can, you know, transport coal between each other, and it’s not the first time, but in this instance what is striking and what actually makes this of dubious...you know what makes this very doubtful, is that this is the exact amount which was claimed to be the shortfall.

Adv Vanara: There is evidence before the Committee from Mr Piers Marsden that Mr Salim Essa, on the 11th, in the morning ‘round about 10, had a meeting with him and requested him, as the business rescue practitioner, to approach a consortium of banks, who were the major creditors of Optimum Coal Holding, for a R1.6 billion loan. He subsequently went to meet with the banks and the response the banks gave to him, which he subsequently conveyed to Mr Salim Essa, was that the bank declined to provide the loan. You clearly had not been satisfied that the meeting, in the evening of the 11th, was convened – do I understand your testimony to be correct?

Ms Daniels: Yes that is correct.

Adv Vanara: Did you find it...did you not find it strange that on the same day, in the evening, the message communicated to you by Mr Zethembe Khoza calling for a special BTC meeting?

Ms Daniels: I will have to ask the honourable guest presenter to please repeat it.

Adv Vanara: We still on the prepayment. There’s testimony before the Committee by one of the business rescue practitioners that on the 11th at 10, there was a meeting between himself and Mr Salim Essa and at that meeting Mr Essa informed him there was a shortfall of R600 million on the purchase price – he asked him to approach the consortium of banks, who were the major creditors of Optimum Coal Holding, for a 600 million loan. At three o’clock he, the business rescue practitioner, communicated back to Mr Salim Essa informing him that the banks had turned down the loan application. So we now know that on the 11th, the purchasers of the Optimum Coal Holding required 600 million – my question to is, you had reservations about this special BTC meeting. It’s called the same day that there is this response to Mr Essa, Salim, so the question to you is... I understand you had these reservations which you confirmed. Now that I’m giving you this information that you didn’t know, that I assume you didn’t know, does it reinforce your concerns for this special board meeting, board tender committee meeting?

Ms Daniels: I can confirm to you I did not know of the meeting between the business rescue practitioner and Mr Essa on that day and yes it does then reinforce my concerns and actually validates them.

Adv Vanara: So, common sense therefore must dictate to us the 600 million loan Mr Salim Essa, or somebody powerful enough to influence BTC to sit and to source the shortfall - is that a far-fetched hypothesis?

Ms Daniels: In my view and based on the facts that I have in front of me and learnt at the time, and post that, I think it’s a fair and reasonable inference to make.

Adv Vanara: We know now, in terms of the Public Protector’s Report, which has not been challenged at least in respect of this specific allegation, that the then Group Chief Executive, Mr Molefe, had been in telephonic conversations with certain individuals said to be the owners of Tegeta. Have you read the Public Protector Report and are you familiar with this portion of evidence in her Report?

Ms Daniels: Yes I am very familiar with the Public Protector’s Report as my team and I provided the responses to the Public Protector in the first instance and we took counsel on Eskom’s approach to the recommendations in the Report. So yes I am. In regard to Mr Molefe’s telephone calls, that came as a total surprise to us, it wasn’t one of the questions, we didn’t have answers. I can tell you that Mr Molefe was quite surprised by that and I asked him for his telephone records so that we can verify that – as I sit here I have not received them.

Adv Vanara: I have no reason, at least until now, not to believe what the Public Protector says in her Report and therefore I must accept that Mr Molefe, based on the Public Protector’s Report, could possibly have arranged or been influential in the arrangement of the meeting of the 11th of April 2016, through of course the chairperson of the board tender committee.

Ms Daniels: Based on what I know, you know what happened at the time, and based on what has subsequently come out in the media etcetera, I am convinced that there must have been some sort of undue influence as it would be very unusual for me to get a phone call from the chairman of the BTC to arrange a meeting for that day at such a late hour.

Adv Vanara: And had this meeting, set on the 13th of April, the board tender committee meeting, if it had sat on the 13th of April 2016, given that we now know through the business rescue practitioner, the due date for the full purchase price was the 14th of April, would Eskom had been able to transfer the 600 million to Tegeta so that Tegeta could pay by due date which is the 14th of April – would that have been possible?

Ms Daniels: No it would not have been possible because as you can see from the evidence that you have, that there were conditions to the decision – I also had to put in place the security arrangement and that took some time. It now makes sense why I was allowed to be excused from the meeting of the 13th to go and finish the agreement because the actual payment took place on the 13th of April.

Adv Vanara: So given that you had to do from the 11th to effecting the payment on the 13th, if the meeting had taken place on the 13th of April as scheduled, it would have meant you were only able to effect payment after the 14th – is that correct?

Ms Daniels: That is correct.

Adv Vanara: Can we then move to the second aspect which is the guarantee and I must remind the meeting that you, graciously so, furnished us with a document that guides us through your testimony and I think we on page seven of the document which is the convening of the board tender committee meeting in December 2015 to consider the 1.6 billion guarantee which was later referred to the finance committee for decision – can you take the Committee through the proceedings of that meeting.

Ms Daniels: Yes, I’ll do that. At the outset I just want to clarify it was not a board tender committee meeting, it was a round robin resolution of the full board that I had to prepare and that’s why you’ll see there I received that instruction from the chairman of the board at the time, Dr Ngubane, and I collated the documentation to the circulated to members. Once again the title of this submission was: “The urgent request to approve the pre-purchase of coal from Optimum Coal PTY Limited”. As this matter was one of an actual financial and investment nature, I had recommended that there was an IFC meeting prior to the resolution being concluded and therefore...I’m sorry an IFC meeting is an Investment and Finance Committee meeting, which is a subcommittee of the board, and that meeting took place at 8:30 on the morning of the 9th of December. It was once again a telephonic meeting due to the time of the year and the timing and the submission to the board consisted of the submission document, the letters from the Department of Mineral Resources, the response to the Director General of the Minister of Mineral Resources and then my covering note which set out what the resolution was required and then all the signatures that I collated so for Members who are not familiar, when you do round robin resolutions you need at least 75% of the members to approve and it would only be ratified at the next board meeting but at the time the decision was taken you can give effect to that decision. So at the IFC meeting that was called, Mr Mark Pamensky who was then chairperson of the investment and finance committee recused himself due to his conflict of interest, as declared he was a director of Oakbay Investment at the time. Dr Pat Naidoo was elected to chair the meeting and members who were present at this meeting were Mrs Venete Klein and Mr Zethembe Khoza and these three members constituted quorum for the meeting. Anoj Singh and I were in attendance as the Group Chief Financial Officer, who was the coordinating official and I acted as the secretariat for the meeting. The discussion of the meeting was set out in the minutes and I shall provide you with a copy of that Mr Vanara. The members resolved that is recommended that the board, that the board approve the transaction as set out in the submission to the board relating to the pre-purchase of coal from Optimum PTY Limited. This recommendation was conveyed to the board members as the round robin documentation was circulated. I then sent an email saying this is the recommendation from the IFC. By the end of that day my office had received unanimous approval bar for Mr Pamensky who had recused himself and Mr Molefe who was off sick. With your indulgence I will read you the entire resolution, the full resolution was as follows: “the request from the Department of Mineral Resources is hereby noted. The Group Chief Executive, together with the Group Executive for Generation and Chief Financial Officer, are hereby authorised to negotiate and conclude a pre-purchase of coal agreement with the proposed owners of Optimum Coal Mine. This agreement shall be subject to the necessary regulatory approvals having been obtained from Eskom and the supplier respectively as and when necessary. The Chief Financial Officer is hereby authorised to take all the necessary steps to give effect to the above including the signing of any consent or any other documentation necessary or related thereto”.

Adv Vanara: Sorry, just on the resolution, why would the negotiations for this pre-purchase of coal agreement be with the proposed owners and not the business rescue practitioners?

Ms Daniels: I’m not sure if, I’m really not sure of what happened. I will have to look at the motivation. I can give you if there was any rationale but from what I have in front of me that wasn’t the rationale.

Adv Vanara: Okay you may proceed.

Ms Daniels: I think, just to give Members context, this is a letter written to the Director General at the time, I’m not sure if he is still the Director General, Dr Thibedi Ramontja, at the Department of Mineral Resources and it comes from Matshela Koko, the Group Executive Generation, and it is dated the 6th of December 2015. The headline is: “Optimum Coal Mine Propriety Limited, Coal Supply to Hendrina Power Station.

As you may be aware, Eskom is involved in a legal wrangle with the above supplier from about August this year. In rather dramatic fashion, the company was placed under business rescue and Eskom was faced with intermittent veiled threats of liquidation while at the same time the business rescue practitioners purportedly sought constructive engagement between the parties. From Eskom’s perspective it was expected that as Glencore operation, Optimum Coal Mine would enjoy far more support than the conditional funding for a limited time period that was on offer. Optimum supplies one of Eskom’s key contributors to the national power system as Hendrina Power Station is a stalwart in the Eskom fleet supplying approximately 2000 megawatts to the national grid. Glencore was fully aware of the dynamics and history relating to the coal supply agreement and its structure when it concluded the sale with its previous owners. At the latest meeting of the parties, the business rescue practitioners together with the Glencore representative indicated that Optimum is being rescued and that it would honour the contract in its current form with no amendments. They further advised that they will follow the contract route to process the Eskom claim of 2.2 billion. They made it very clear that they are not insisting on the extension of the Koornfontein coal supply contract with Eskom. They insisted that the extension of Koornfontein coal supply contract is at the discretion of Eskom. Eskom is perplexed by this about-turn given the events of the past few months and at the blatant disregard Optimum displays for the threats of liquidation has on the precarious balance of electricity supply and commercial viability. As a Glencore operation, Optimum surely cannot be perceived to be acting in the national interest”. It’s a rather long letter – that sort of gives you the motivation and then in parallel, “you’re aware we have similar challenges at Arnot Power Station. While Eskom surely appreciates the turnaround of the business, it remains concerned at such erratic display of business stability may compromise the security of supply to Hendrina Power Station in the short to medium term. Therefore Eskom would require a firm resolution on Optimum by mid-December 2015. The risk of security of supply for Hendrina, Komati and Arnot Power Station is of such key national interest, that we thought it important to bring it to your attention. The upcoming adversity facing Eskom would require some form of intervention on the part of the Department of Mineral Resources to assist Eskom in leveraging the necessary key authorities to assist in ensuring resolution to the coal supply situation and certainly going forward. I would request your assistance in this regard. Should you require any further information please do not hesitate to contact me.

