Eskom Inquiry: Zethembe Khoza on behalf of Eskom Board


Public Enterprises

05 December 2017

Chairperson: Ms D Rantho (ANC)

Eskom Inquiry: Zethembe Khoza

Submission by Board of Eskom Holdings Soc Limited

Meeting Summary

In the late afternoon session, the Acting Eskom Board chairperson, Mr Zethembe Khoza, read the Eskom board submission.

The evidence leader asked Mr Khoza about Mr Molefe’s pension payout; the prepayment of coal to Tegeta; the R1.6 billion guarantee by Mr Anoj Singh; allegations of state capture given in Mr Khulani Qoma’s testimony before the inquiry; the Trillian-McKinsey contract and subsequent payments; The New Age (TNA) breakfasts sponsorship; suspension of the four Eskom executives; the conduct of Mr Anton Minnaar at Eskom; and the investigation reports into Eskom taken for senior counsel review by the board.

Meeting report

Hearing of the Eskom Board
Chairperson: We are going forward with our inquiry for the day. We are now going to give over to Adv Vanara. Are you going to lead Eskom or is Eskom going to present to us? The board members are here. Are they all going to respond?

Adv Vanara: The Board will make a submission, after which I will engage with them. I just want to communicate to Mr Singh that the Committee will get back to him with the date in due course.

Chairperson: Eskom has a submission that it is going to give us as. I take it that the Chairman is going to lead the submission. All the board members have come to the Committee are we going to allow all of them to respond or are we going to get responses from the Chairperson only?

Mr Swart: Perhaps we could first get an explanation as to who is here. Adv Vanara will be leading the evidence and one assumes that they might want to go through their document very briefly.

Chairperson: They will go through their document very briefly and then Adv Vanara will be leading the evidence. Are we expecting all of the board members to respond or only the Chairperson?

Mr Singh: I think that the responsibility should lie with the Chairperson, unless he deems it necessary for another board member to explain something.

Dr Luyenge: Agreed. If there are special allocated aspects in Eskom, where a particular board member is in charge, that board member can respond to that particular question.

The Chairperson: Can we be appraised of who is here from the Board.

Mr Khoza, Acting Chairperson: I have here with me, Pat Naidoo, Member of the Board and Mr Sean Maritz, who is Acting CEO. There are three board members here: Pat Naidoo, Sean Maritz and myself. The other board members were not available.

Adv Vanara: I suggest that Mr Khoza and Dr Naidoo be sworn in so that if either of them can respond.

Witnesses: Mr Zethembe Khoza and Dr Pat Naidoo

The Chairperson proceeded to swear in Mr Khoza and Dr Naidoo

Mr Khoza read the statement from the Eskom Board: Submission by Board of Eskom Holdings Soc. Limited (see document)

Adv Vanara: Let’s go to the pension payout. Did Mr Anton Minnaar make any contribution to your statement at least insofar as the pension payout is concerned?

Mr Khoza: Yes,, some of the information is drawn from his records.

Adv Vanara: The position you have expressed in your understanding of the instruction from Cabinet and the Minister about the five year fixed term changing the initial permanent employment, is that a position shared only by yourself or a position shared and continues to be shared by the board?

Mr Khoza: As per the advice, because the contract was drawn by HR and Legal, it was assumed as a correct contract because we were informed that it was employment on a permanent basis with a five year term.

Adv Vanara: You have now gone through your submission as the Board chairperson. Is what you are saying in the submission your personal understanding or the understanding of the board at the time?

Mr Khoza: It is the understanding of the board. The letter of offer which was given to Mr Molefe did indicate the salary and benefits which then meant that from the letter of offer which Molefe signed, it was an indication of permanent employment.

Adv Vanara: Which part of your submission around this pension preparation or arrangement did Mr Minnaar contribute?

Mr Khoza: Mr Minnaar as an HR expert or the person that assists us with the drafting of documents assisted Mr Molefe with the drafting of the document which was submitted to the Chairperson when Mr Molefe wanted to retire at the time.