Yours sincerely

Matshela Koko

Group Executive Generation

This was part of the submission and then the Director General responded in the following way:

Having regard to the above, which is the letter and the intervention required from the Department, we would like to advise as follows, in respect of Hendrina Power Station, the Department will prioritise and fast track approvals for the transfer of the mining rights on an urgent basis should this be lodged. We have already requested an urgent meeting with Competition Commission to go and plead the case and explain the urgency with which it must be treated as it is indeed a specific case given the consequences for our country. Financial provision due to historical liabilities as OCH level is estimated at 1.7 billion. The amount still has to be confirmed through a process which will involve the parties concerned. We would also request for Eskom to play an active role in providing support for the project to proceed. In return for the new owners honouring the current contract to 2018 and for driving transformation, we would like to propose that consideration be made for some pre-payment to be made for up to one year of coal supply understanding the upfront capital injections to be made to ramp up production to meet coal supply requirements for these mines. We firmly believe that every possible angle must be considered and offered to ensure that supply is guaranteed at the contract price for all of these critical times thereby averting any national crisis that we as South African can ill-afford.

Adv Vanara: Due to time pressures, particularly the documentation that we have, we, the Committee will, at its own pleasure, interrogate the documents. But I want us to quickly go to paragraph 54 of your statement, on page nine.

The Chairperson: Advocate, we still have more time. We’ll join a little bit later, you can continue. Relax.

Adv Vanara: Thank you Chair. Can we just go to what happens after the board’s resolution which you deal with on page nine, paragraph 54? 

Ms Daniels: Alright, so on the 10th of December, Ms Caroline Henry, the Senior General Manager for Treasury, we have a Treasury Department in Eskom and she was then Treasurer at the time, she prepared a documentation – I’m not privy to the discussions that happened between Caroline and Anoj on that but because I would work closely with her on issuing of guarantees and share related transactions, she then provided me with a copy of the memo that she prepared. What she asked is that, what the approval did was say that we were going to lay out R1.6 billion in cash to Optimum which she did not feel was the appropriate manner in which to do it. So she prepared a note which said that she would ask the Chief Financial Officer to approve the issuance of a guarantee in favour of Tegeta Exploration and Resources and to approve a counter-party investment concentration limit excess for ABSA for the duration of the guarantee, because from what I understand, it then exceeded our borrowing limits and whatever limits we have. Her reasoning for this at the time was that in order to provide Tegeta payment certainty and shield Eskom from recovery of the funds in the case of the conditions precedents are not met and Eskom contracted to issue a performance guarantee. So what she was asking was that instead of laying out the cash, can we please issue a guarantee in this regard. but this would have required...the guarantee was for three months, it was for R1.6 billion and her recommendation was that the CFO approve the issuance of the guarantee in favour of Tegeta. The CFO approved ABSA as a counter-party to issue the guarantee and the CFO approved the counter-investment concentration limit excess for ABSA for the duration of the guarantee. And this was approved by Anoj Singh, as Chief Financial Officer, on the 10th of December 2015.

Adv Vanara: What was Mr Anoj Singh’s delegation of authority’s limit?

Ms Daniels: In terms of the resolution of the board, he was authorised to take all the necessary steps to give effect to the above including the signing of any documentation. In this particular instance, with the issuing of a 1.6 billion guarantee, we would have required PFMA approval.

Adv Vanara: Okay but I’m still asking the question – surely the board can’t take a resolution authorising an official to act ultra vires. Would you agree with me?

Ms Daniels: I agree with you. In the issuing of the financial instrument, they ought to have been made aware that...our materiality framework is 1.5 billion and anything over that 1.5 billion needs approval so in this instance, while the guarantee was probably a better commercial transaction, it was still irregular.

Adv Vanara: That’s my question - what was Mr Anoj Singh’s delegation of authority?

Ms Daniels: As Ms Tsholofelo told you earlier that it’s quite a detailed document so I will let you have it but even if he had the authority given the materiality framework, we would have had to apply for permission from the Minister.

Adv Vanara: And are you aware that the Minister’s permission was sought and obtained in this regard?

Ms Daniels: No it wasn’t.

Adv Vanara: You mentioned that the cash...or the General Manager, Ms Caroline Henry, was not comfortable with the cash payment but was more comfortable with the, or at least recommended, the performance guarantee.

Ms Daniels: Yes she states that in the memo that she provided because from what I can deduce, her instruction was obviously to make sure that the money is available.

Adv Vanara: Now we have...and of course this guarantee facilitates Tegeta...the bank, ABSA, issues the guarantee on instructions of Eskom to the Bank of Baroda in favour of Tegeta – am I correct?

Ms Daniels: I don’t know if it went to the Bank of Baroda because in terms of the documentation it was in favour of Tegeta. What I do recall is that we had to work to get it done that day and Matshela Koko personally took the original guarantee – I don’t know where he took it to.

Adv Vanara: And we...there is evidence before the Committee that this guarantee then facilitated the 1.6 payment towards the purchase price – so we’ve got the 1.6 now. We’ve got the 600 plus million. There’s also evidence before the Committee that Eskom paid Trillian monies and Trillian contributed to the purchase price – do you have any knowledge about that?

Ms Daniels: The monies that were paid to Trillian yes I do have knowledge of that as I’m the author of the infamous 48-hour report sent to Minister Lynne Brown and there was a series of payments between 2016 and 2017 which amounted to about 564 million.

Adv Vanara: Okay we will deal with those a bit later when we deal with relations with Trillian and McKinsey and Eskom.

Ms Daniels: I wasn’t aware about the contribution to this transaction until the Public Protector’s Report.

Adv Vanara: Are you aware of a concept called OPM? In other words, a company uses Other, for O, People’s, for P, and M, Money, to conduct a business?

Ms Daneisl: Yes I am. Prior to joining Eskom I was an attorney in commercial practice and I’ve used some of these guarantees to do that, yes so I am aware.

Adv Vanara: This particular transaction we just discussed now, if the 1.6 billion was facilitated by Eskom, the 600 million came from Eskom and a portion of the purchase price came from Trillian who happened to have been paid under very dubious circumstances, also by Eskom – do we see this OPM concept at play here?

Ms Daniels: From all the evidence that I had at the time, what I know now, what I know from the media and from other reports, this is definitely a case of OPM. While the guarantee was in place until the 31st of March, at all the relevant times it would have appeared to any investor that Optimum actually had the financial resources to buy the mine.

Adv Vanara: The hashtag Gupta Leaks – there is an email from Mr Mark Pamensky, who was a board member at Eskom, and I do appreciate that he recused himself at the meeting because of the potential conflict of interest, but what disturbs me in particular is the email that I’ve seen, and of course Mr Pamensky would get a chance to come and respond, but the email suggest that from inside the board, he was communicating with people at Oakbay regarding the sale of the mine – are you aware of such email?

Ms Daniels: Yes I am aware of that email and it really shocked me when I read about it as I did not relate it to the R1.6 billion pre-purchase. I actually related it to...because if you look at the timing of that email, it actually relates to the resolution of the penalty so that was the defining moment for me as to why, and we’ll get to that, as to why that deal went the way that it did and it was really a devastating moment for me.

Adv Vanara: I introduce that because we are to get to exactly the fine and I would like you to take the Committee through this fine. My understanding is that, and there is evidence before the Committee, that amongst other challenges Glencore experienced financially, the financial situation of Optimum Coal Holding and its subsidiaries was exasperated by challenges it had in relation to Optimum Coal Mine. And over and above that, Eskom had levied a 2.1 billion fine which related to some of the regulatory contraventions and quality of coal. Can you take the Committee through what Glencore’s position was and what Eskom’s position was on the fine, vis-a-vis the fine, and how the position changed drastically when Tegeta became the owners of the same mine.  

Ms Daniels: Mr Vanara I am at a slight disadvantage because I left primary energy in 2011 so I’m not close to what happened then. I became involved in September 2016 as the acting head of legal and also when the Optimum came out with business rescue I would then have to deal with arbitration and the subsequent legal proceedings so I can give you an account of what I did from that, if that’s in order.

Adv Vanara: That’s in order ma’am.

Ms Daniels: So the first thing that I did, you know, is ask what had happened. I think for context the 2.2 billion was fined from 2012 to date so we actually were dealing with a historical issue. During the time that Glencore was engaged in a cooperation agreement with Eskom, from my reading of the documents that were made available to me, there was a period where Glencore and Eskom were negotiating future contracts, existing contracts as a portfolio. They entered into a cooperation agreement and in terms of this agreement the implementation, or the exercise of penalties, was stayed so that people could find a solution. And I think of one of the solutions that parties were hopeful of fining was how to deal with the penalty. The reasons summons was issued was to stage prescription on the matter because you can see the claim arose in 2012 and we were now in 2016 so part of it had already dissipated. Summons was issued at the time, prior to business rescue. In terms of the contract between Eskom and Optimum, arbitration is the way to sort matters of this nature out n the first instance. I was actually involved in an arbitration with Optimum when I was at primary energy so you know, it has a...it is a quick way to deal with matters. And in this instance what I asked for was all the reports, what had been done to date, the rationale for the 2.2 billion and I was presented with this spreadsheet. Now this spreadsheet spanned the time and what I noticed was that there were various amounts, you know, it wasn’t consistent. My first question to the primary energy team and the lawyers was, how did you arrive at this 2.2 billion and I called a meeting ‘cause I was quite familiar with the Optimum agreement based on my experience, it was actually the first matter I dealt with at Eskom when I started there because BHP Billiton had ceded the contact to another party so I knew the contract quite well. I also, the previous time when we had to negotiate the qualities, the very penalty regime that was in place, I was part of the negotiating team that did so, so the numbers that I was seeing and the manner in which it was calculated was not in line with that methodology. So I wanted to know how did they get to it, what considerations etcetera.  When I had the meeting with the team it consisted of the finance group, the contract manager, the coal supply manager and the legal team and my question was simply how did you get to 2.2 billion. I was quite shocked at the answer – the answer that came back was no, this is not actually 2.2 billion and anybody who knows me and who’s worked with me knows that I don’t keep my mouth shut and I actually asked why, what happened? As ludicrous as it sounds, the answer was there was an error in the spreadsheet and we used the incorrect formula. So a billion Rand disappeared off that claim and at that point I was beyond furious. I said but we have gone out in the media, there’s been a big story about this, how the heck do you think I’m going to go into court, I have a philosophy that I only go into court if I know that we have a more than 50% chance of winning because I don’t want to waste resources – Eskom has a huge legal budget, I mean for litigation but you know we need to spend it prudently.  The other element was that the person who had actually managed and drawn out the spreadsheet had now moved to Glencore so if I were ever to go into arbitration and have to call witnesses I would be dealing with a hostile witness or if I would have a witness at all. The contract manager had also left the employ so all I had was documentation. I then asked the primary energy people to kindly draw up for me the rationale as to how they got that. To cut a long story short, in the final analysis, I think we could of, I think the claim would have been round about, my estimation was R722 million and I was quite pleased to hear Mr Marsden, he estimated it at around R700 million so we weren’t far off the mark. At that stage I was now quite perturbed because this was a huge reputational issue for Eskom, a huge risk. We’d gone out, we had our Group Chief Executive. I spoke to Matshela Koko and Anoj Singh, at the time Anoj Singh was my direct manager, and Matshela Koko was the Group Chief Executive, and I said that while I do have the delegation of authority to decide on whether Eskom proceeds with litigation or not, I was not prepared to make this decision on my own without bringing it to the attention of the board. Obviously there was wrangling, let’s see if we can get out of it, and I said no, I’m going to the board. Unfortunately I had to go to the board tender committee because this was essentially a procurement issue. In the background we continued with the arbitration so we filed papers, we did, you know, the normal so that we did not waste time. At the first occasion that I went to the board tender committee, I just wanted to appraise them of the risk that we faced in terms of, we had a 2.2 billion claim and now it looks like we’re going to end up with nothing. We went away and did some more work and then I formally approached the board tender committee, took them through what was required, I actually brought in the external legal team that helped us, had done a formal case assessment from counsel as well so that I knew my legal assessment was correct and we did, there was one done before business rescue but I now did one after business rescue because it had different implications. So from that we could see that at most we would be able to prove around 700 million. The other complicating factor was that about 248 million of that penalty had already been paid so whatever amount you settled at you would need to deduce the 248 million and based on the calculations that had been done independently, when I looked at the records, that is exactly the same amount that Glencore had said at the time that they owed so there was no reason to quibble about the 248 million, I think we were out by a few cents quite frankly. On that basis we continued. It left us in a bit of a quagmire as far as the arbitration was concerned so once we got the pleadings from the supplier, it was interesting at the first arbitration, or pre-arbitration meeting, you know attorneys always talk settlement and we were saying sort of okay lets entertain it, give us your proposal but given that I knew in the background and what I know now about the, from the emails as you say, from all the other reports, I think I was on a hiding to nothing quite frankly because the attorney who walked in there, he had a file, now bearing in mind that this matter had been going on for so long, he walked in there with a file with like a couple of pages in, like this, and I, my team had like a whole row of things because it was quite a historic matter so it was clear that he wasn’t briefed properly or that he was so confident that they would get what they wanted. I pushed back, I said that I wanted a formal settlement proposal. It took us a couple of meetings. In the interim, in parallel, I went to the BTC, and they gave me, because the supplier indicated a settlement or a pre-direction to settle, I’d ask for a mandate to settle but not conclude – you see in Eskom we had, because I wanted to supply the board with the settlement parameters because at that stage I did not know what the supplier would come back with. The supplier actually was quite disingenuous – it came back and said we owe you 239 million of which we paid it so we don’t owe you anything. So I said well then we’re going to go and fight. We wrangled, we met, obviously they had the information from Glencore so the figure was around the 248 million but that was only a portion of the claim and I was interested in the balance of the claim. So we wrangled and wrangled, I think the figure started...to get them up to 500 million was quite an effort. I then went back to the board tender committee, told them, this was between January and the first quarter of the year, and I said to them that, look, this is the situation. My view is that we should still go ahead and claim the 700 million but I’m open to this. At the meeting it was quite strange because they wanted to know, members wanted to know, why are you here?, you know you can sort this out yourself and I said no, given the risk to Eskom, I am not going to make this decision by myself, I would need the board to support the issues. My view was stated very clearly that we could claim up to 722 million or that’s what I thought we could reasonably defend. I took them through what we needed to do, and then to my surprise, or not so much now knowing what I know, the board tender committee gave me a mandate to settle the claim without coming back to them and the words were “no less than 500 million” and this was offered, stated by Mr Naidoo who, this was proposed by Dr Naidoo, Pat Naidoo, who was a member of the BTC at the time, and supported by the other members. So there I went with a mandate to settle while I had said 700, I came out with a mandate saying not less than 500 million. I instructed the attorneys push as hard as you can, I’m not going to the board, or I am not going to be able to explain to South Africa 500 million or less, so I’m not going to take that chance. We ended up settling at 577 million and of which 248 million had already been paid. So Optimum then owed us the balance and that was to be paid over the duration of the contract which ends next year.

Adv Vanara: Let’s then move to the payment of the pension fund, or the pension payment, to Mr Molefe. Can you share with the Committee the circumstances around the payment of the 30 million plus paid to him as the pension.

Ms Daniels: I actually need to clarify – the 30 million was not paid to Mr Molefe but was paid to the Eskom pension fund and Mr Molefe then drew a pension of, I think it was R100 000 a month and then taxed – the figures are in the court papers so I am happy to take you through how we got to that. I think in the evidence guideline that I’ve prepared, I set out quite in detail what happened before that but I think for us we woke up one Sunday morning to read in the Sunday Times that Mr Molefe had received a R30 million pension payout. It was only at that point that we then started looking at the...because I must admit up until that stage the figure that was actually provided to Mr Molefe was not communicated back to board so at least we read about it in the Sunday Times. We then, obviously as a result of that newspaper report, got called to a meeting with Minister Lynne Brown. Eskom was represented by Dr Ben Ngubane, as the chairperson, Mrs Venete Klein as the chairperson of people and governance, Mr Anton Minnaar, who is the Executive responsible for executive remuneration and who administered the pension arrangements in this instance and myself in my capacity as company secretary. And she wanted to discuss the concerns related to the pension payout referred to in the article of the Sunday. We went through the rationale and the background and I’ve set it out in quite detail in the preceding paragraphs and Members are welcomed to ask me about it. And then she indicated that she was quite horrified at this amount and that we would need to...her words were revaluate the pension payment or, if I can quote her, she actually said “an alternative pension arrangement” so the instruction to Eskom at that point in time was, not happy with 30 million, go and negotiate an alternative pension payout. We then met, myself and Mrs Klein then met with Mr Molefe basically it was without prejudice, it was also to see where he was at in terms of his amenability to actually reduce the amount or any other alternative arrangement. And he was really not...he asked for time to think about it which was fair because we actually did it on the, we actually met with him on the afternoon after the meeting with the Minister. I had also instructed attorneys; based on the Sunday Times article and we were also getting our information together as to how we got to the 30 million. So the agreement was Eskom would negotiate with Mr Molefe and return with a proposal to Minister Brown. However Minister Brown issued a statement on that Sunday which said that she has now declined the Molefe payout and that she had instructed Eskom to reconsider the issue. The statement was a bit contrary to the agreement so we then had to look at it. During this time I briefed the board on what was discussed with Minister Brown and then we had a meeting on the 25th of April. My legal team and I worked over the weekend to get all the papers together and we suggested options pursuant to the meeting. On the 28th of April we received our legal counsel’s opinion in respect of the payment of the pension benefits and Eskom was then advised that the early retirement agreement was actually legally impermissible as it was not allowed for Mr Molefe and you will see in the subsequent litigation there’s different interpretations. It was not allowed for Mr Molefe to take early retirement at the age of 50 in terms of the rules because the decision was made in terms of specific rules and those rules really did not apply to Mr Molefe. So on the 2nd of May we met and we considered the legal advice received and I advised the board that the approval of Mr Molefe’s application for early retirement actually could not be implemented. That left Eskom in a bit of a quandary as he had departed – he was now an MP because technically if that agreement was illegal or impermissible, he was still an employee of Eskom and therefore the election had to be put to him that you either come back or you resign. The other options were that we provide him with a settlement arrangement and the other for us to sue the pension fund and you know there was a lot of cross litigation, very technical, it’s in the documentation that I have provided to you.