Adv Vanara: I am referring to your submission today. In it, part of the topics you deal with from paragraph six on page 17 to page 24 are the employment and early retirement of Mr Molefe. That is where I am today. Do you understand? I am asking if Mr Minnaar in this portion of your submission played any role in assisting you prepare this submission?

Mr Khoza: No, he did not assist me in any way. Some of the documents were sourced by the legal representative from his office.

Adv Vanara: Insofar as what your submission talks to, is it a reflection of the position of the board, and not your personal views?

Mr Khoza: Yes. It is the reflection of the board.

Adv Vanara: Can you help me understand here, why did the board prepare this special pension dispensation for Mr Molefe, what were the motivations or reasons?

Mr Khoza: The motivation was based on retention. Initially, Molefe was given a letter of offer as a permanent employee. Later it was supposed to be changed from a permanent employee with no limit in terms of tenure. Later it was changed to an employee on contract for five years, and when he was given the five year contract he questioned it, saying first he was given the permanent job taking into account the skills and knowledge that he had at the time and we also wanted to keep Mr Molefe. It was in our interest to say, “Let’s try to address the gaps”.

Adv Vanara: So the genesis of the pension fund regime is Mr Molefe himself understanding that he was no longer a permanent employee?

Mr Khoza: I think at the time he understood that he has a fixed term which is a fixed term that he had in his previous job which did not give him enough time to accumulate a pension. And that was his content.

Adv Vanara: His understanding was that he was not a permanent employee. He was now a fixed term contract employee. He was there for five years at the most.

Mr Khoza: To my understanding, he felt he was a permanent employee with a fixed tenure of five years because he was already contributing to the pension fund and he was already getting the benefits.

Adv Vanara: That statement you just mentioned tallies up with the attitude that Mr Anton Minnaar insisted on this morning – that the five year fixed term contract was nothing but permanent employment. Am I correct?

Mr Khoza: Yes. That was the understanding which was communicated, and that is the understanding that was in the records. It is also in his contract.

Adv Vanara: Let’s go back to page 18, paragraph 6.6 of your statement. You say on 1 November 2015, the Minister responded to the letter of 16 October 2015 when she approved the proposed remuneration package to Molefe. This letter was addressed to the Chairperson, and was received by the Company Secretary on 4 November 2017. In the same letter the Minister further expresses her view that the period of employment for Mr Molefe be recorded as five years subject to annual performance reviews. This is what is important to note, this is the first time that Eskom is advised that the tenure of Mr Molefe’s employment be on a fixed term basis and not permanent. That statement sharply contradicts what you said a minute ago, which was consistent with what Mr Minnaar said earlier today. Do you agree with me?

Mr Khoza: I think maybe I can explain the context.

Adv Vanara: No. No. Just answer the question. Do you agree with me that what you have written there sharply contradicts what Mr Minnaar said this morning and what you now said you align yourself with?

Mr Khoza: I disagree.

Adv Vanara: On what basis?

Mr Khoza: In that context, because he was given a permanent contract with no limit and now he was given a limit. I think the ‘permanent’ here was put in the context of it being a permanent perpetual contract until he retired, the initial contract, but it was fixed to five years.

Adv Vanara: Acting chairperson, it could never be clearer than the way you put it in this sentence. You say to the Committee, and you are on oath. Please remember that. You say “this is the first time that Eskom is advised that the tenure of Mr Molefe’s employment be on a fixed term basis and not permanent”. How many permanents do you have in mind?

Mr Khoza: I think as I said, there the permanent is when a person has a perpetual contract. But here it was saying it was going to be a fixed term and not a permanent contract until he retires. I think the use of the term “fixed” versus “permanent” because permanent would be perpetual and fixed term would be fixed.

Adv Vanara: Let’s go to 6.12 on page 19. The last paragraph you wrote there and it is the understanding of the board, and not mine. The last sentence reads: “due to the loss of benefits Mr Molefe suffered as a result of being on a five year contract as opposed to being a permanent employee. The early retirement was seen as an effort to mitigate some of these losses and incentivise him. The resolution provided that in cases where a director appointed on a fixed term basis decides to take early retirement and has a shortfall in the number of years”. That is prescribed by the Pension Fund, and it is very clear here that the board and your understanding is that Mr Molefe is not a permanent employee. What do you say to that?