Adv Vanara: Okay, I want us to just go back a little bit because I’m interested in what I perceive to be governance failures. There’s a letter dated 16 October 2015 addressed by Dr Ngubane to the current Minister of Public Enterprises – is it correct that Dr Ngunane was not an executive chairperson of the board? 

Ms Daniels: No he was not.

Adv Vanara: Was there ever a board resolution prior to his letter to the Minister?

Ms Daniels: Which letter?

Adv Vanara: The one dated 16 October 2015.

Ms Daniels: That one was in connection with his remuneration so executive remuneration was discussed at the people and governance committee which was chaired by Mrs Venete Klein. This did not deal with the pension arrangements.

Adv Vanara: Yes I know but it seems to form the basis later on around the discussions on the pension regime, isn’t that correct?

Ms Daniels: No, that isn’t correct. That’s the letter of 25 November 2015, its in paragraph 64.

Adv Vanara: I’m sorry for that but prior to this meeting of the 25th November 2015, was there any board resolution that Dr Ngubane was communicating to the Minister?

Ms Daniels: Yes there was. This was discussed at the people and governance committee and also during this time Eskom was negotiating Mr Molefe’s permanent employment with him as the Group Chief Executive and I’m using the term permanent employment very loosely not in the contractual terms because you would recall he came across to Eskom on secondment from Transnet and his secondment had been extended, I think, twice.

Adv Vanara: Can you for the record read what then were the proposals to the Minister. In other words you confirm that paragraphs 64.1 to 64.4 were issues consistent with the resolution of the people and governance committee.

Ms Daniels: Yes that I...at this stage it was a proposal to the Minister. It would only be confirmed at a meeting of 7 February 2016 but what the proposal was, as extracted from the letter, and this was the provisions, one was: regardless of Mr Molefe’s age after the five year termination date, he be allowed the retire from the service on the basis that he is aged 63, that the penalties described in the Eskom pension and provident fund prior to age 63 be waived, that Eskom carries the cost of such penalties to be paid over to the EPPF, in the event that Mr Molefe’s contract is not extended beyond the five year termination date, he will be allowed to subscribe to any other SOC or government pension fund.

Adv Vanara: Now what happens to the letter that is sent to the Minister with these proposals?

Ms Daniels: I forwarded that letter as signed by Dr Ngubane to the Minister’s office. I usually as protocol is... the Company Secretary is the one that communicates formally correspondence with the Minister’s office and so I sent it to her PA, Ms Kim Davids. Receipt was acknowledged. In that time we were discussing remuneration issues for executives and non-executive directors because they were all new and also in preparation for the AGM. And so I think the first meeting that year was the 9th of February 2016 and this was to discuss the retirement of Mr Molefe and other remuneration matters. Well this is not his formal retirement proposal. So that was on the 9th of February. From my notes there was a subsequent meeting which I attended on the 23rd of February with Minister Brown, Dr Ngubane and Mrs Klein in Cape Town where Mr Molefe’s pension arrangement, as set out in that letter, was discussed. Minister Brown indicated that she would not oppose the pension proposal but that it must be submitted to her in writing so that she could deal with it expeditiously. I highlighted to her that the correspondence had been sent to her office in the letter dated 25 November 2015. We also required clarification because when Mr Molefe joined Eskom it was on the basis that he would be a permanent employee as defined permanently employee i.e. no fixed term contract however the...and that is also how the letters came from Minister’s office when she appointed him or support the recommendation that he be appointed as Chief Executive that he would be permanently employed. I then asked the governance unit in the DPE that they had mentioned that it was going to be a five year contract as per Cabinet but it was not stipulated. They subsequently corrected that but Minister seemed to be surprised, she asked that could confirm for us whether that it indeed was the Cabinet position and it subsequently appeared that it was so, that it was confirmed. So at the meeting of the 9th of February, the people and governance committee, I set out what was resolved at the meeting in paragraph 68.

Adv Vanara: Just before you get to paragraph 68, there is in paragraph 67, the meeting seems to have noted the discussions relating to the conclusion of Mr Molefe’s employment contract, it says with particular reference to and I quote, the current rule that staff over 50 years of age with at least 10 years service were entitled to retire at or as per the Eskom pension and provident fund rule. This was followed by a request and I quote: “the Eskom rules to be amended in respect of executive directors with fixed term contracts to make up for shortfall in years waive the penalties and refund the pension and provident fund the actual cost relating to additional services”. Unquote. So what I gather here is that at least the peoples and governance committee seemed to be familiar with the rules of the Eskom pension and provident fund to the extent that they were to request amendment to the rules – is that correct?

Ms Daniels: Let me just give you a bit of context before I answer, the, Mr Anton Minnaar was the person who dealt with the Eskom pension fund and he and Ms Klein, Mrs Klein, as the chairperson of people and governance, ran with this transaction. It was not really fully discussed at the board. And you know when you talk about the governance, we have non-executive directors, there are only two executive directors, namely, the chief executive and the chief financial officer so this was a bit unusual. The first time that myself and the board secretary actually knew about these things was at the meeting because we were told it’s so highly confidential and also as I was a junior to the chief executive I couldn’t have access to that so what was anticipated that we could amend, that Eskom could amend the Eskom pension fund rules but that was not so. And this was on the advice of Mr Anton Minnaar but that did not materialise in that manner.

Adv Vanara: I hear your explanation. The point I’m making is that it would appear that members of the people and governance committee knew about a rule that pertains to the pension payout and they are aware that this rule, insofar as the executives that are appointed on contract had to be amended and that’s why there’s now a request to amend the rule.

Ms Daniels: Yes that’s correct because this was the first time that Eskom would have executives on fixed-term contracts but they were quite familiar with the rules.

Adv Vanara: The Eskom pension fund, pension and provident fund, says it was misled by Eskom in that Eskom presented Mr Molefe as a permanent employee as opposed to a fixed term contract employee which would not have entitled him membership of the fund – what is your response to that?

Ms Daniels: I agree with the Eskom fund – in our preparations for the court case coming up, we discovered that indeed he was loaded onto the system as a permanent employee notwithstanding the employment contract was very clear that his employment terminates in 2020.

Adv Vanara: Let’s then move quickly to the Trillian McKinsey and Eskom relationship – the first contract you’re referring to, there was a payment to Trillian Management Consulting. Ms Bianca Goodson testified that at the time of receipt of this invoice, which amounted to in excess of 30 million – not R30, not R30 000, R30 million. It was herself and her COO and no work had been rendered to Eskom. Are you aware why and the circumstances Eskom paid this amount?

Ms Daniels: I wasn’t involved in the actual transaction – I was neither company secretary nor head of legal at the time however I am the person putting together the report for Minister Brown and so based on, what I’m going to tell you is based on that and it does corroborate what you mentioned Ms Bianca Goodsen, it really does corroborate her version, her testimony here. It is also corroborated in the Oliver Wyman Report which points out that the value for money for Eskom is actually questionable.

Adv Vanara: And that’s besides the point that there was no contract between Eskom and Trillian.

Ms Daniels: No, at no stage during payment cycles or any of the payments was there a formal contract between Trillian and Eskom – Trillian was styled as a subcontractor to McKinsey. In this particular instance you will find, going through the records, that payment was made and Trillian was registered as a subcontractor to McKinsey on the Eskom system.

Adv Vanara: So there’s no relationship between Trillian and Eskom – there’s a relationship between Trillian and McKinsey is that correct?

Ms Daniels: That’s correct although McKinsey formally terminated or formally advised Eskom that it terminated its relationship with Trillian.

Adv Vanara: We’ll get there very shortly. The point I’m making – if there were payments to be made to Trillian, those payments should have been paid, based on a relationship, paid by McKinsey to Trilian based on the relationship that they had –is that correct?

Ms Daniels: That is correct.

Adv Vanara: The second contract there’s again amounts paid to Trillian – how much was that? Look at paragraph 144, page 20 of your document.

Ms Daniels: Payments to Trillian under this contract, the second contract, was R564 562 913.29.

Adv Vanara: Ms Bianca Goodson told us the business operating model of Trillan Management Consultant that they do not do the work. They use their influence to get the business in the public sector. They get an international company that’s competent to do the work, they subcontract as SDL and that’s how they make their fee. If you look at this McKinsey TMC arrangement, is it consistent with that operating model?

Ms Daniels: On the face of it no. there’s a slight...and I do acknowledge that her, you know she was there for a short time. I have looked at minutes of the steering committee and there are Trillian representatives at the meetings at Eskom even though there was no contractual relationship between the parties. They were there as part of the McKinsey team. So whether that was their business model throughout, I can’t say.

Adv Vanara: You’re South African. You know the material conditions under which majority of this country live in. There are people that struggle to make ends meet. When Eskom pays these amount of money to companies that do not have contracts with them, where there was no procurement process, where we cannot verify the value add – what message are we sending to the poor of the poorest in this country?

Ms Daniels: In this instance Mr Vanara I’m not so sure what the message would be but in my view, based on what I know and what I have discovered, there’s only one way to describe this between the people of South Africa – this was brazen theft.

Adv Vanara: According to your knowledge you have prepared a report for the Minister and are you prepared to make that report available to the Committee or are there any reasons why you can’t make that report available to the Committee?

Ms Daniels: I am fully prepared to make it available to the Committee and answer any questions. This is the report that I prepared for the Minister which she said was glaring gaps and this is the entire history and hence I can confidently say it was brazen theft. 

Adv Vanara: So this report was given to the Minister?

Ms Daniels: Yes it was. It was personally delivered by me to the Director General on the 1st of September 2017.

Adv Vanara: You refer to some of the activity as brazen theft – are you aware that the Minister has actioned this report in terms of reporting the thieves to the law enforcement agencies?

Ms Daniels: No, she...the action that she took was to discredit or try and discredit the report by advising the acting Chief Executive on the morning that it was going to deliver it that it had been leaked to the media when that would have not been possible as I was still busy collating the pages. The, there was a meeting between her and the chairperson and the, sorry, the interim chairperson, Mr Zethembe Khoza, and the interim chief executive, Mr Johnny Dladla, on the 15th of September at the airport where they discussed the report because she issued a media statement on that evening.

Adv Vanara: So the board is aware of your report to the Minister which points, among others, some brazen thieves – has the board acted against the thieves?

Ms Daniels: I briefed...the answer is no. I briefed the board on the 29th of August regarding the outcomes and the findings of the Bowman’s Report and regarding the findings that were made and I set out the recommendations –you’ll see I refer to a memorandum of the 29th of August, I set out the various legal remedies that we needed to take including referring the matter to the Hawks. I think the board was not really interested in hearing me. They gave me some pointers in how I needed to fix up the memorandum and the thing that stuck in my mind was that Dr Naidoo told me to go and make sure that the numbering was correct – for me there were far more important issues in the memorandum than the numbering but be that as it may, I then, I was asked to take back those memos so that nobody had a copy and I was instructed to shred it but I did not shred it so I have the full bundle of what I handed out there and you’ll see my notes on there as to what was discussed at that meeting.

Adv Vanara: Would you be so kind to hand the bundle with your notes to the Committee including the report that you submitted to the Minister and to your board. But let me go back to the meeting of the 21st of November 2016. There’s a CIPC letter addressed to Eskom and also sent to the Minister raising a concern around Mr Molefe’s return. According to CIPC, they were informed that Mr Molefe had resigned and draft minutes of a meeting were sent to CIPC – can you shed light around that.

Ms Daniels: Mr Molefe held two positions as a non-executive director and as an employee of Eskom. Insofar as the directorship was concerned, CIPC requires that you have a formal noting that he resigned as a director – early retirement does not feature on their options and that was I explained to them in the letter that I then wrote. The minutes was still draft because we were trying to find a way in which to say that he had left the company and that we could, you know, deregister him as a director on the system. You will see that, so what we did in the updated, the final minutes, was to say he resigned as a director and he applied for early retirement as an employee, to make it very clear.

Adv Vanara: Where are the minutes of this meeting 29 November 2016? The 29 November 2016 there was a draft minutes sent to CIPC to communicate his resignation. In the response you say those were draft minutes – I want to find out, a draft must become a final document at some point.

Ms Daniels: Yes so I have that for you as well. I’ve kept the full set of how it developed.

Adv Vanara: So they are no longer draft?

Ms Daniels: No they are no longer draft. At the time when they were submitted...I think what occurred is administratively someone in the office of the Company Secretary deals with statutory requirements and they used the draft minutes to do that which is not good practice but I have that on record as well as the responses that we gave.

Adv Vanara: In your report to the Minister, and you shared with the board, you making reference to brazen theft and therefore there must be thieves – do you identify the thieves?

Ms Daniels:  Yes I did.

Adv Vanara: Can you share with the Committee who the thieves are.

Ms Daniels: Mr, the people implicated and who I identify as thieves, that’s my view, is Matshela Koko, Anoj Singh, Edwin Mabelane, Prish Govender and Charles Kalima. 

Adv Vanara: We know that Mr Koko is going through some disciplinary proceedings. In those charge, so are you aware the charges that he is facing, are any of the issues that you identify in your report as forming the basis to call him a thief part and parcel of those charges?

Ms Daniels: No they are not. That relates to the matter of Impulse International where he failed to declare his step-daughters interest in the company. 

Adv Vanara: But you must surely agree with me that package should form part of those proceedings, isn’t it?

Ms Daniels: Yes in the ordinary course of business I would agree with you. The reason I sought to keep it out of that particular disciplinary inquiry was for me that the current disciplinary inquiry is a sham.

Adv Vanara: We know that the, or at least I know that the Cliff Dekker Hofmeyr Report, on the Impulse issue, had exonerated Mr Koko, Matshela. How, I’m not aware but my understanding is that that seemed to be the basis of the charges he’s facing – is that correct?

Ms Daniels: That is correct. The Report of 13 June did make that conclusion that factually Mr Koko’s version held up however I recommended to the board that we cannot accept that Report at face value – there was no cross examination of any of the people interviewed, there was no legal testing. I spoke to the people who opined on that Report and I was not comfortable with the responses – I thought they were superficial. I recommended that we obtain a legal opinion from senior counsel on that matter and that senior counsel provide us with a view and you would see that Advocate Azhar Bham briefed and that he came back with quite a few anomalies in the, in the opinion that he provided and he did recommend disciplinary action against Mr Koko to interrogate those issues. He also assisted Eskom in preparing the original charge sheets.

Adv Vanara: The original evidence leader, who I believe was subsequently removed, is he on the panel of lawyers providing service to Eskom, if not how did he get to be appointed?

Ms Daniels: I was away on leave that the time but no he is not part of the panel. The audit and risk committee instructed the Chief Procurement Officer, Mr Jay Pillay, to source these individuals so he sourced senior counsel, three senior counsels and Mr Sebetja Matsaung. So the CVs were presented to me. Originally my proposal to the audit and risk committee was Advocate Sibande be case presenter for Eskom as he was intimately au feit with the case and that one of the senior counsel, I think Allister, I just can’t remember his surname, as the chairperson as he had the most experience in terms of labour matters etcetera. I set that out in a very detailed memo to audit and risk committee. They came back and supported it on the one day but the next day Mr Gounden who is the chairperson of the audit and risk committee, sent me a message and said I must please speak to the chairman he has some ideas on the case presenter. I asked him to clarify, you know, because I needed it to go ahead and before he could respond I got a message from the chairman saying that him and Mr Gounden thought that Mr Matsaung should be the case presenter. My views on Mr Matsaung’s experience to deal with a matter of this nature were quite broadly reported. I thought he had very little experience and this matter was not suited for a person of his level of experience.

Adv Vanara: My second last question, you refer to that disciplinary process as a sham – what do you mean by that?

Ms Daniels: There’s been considerable board interference in that investigation and with Mr Khoza leading the charge. He, in my discussions with him, he would mention that “I was talking to Matshela this morning and he thinks we should do it this way”. I don’t think he realised that he had told me that ‘cause I actually said “I beg your pardon” and then he changed tact, you know. That made me suspicious. The fact that after formal board approval of the charge sheet prepared by myself and Advocate Bham they had been changed twice. I was very surprised to see what was published as the charge sheet- it is fatally flawed in law so the risk to Eskom of Mr Matshela Koko being exonerated on those set of charges is actually quite high. And then also the manner in which the case was dealt with from the start – the fact that the evidence leader actually didn’t really prepare witnesses. I had asked him for a list of his suggested witnesses on the 23rd of August this year and I’m still waiting for it so you know I really don’t have any faith in the process that is on the go at the moment.

Adv Vanara: My last questions are twofold – one, have you ever been to the Gupta family, if so, why and secondly, why are you on suspension?

Ms Daniels: I’ll answer the first one...I’ll answer the last one first – my reason for suspension is as follows. I quote from it because Eskom has been denying that I am on suspension because of my report to the Minister but my charges clearly read as follows: “at the core of these allegations regarding misconduct is the allegation that, whereas you prepared a report for the Minister dated September 2017, which report contains various matters of concern. After perusal of this report and after further relevant information were obtained, issues were identified which could warrant disciplinary proceedings being instituted against yourself. It would thus be in the interests of yourself and Eskom that through a interrogative process of disciplinary proceedings questions be answered relevant to the report and the information received”. And I close the quote. So that’s the reason for my suspension. In respect of your answer on the Gupta family, I have had the occasion to meet Mr Ajay Gupta on the 29th of July 2017.

Adv Vanara: What were the circumstances and did you have any discussion with him? Who had accompanied you to this meeting?

Ms Daniels: Okay, I was contacted by Mr Salim Essa and he asked to meet for coffee. I was intrigued as I had met him on previous occasions as well which I will share with you. And the reason I remember the date so vividly is that it was the only free Saturday that I had upon coming back from holiday. Subsequent to that I take my daughter to maths every Saturday morning so there was no opportunity to have coffee with anybody. I met him at Melrose Arch outside, I think it’s the...he had said meet me outside the African Pride Hotel and I thought...I was in the reception area and he came to meet me and then we walked to a...I didn’t know that there were actually townhouses at Melrose Arch, a set of apartment blocks and we went into one of those apartments and as we walked into the lounge area, there were four people which I was introduced to –Mr Ajay Gupta, Mr Duduzane Zuma, Deputy Minister Ben Martins and a Chinese lady who’s name I just cannot remember because at that point I was actually speechless. The purpose of the discussion was around the process of the Molefe court proceedings. Mr Gupta wanted to know how far they were and I said there was a scheduled meeting with the Deputy Judge President to discuss when we would set down the matter because as you would know, as the Honourable Members would know, the DA, EFF and Solidarity have joined the application and we wanted all the matters heard on the same day. He then...it was very difficult to understand him because he speaks in a very heavy Indian accent but the gist of what I could gather was that he was saying that, okay, he will have to talk to someone in the DJP’s office and to make sure that the meeting, that the hearing take place after December 2017 so that it could be dealt with then. He mentioned something about Nkosazana Dlamini-Zuma but I really couldn’t follow what he was saying partly also because I couldn’t believe where I was and what I was hearing. And then there was some mumbling and then I left. That was the second occasion that I drove from Melrose Arch to my house, locked the door, poured myself a stiff shot of whiskey and went to sleep. The first occasion was on the 9th of March 2015, I think it was, I just want to check the...it was the date Ms Molefe mentioned, the 9th of March when Matshela Koko phoned me to meet him at Melrose Arch and went through. He came and collected me at JB Rivers once again and we went to the office of, who I now know as Salim Essa. Mr Essa started explaining to me, he asked me what was Eskom’s disciplinary procedure. I said I was not really familiar with it because I’m actually not a...I have an aversion to employment law, because I’m a contracts person, but I said generally you know if you want to discipline someone you have to have give them a right of hearing and all of that. He got a little bit more specific and asked me what needs to be done if you want to suspend people and I said well, you’d have to have a reason to suspend them and a rather valid reason, and give them a chance to respond and then you can make your decision and that was as far as I go. He then proceeded, in the presence of Matshela Koko, to sketch out to me what was going to be happening in the next couple of days. He told me that Mr Matona, Ms Molefe, Mr Marokane and Mr Koko would be suspended and that there would be an investigation into Eskom and that you know, the board would communicate this in due course. Little did I know that it was going to happen the next day or it actually happened the day after. And I actually didn’t respond – that was the first occasion I went home from Melrose Arch. I think those are...and then the second time I saw Mr Essa was at Eskom. It was round about October 2015 as he congratulated me on my appointment as Company Secretary so those are the last significant dates for me.

Adv Vanara: As I hand over to the Chair, Mr Koko was the one who convened the meeting with you and Mr Essa and he was going to be part of those suspended? And we know that he’s the only one who survived the suspension – is that correct?

Ms Daniels: That is correct.

Adv Vanara: No further questions Chair. 

Discussion

Dr Luyenge thanked the presenter for her thorough assessment of events. He asked if she would have access to the attendance registers in terms of evidence as to who was present at the meetings – such information would make it easier for the Committee and Parliament to take the matter forward. It seemed the witness collected a lot of information – approximately how much money was lost? He asked this because the Committee wanted to ascertain how much damage there was already insofar as Eskom was concerned. The conduct of the board and management at Eskom was something he did not believe in the past when people spoke about activities convened to loot state resources – the witness made it clear there were these types of meetings. At times when people stole, a human element came to the fore that one would not want it to be seen but by the looks of it, what was happening now was an arrogant kind of behaviour that failed to put the plight of the poor masses of the country. He asked Ms Daniels to share if she reported these activities to any state entities and, if so, what the response was. He asked if she had been receiving any threatening calls or was discouraged from testifying before the Committee. He questioned if Ms Daniels was ever part of a meeting or received any instruction to implement these unscrupulous activities.

 

Ms Daniels responded that she had prepared a full dossier for Adv Vanara but was still in the process of putting it together given the amount of information. It would be given to the Committee for purposes of its inquiry – it would include minutes, documents etc. She could not say how much was lost to SA. The rough estimate she spoke about today was about R5 billion. Looking at all the transactions, enough information had not been uncovered and Eskom employees were increasingly coming forward with more information. She had not approached any state agency – given all that had happened she was very sceptical as to the bona fides of the state entities. She had been receiving threatening calls, had attempted break-ins at home, been bullied on the road, followed a number of times and had her phoned tapped. When she met with Mr Essa she phoned her friend, Rustum Mohamed, to ask if he knew Mr Essa and if he could be trusted – the next day at work, Mr Koko asked her why she was speaking to Mr Mohamed. She had increased security at her home and made sure she did not taking the same route home. Threatening messages disappeared off her phone so she did not have evidence to lay a charge. These were death threats saying “if you know what’s good for you, you’ll shut up”.

 

She did not have direct instruction from the Department but recalled a time when she was approached by Ms Davids, the PA to Minister Brown, at a chairperson’s forum, where Ms Davids informed her that Minister Brown had been receiving complaints from suppliers and the Minister would be issuing a letter to say the suppliers must be given work. When Ms Daniels questioned who the suppliers were Ms Davids mentioned Trillian. Ms Daniels was incredulous at that time because Trillian was in the news. She was also surprised that a PA was telling her what to do. Ms Davids also phoned her to inform her that Minister Brown requested she used Nkonki for the investigation of Mr Koko – this added to why she thought the process was a sham. She was perturbed by the fact that a PA would be allowed to do so. There may have been more such instances that she was oblivious to.

 

Dr Luyenge asked if Ms Daniels came across any of the Guptas.

 

Ms Daniels reiterated that she had met Mr Ajay Gupta on 29 July 2017 in relation to the matter of Mr Molefe.

 

Ms Mazzone was blown away by the testimony of Ms Daniels which confirmed what many unfortunately already knew. It was very important for the Committee to note that Ms Daniels had been threatened and that her safety had come into question – the Committee did all it could to keep Ms Daniels safe although nothing could be guaranteed. At least the matter was now on public record – the Member was once told the best way to deal with bullies is to blow the smokescreen away so that it was out in the open and Ms Daniels had now done so. She hoped no one was as silly as to harm Ms Daniels now as it would be too obvious who it is. It defied logic as to what a member of the Gupta family would be doing at a meeting concerning an internal Eskom inquiry.

 

Ms Mazzone asked if a reason was given or why it was justified that Mr Gupta would be at a meeting discussing Mr Molefe’s court case – this made no sense to her. Did anyone query why Mr Gupta was there? Was there intimation of who the Deputy Judge President was? Was someone named? Did it mean they were trying to get someone to be the Deputy Judge President? Was there a discussion with Dr Ngubane, as board chairperson at the time, instructing that Mr Molefe would go on early retirement was completely irregular and could not be done? If so, what was Dr Ngubane’s reaction to that? Coincidentally it is one year ago to the day since Mr Molefe resigned. She asked Ms Daniels if she is clearly of the opinion that there is no way and no how that Mr Molefe could have belonged to the pension fund and could have received the pension fund payout that he did because of the contract he was on. Minister Brown was vocal that she did not know these things were happening and was going to institute inquiries – she asked Ms Daniels if the Minister in fact knew about the Eskom Trillian relationship. In a parliamentary question, Minister Brown claimed to not know of the relationship. Did Minister Brown know from the onset about Mr Molefe’s pension payout?  Did Minister Brown know Ms Daniels was asked into these meetings where people like Mr Gupta were present? The Department of Public Enterprises is the stakeholder so surely the DG must know of what was happening as he oversees the Department under which Eskom falls – were these matters ever reported to the DG? Was Ms Daniels ever instructed to do anything by the DG of DPE? She asked Ms Daniels if she knew of matters being reported to the DG of DPE but not then acted on. It would seem Eskom has become a three way run entity by the board of Eskom, government and a Gupta-affiliated consortium – she asked Ms Daniels if she agreed with that assumption.

 

Ms Daniels noted the meeting of 29 July was not a scheduled one. Mr Essa had asked her to meet him – she could not say why Mr Gupta was there etc because it was not actually a formal meeting. Mr Gupta was in a grey tracksuit pants, no shoes and a t-shirt so it was not a meeting – in her view he looked worse than someone at a shebeen. She felt like she was in a movie with Mr Gupta, Mr Duduzane Zuma, Mr Ben Martins, who is the Deputy Minister of Public Enterprises, and a lady she did not know but would be able to recognise from a picture. Ms Daniels prayed to God that she was not killed at the meeting because she felt she walked into a trap – these were kinds of thoughts going through her head. The Deputy Judge President allocated judges. The scheduled meeting from Eskom’s side was to arrange a date for a hearing of all the applications. The machinations were to make sure the hearing took place post-December 2017 so that it was more favourable – this was her guess. The talk at the meeting was about trying to figure out how the process could be influenced. Attorneys know that if they were nice to registrars etc they would get suitable dates. She found it shocking that Mr Gupta knew about this. After this meeting she was convinced state capture was real.

 

She had no doubt Dr Ngubane must have been aware of what was happening in the board because under his watch there was the Mr Molefe payment, driven by Ms Klein, BTC issues and Mr Pemansky being chairman of the IFC while sitting on Oakbay and was found to be the CEO of Trillian Property and Asset Management while presiding over disposal of Eskom’s non-core assets. Facts are facts – one could not be the head of an organisation and not know what was going on. In terms of the pension payment, protocol was that only the chairman corresponded with the Minister so in this instance the letter was prepared by Mr Minnaar and signed off by Ms Klein and Mr Khoza. Now that she had all the facts, Ms Daniels knew Mr Molefe was not entitled to the pension payout.

 

Based on her PA’s intimations to Ms Daniels, Minister Brown knew about Trillian before. Her reaction to Ms Daniels’ report meant that the Minister sanctioned the action – there was no other inference to draw. Ms Daniels was also convinced Minister Brown knew of the pension payout to Mr Molefe but tried to fob it off on her officials. Three people in the office of Minister Brown acknowledged receipt of the letter and there was a meeting with the Minister on 23 February at her instance – the Minister therefore could not have not known. On a balance of probabilities, Minister Brown must have known about the Gupta meeting. Ms Daniels, given her experience and what she now knew, was of the opinion that everyone in the office of Minister Brown was captured. As a right thinking South African, Ms Daniels would not be fooled. The DG of DPE had never instructed Ms Daniels to do anything but the officials in the Department had an attitude that Eskom worked for them and so did not really understand the role of a shareholder. At times unnecessary reports and information were required – Eskom officials were called to meetings with the Department at a moment’s notice where they would have to explain for hours when they actually had work to do – this was an abuse of power and not a healthy relationship. It pointed to the paucity of leadership – when the Minister and DG were so lax not much could be expected. Ms Daniels definitely agreed Eskom was being run three ways.

 

Mr Swart was outraged by what was shared with Committee today and the level of capture suspected on the prima facie evidence. The factual findings of the Public Protector’s Report have not been taken on review whilst a small part of it has been taken on review by the President relating to a legal issue – we know the Public Protector found seriously breaches of the PFMA particularly with the Tegeta contract. He did not understand why Ms Daniels complied with the Gupta meeting of 9 March 2015 – he asked why she did not tell them to get lost or ask them what right they had to ask her those questions, similarly to what the previous Deputy Minister of Finance told the Guptas in more lucid terms. The meeting of 9 March 2015 fits into the pattern of the executives being suspended as the Committee heard from Ms Molefe this morning, after Ms Molefe pushed back on signing Gupta-influenced contracts. It was heard from Ms Daniels that the entire sequence of events was all planned out. This all plays into the narrative of Eskom having been captured by Gupta-aligned people. He asked Ms Daniels to comment on this.

 

Ms Daniels replied that the meeting of 9 March 2015 was not a formal one – at the time she was a senior manager i.e. four levels junior than what she is now.  She has been with Eskom for 11 years beginning as a junior legal advisor after working her way up. After the meeting with Mr Essa, she also phoned Mr Dan Morakane, who was at that stage the acting Group Executive: Group Capital and her boss prior to Mr Koko – she told Mr Morakane exactly what happened and he said he had heard the rumours. After the meeting with the Guptas, she instructed the team to get a date before December 2017. The case is now going to court on 29 November 2017 – in this way Ms Daniels did what she could to put her foot down.

 

Mr Swart said the CEO of Trillian Advisory told the Committee about the payments – the CEO was of the view the payments were made in contravention of the PFMA and the Companies Act and were therefore unlawful. The Report of the Public Protector also referred to this but yet at this stage very little action has been taken. The Budlender Report also expressed concern that the matter of capturing was ongoing and malfeasance was ongoing. What was happening now to recover the funds from Trillian and McKinsey? Is there litigation? Is it going to the Special Investigating Unit (SIU) which would be a further delay tactic because the President appoints the SIU?

 

Ms Daniels said the Bowman’s Report recommended certain steps – she briefed the board on this on 29 August. Notwithstanding the referral to the SIU, there is an obligation on the board of directors, as the accounting authority, to recover the money. She made this clear in her presentation that despite referring it to the SIU (on which there was a formal board resolution) there was an obligation in terms of the PFMA and Companies Act. She could hand her files to the Hawks but she did not have confidence that they would do anything about it. She personally issued the letter of demand to McKinsey and Trillian – she did not tell anybody that she was doing this except the CEO. The very next day she was suspended.

 

Mr Swart asked where the process was now.

 

Ms Daniels heard through anecdotes that the board was trying to discredit her report and discredit veracity of the Bowman’s Report so that it cannot be used. Apart from suspensions, no action had been taken.

 

Mr Swart asked if this meant no further action was taken since the letter of demand was issued.

 

Ms Daniels said the letter was issued on 4 or 5 October 2017. She recommended Eskom go to court, get the decision to pay set aside, as it was an action in terms of the Administrative Justice Act, and this needed to be done within six months of the decision being taken. By now, because of all the stalling, she thought a Judge or any court would be hesitant to grant condonation. She found McKinsey’s commitment to pay the R1.6 billion quite disingenuous because she was sure its lawyers would have informed them the time period for Eskom to do something was now expired. She had been on suspension since 6 October 2017 and her access to Eskom information was severed.

 

Mr Rawula sought the legal opinion of Ms Daniels on the different versions relating to the pension/leaving of Mr Molefe where Eskom basically bent the rules to specifically fit the case of Mr Molefe. What was the actual version of events? The proposed amendments to fit Mr Molefe were actually effected by Eskom because the R7.9 million, as a result of the adjustment, would not have been paid if that was not the case. The point is the process was already ongoing – he asked Ms Daniels to respond to this.

 

Ms Daniels, speaking in her personal capacity and not for Eskom, said it was indeed a fit for purpose arrangement done specifically for Mr Molefe. There were attempts to do the same for Mr Anoj Singh but because Mr Singh was too young it would not have worked. In her view the talk of early retirement, leaving and all the different versions was all a smokescreen to create confusion – Mr Molefe did not officially offer a resignation letter. The statement Mr Molefe made that he was stepping down in the interests of good governance was sent to all board members as well. Mr Molefe applied for early retirement but he did not meet the requirements but the board was willing to subsidise that. If Mr Molefe did qualify for early retirement, as a pensioner he would be able to take a third of what was due to him as a cash payment – this money would then have to be paid back because Mr Molefe was not entitled to it. Ms Daniels made it clear she was not called to advise on these matters. Only after reading the Sunday Times that morning did she start putting together a file – only after going through the information did she realise Mr Molefe did not qualify and she distinctly remembered asking if it meant he was still an employee of Eskom while being an MP.

 

Mr Rawula asked if it was standard practice for Eskom to make prepayments in reference to its contract with Tegeta. The Committee heard from the business rescue practitioner that there was a contract which Eskom had with Pembani but for some reason Eskom was not happy with the contract other than that it did not have the capacity envisaged – at the same time Eskom preferred the contract with Tegeta. Was Tegeta favoured because it was a Gupta-linked company? The Committee also heard Mr Koko pressured officials to flout procurement processes and policies and for this the officials were suspended. Part of the job of Ms Daniels was to ensure the board was compliant with legal prescripts – he asked Ms Daniels what her role was in terms of flouting the law. In hindsight based on her own personal ethics, he asked Ms Daniels if she should have resigned earlier or blown the whistle against wrong doing taking place.

 

Ms Daniels clarified that she was a legal adviser at Eskom in the primary energy division in 2006. She then became primary contracts manager in the primary energy division from 2009 until 2011 before working as a senior manager in the office of the Group Executive. Her role changed along the way. She only became Group Company Secretary on 1 October 2015 before taking over, by request, as the acting Head of Legal when the incumbent left. She reported issues in 2015 to Mr Morakane. Mr Matjila did not pressure Ms Daniels into signing any contracts – as chairperson of the suppliers’ suspension committee, where errant suppliers were dealt with, she dealt with a supplier who had committed fraud and the committee in effect blacklisted them so the company could not do business with Eskom for five years. Mr Matjila wanted Ms Daniels to uplift this suspension but she refused and he then threatened to fire her that day and she said “go ahead”. This was the only instance where Mr Matjila forced her to do something that she did not want to do but he did not succeed.   

 

Ms Daniels was not aware that Eskom entered into a contract with Pembani – she knew Pembani approached Mr Molefe to sign a contract as it was interested in buying Optimum on terms. This was not presented to Eskom – she only found out about this in the Public Protector’s Report.

 

Suppliers across the board were often given prepayment – there were strict rules about it and in the case of Tegeta those rules were applied. Ms Daniels had the share certificate, it was pledged and the guarantee was only uplifted once the money was set off against the coal delivered. The case was unusual in that Eskom clearly favoured Tegeta because it helped them buy Optimum.

 

Ms Nobanda was interested in the meeting with the Guptas – she asked Ms Daniels to repeat who was present at the meeting with Mr Ajay Gupta.

 

Ms Daniels repeated that it was Mr Ajay Gupta, Mr Duduzane Zuma, Mr Salim Essa, Deputy Minister Ben Martins and a lady whose name she just could not remember.

 

Ms Nobanda reminded Ms Daniels of the meeting of the Committee of 23 May 2017 at the Townhouse Hotel which she was part of with Dr Ngubane and some of the Eskom board members. In this meeting, Dr Ngubane mentioned that Mr Molefe qualified for the pension fund payment. Ms Daniels was present at the meeting and assisted in explaining the calculations and how the R30 million was reached. The Member asked why she should now believe what Ms Daniels was saying and presenting to the Committee was true. At the time Ms Daniels did not say what was happening was wrong.   

 

Ms Daniels responded that at the time she did not have all the information that she had at her disposal right now. She went through an extensive process of looking for documents and putting it together. Information in the file on the Mr Molefe matter came from different departments. Whatever she told the Committee Ms Daniels could verify with fact. Had she known something was wrong at the time Ms Daniels would have said so.

 

Ms Nobanda asked if Ms Daniels did not have the information she did now, and everything went smoothly for the pension payout of Mr Molefe, it would have meant Ms Daniels was complicit in the deed whether it was wrong then or wrong now. 

 

Ms Daniels did not agree as her role as Company Secretary was administrative. In terms of this transaction she was not asked for advice at any time. At the meeting she recorded the advice. She supported the theory of the Member that had the Sunday Times not published this story, no one would have been any the wiser –this came with the benefit of hindsight and what Ms Daniels knew now.

Ms Nobanda referred to the section of Ms Daniels’ statement which spoke to circumstances leading to her suspension – she asked what led the board to suspend her if the board was new. Were the recommendations for disciplinary action against Ms Daniels what led to her suspension or was this a different matter?

Ms Daniels was saying in the statement that her role became increasingly difficult with the new board – at its first meeting of 23 June, the new board tasked Ms Daniels with firing the manager in the office of the chairperson who had written an opinion on Eskom’s reputational crisis and the board’s breach of its fiduciary duty. Ms Daniels refused to do so because the manager was hired to deal with Eskom’s communication, more particularly the board’s reputational issues. In her case, Ms Daniels took annual leave from 1 July and while away, at a board breakaway, Mr Khoza announced that the board decided that the Group Company Secretary and Head of Legal cannot be one person and Ms Daniels needed to choose knowing full well that she had already chosen in March of that year to be Head of Legal. During this period, because of the Molefe matter and the governance issues raised and that decisions taken were actually irregular, the chairman of the board asked the Chief Audit Executive to do an investigation on the governance issues. That Chief Audit Executive recommended to the board, without her knowledge, that she be suspended – this was on a different charge. She picked this up while preparing for the audit and risk committee and it was said she backdated minutes and had not done certain things. A detailed response was then provided to Mr Gounden and his colleagues and to this day no response was received. The Audit Executive then said he made a mistake via email – Ms Daniels did not accept it and told him to go back to the board to inform it this was wrong. He was then requested to amend his submission but it did not deter from the fact that there was a concerted effort to get Ms Daniels out of the way.

Ms Nobanda asked Ms Daniels why she thought Mr Koko was so comfortable taking her along to meetings with Guptas.

Ms Daniels explained she was the, for want of a better word, chief of staff in the office of Mr Koko – these meetings were ad hoc and were not actually meetings. Mr Koko said they would go and discuss IPPs but then they would end up at the offices of Trillian where she would wait outside as Mr Koko met with Mr Essa and Mr Wood. The meetings were not formal. There was no discussion of “how” and “why” and there were no actions for Ms Daniels to take. Mr Koko also wanted to “show off” who he knew.

Mr Gungubele questioned how Mr Koko escaped from being suspended.

Ms Daniels said the strategy of Mr Koko was to “wait it out” while the other executives left. There was a meeting where Mr Koko had to motivate why he should stay – he prepared a written submission and thereafter the board was ostensibly convinced that Mr Koko was sincere and wanted to come back.

Mr Gungubele asked if the relationship between the current chair of the board and Mr Koko was purely professional.

Ms Daniels, in her view, did not think it was. During the disciplinary process Mr Khoza was quite hostile towards Ms Daniels in terms of what she wanted to do. He interfered in the charges and was too operational to be the chairperson.  

Mr Gungubele noted there was a general allegation against the current board that it was a Gupta board – he asked Ms Daniels to comment on this allegation.

Ms Daniels, in her view, agreed certainly in the case of the current and previous board, in her experience because she worked with both boards. During the time when banks were beginning to question peoples accounts, one of the directors phoned her for advice and the director was livid because she had been declared a politically exposed person – she then said to her “we all know this is a Gupta run board and we all know we take instructions from the Guptas so if these guys think I am going to go down I will tell on them”.

Mr Gungubele asked how critical Mr Khoza was on the board for being a Gupta conduit.

Ms Daniels said that in Mr Khoza’s previous role as chairperson of the board tender committee, many of the transactions went through unopposed, there were round robin resolutions and ad hoc board committee meetings called at a moment’s notice – the ground was there. For a non-executive chairperson Mr Khoza had been at the office every day – that is unprecedented.

Mr Gungubele requested the Committee get all the CVs from the current board to ascertain if they were professionally appointed. He asked Ms Daniels to explain the prepayment.

Ms Daniels replied that in simple terms, it meant Eskom gave the supplier the cash ahead of supply. This was because if Eskom was going to ask the supplier for more coal, it would need to fund the operations of the supplier. 

Mr Gungubele questioned if it was correct that this prepayment was deposited to Tegeta.

Ms Daniels confirmed this. She drafted the pledge and share agreement. When there was cross-supply, as there was in this case from Hendrina to Arnot, it was plausible.

Mr Gungubele asked if this was legal oversight on the part of Ms Daniels.

Ms Daniels said she was not a lawyer then.

Mr Gungubele noted Ms Daniels was the Company Secretary and her primary responsibility was to advise on corporate governance. She was also legally trained – to an extent she must accept there was oversight on her part.

Ms Daniels accepted this – her focus was to ensure Eskom had security.

Mr Gungubele wanted to know more about the guarantee of R2.1 billion, which involved ABSA, and the story behind it.

Ms Daniels said Mr Koko wrote to the DG of the Department of Mineral Resources. Usually the Eskom coal contract was used as surety – it was a little bit unusual for Eskom to have given the guarantee to a supplier.

Mr Gungubele asked if it was unusual or wrong.

Ms Daniels stated it was wrong.

Mr Gungubele asked who prepared the documentation in this case.

Ms Daniels responded that it was Treasury – she was not involved in it.

Mr Gungubele questioned the role of Cliff Dekker Hofmeyr and if procuring the company, in terms of corporate governance, was a prudent decision. 

Ms Daniels said they were on the Eskom panel and investigated the conflict of interest and whistle blower reports. With the benefit of hindsight, she would have used another company.

Mr Gordhan wanted to play devil’s advocate for a short while and put to Ms Daniels that she was spilling the beans due to the suspension as opposed to something being genuinely wrong.

Ms Daniels responded that she was fighting the suspension – she believed in Eskom and would like to go back to work to be part of the Eskom clean up. Other than when asked about her personal opinion, Ms Daniels ensured she could back up what she was saying with documentary evidence. This was not an act of vindication on her part.

Mr Gordhan asked how Ms Daniels would rebut Mr Koko or Mr Essa if they denied her claims around having coffee at Melrose Arch and seeing certain people in tracksuit pants.

Ms Daniels would not be able to do – it would be her word against theirs. People said the Gupta leaks were not true but now we know that they are – it was a question of one making up one’s mind as to whether one believed Ms Daniels or not.

Mr Gordhan noted that the name of Mr Gounden flowed constantly through the testimony of Ms Daniels – he asked if Mr Gounden operated with the right level of integrity on the board and as chair of the audit committee.

Ms Daniels was of the view that no - Mr Gounden was very much tied to the influence of Mr Khoza. When Ms Daniels presented the Trillian Report to the audit and risk committee, Mr Gounden was prepared to allow Mr Anoj Singh to sit in while she presented – at this point she lost respect.

Mr Gordhan wanted to know what “issues” were discussed in the report Ms Daniels prepared for the Minister.

Ms Daniels responded that there were four issues – Minister Brown said it was clear from the report there was a complete failure in audit control and Ms Daniels agreed with her on this because the report by the Chief Audit Executive said the McKinsey Trillian deal was above board, compliant and the only thing required was a termination agreement. The second question the Minister asked was why there was no contract in place for Trillian – she responded that there was no legal or contractual obligation to do so. Thirdly, the Minister said it appeared the legal department had no role in the contracting process – this was not true because it was dealt with by her predecessor and there was in fact an opinion from Adv Kennedy that the contract between McKinsey and Eskom required Treasury approval for the deviation. The fourth issue was that the Minister wanted an explanation to the executive ethics committee as to why she had lied to Parliament. 

Mr Gordhan asked why Ms Daniels was being suspended – was it incompetence?

Ms Daniels said they said she ought to have known about the contract and advised the board – the first time she became aware of the matter was on 5 December 2016.

Mr Gordhan wanted to know why Mr Dladla delivered the suspension personally to Ms Daniels at her residence.

Ms Daniels thought he was under enormous pressure to suspend her – she expected it from the day she handed in the Trillian-McKinsey report. Mr Dladla needed to go back and say he delivered the suspension.

Mr Gordhan asked Ms Daniels, based on her knowledge of the Companies Act and PFMA, if the current and previous directors of the Eskom board were capable of being reported for their lack of diligence, amongst other things, to the CIPC and declared delinquent directors?

Ms Daniels thought a delinquency application would have very much merit in this instance.

Mr Gordhan recommended the Committee write to the office of the Gauteng Judge President and inform him that the DJP’s office came up in its discussions today so that he was aware of the abuse of these sorts of matters in the context of state capture.

Mr Marais asked if it was also the task of the Deputy Judge President to allocate cases to Judges – this was the crucial point because the Deputy Judge President could decide which Judge to give this case to.

Ms Daniels said this should be emphasised and it explained why Mr Gupta, at that meeting, wanted to know the process.

Mr Tseli did not want to assume that Ms Daniels, as a legal person and in the course of performing her duties in advising the board, did it in writing.

Ms Daniesl responded that she did some memos especially around the McKinsey Trillian matter.

Mr Tseli asked if Ms Daniels advised in writing on what was best to do in the Mr Molefe pension matter.

Ms Daniels said this was all in writing.

Mr Tseli asked if Ms Daniels, as Company Secretary, was not supposed to be part of the processes involving the business rescue practitioner negotiations around the R600 million shortfall.

Ms Daniels would not have been as her role was administrative to the company. She recalled being called to one meeting with the business practitioners but Mr Koko wanted notes taken of the meeting – Mr Nazeem Howa was there and the people from primary energy.

Mr Tseli sought her comment on the relaxing of the rules of the Mr Molefe pension matter. Was there anything wrong in that particular instance?

Ms Daniels explained the relaxation of the pension fund rules did not materialise because the board was not authorised to do so – the pension fund was administered by a separate board of trustees and any amendment to the rule would get done there. The best that could have been done was to ask the pension fund certain questions.

Mr Tesli asked if this was the first instance of a rule needing to be amended that Ms Daniels had come across since working for the company to address a particular aspect.

Ms Daniels said it was not – it had been done before when executives took early retirement but the instance of Mr Molefe was different because he was a contract employee. She was quite relieved that it could not be done.   

The Chairperson thanked Ms Daniels for her time before the inquiry and her cooperation. It was valued and would assist a great deal in providing Members with an understanding of Eskom during her tenure.

The meeting was adjourned.