Mr Khoza: I think it is a choice of words. As I said, the permanent employment in that particular context was referring to a person who is permanently employed until 63 years versus a person employed on a five year contract and not that he is a particular employee, but the employment meant that he came from Transnet. It was already a permanent contract with a fixed term, but he did not accumulate enough pension. Since he did not accumulate enough pension he wanted a longer period of employment to accumulate a pension. That was the context.

Adv Vanara: The TNA breakfast show. In paragraph 16 of your statement you say “The board decided to ratify the sponsorship agreement after obtaining and taking into consideration the legal and reputational consequences of cancelling these agreements”. What were these legal and reputational consequences?

Mr Khoza: As mentioned in the submission, the contract that was signed had no exit clause. As it had no exit clause, there was no way to terminate it, otherwise we would have paid the full amount of the contract. And also because it was going to be wrangled in a court of law, it was going to cost us reputational damage if we have to argue something which was already signed with no exit clause.

Adv Vanara: But how many times has Eskom been in court, you are now going to court to challenge McKinsey and Trillian on the R1.6 billion that already paid under dubious circumstances. What would be wrong with the board contesting a decision of an official who went against all advice and was on a frolic of his own, whose conduct resulted in the financial statements of the institution having a matter of emphasis?

Mr Khoza: The challenge was that Collin Matjila was no longer an employee of Eskom at the time, and for us because the contract was already written and had no exit clause, there was no way we were going to challenge it as the contract was valid on its own. On the other side, we were informed by management that the TNA contract is still necessary and they are utilising the contract at the time, so for us to go and challenge it when it was required that we carry on with it, did not make sense.

Adv Vanara: You are providing a different reason why you retained or approved or condoned this irregular expenditure. We will get to that, but I want to focus on the reason pointed to in 4.1. 2 on page 16. You say “you could not. You decided to ratify the sponsorship agreement after obtaining and taking into account legal and reputational consequences of cancelling the agreement”. I am saying Eskom is repeatedly in court. You have now recently taken a decision to sue McKinsey for R1.6 billion, and Trillian for having paid Trillian without any contract or basis. Why would you, when this particular transaction reflected so badly on the financial statements of the company, want to cover and ratify this transaction?

Mr Khoza: As I said, that was the legal opinion we obtained at the time that guided us in taking the decision. But on the side of management, they still required the contract to carry on.

Adv Vanara: A lawyer advises you, but it does not take away from your responsibility as a non-executive director having fiduciary duties to the company. It is not going to help you to jump and say “we did this because the lawyer advised us to do that”. You need to demonstrate to us how you and your board applied itself. You don’t need a lawyer to remind you that this particular transaction became a matter of emphasis on the financials of the institution. If you can go to court for unnecessary blunders, how could you on a principle basis not go to court to have that contract set aside?

Mr Khoza: I think at the time the board decided based on the legal opinion and information from management that said they required the contract, and also with the external auditors, if we had taken external measures to condone the contract, it was going to be necessary to address the reportable issues.

Adv Vanara: Which management told you that they needed these services? We had a number of executives that were directly in line for this particular transaction that were opposed to the transaction itself. Ms Tsholofelo Molefe is on record as having advised against Mr Matjila usurping the powers that he did not have. Ms Erica Johnson’s testimony is on record where they had to find a reason to please Mr Matjila to have this contract in place. So which executive all of a sudden had these brilliant ideas that Eskom would not live without this TNA contract?

Mr Khoza: I can’t recall the name now because it was quite a while and we were just starting, but I will check on the submission and forward the requisite information to you.

 Adv Vanara: Around the pension, you make reference to the Minister’s views, 6.19, page 21. In a letter from the Ministry of Public Enterprises to the media dated 27 April 2017, the Minister formally declines payment of Mr Molefe’s illicit pension payout. In her communication to the media, the Minister indicates that the proposed pension payout is not justifiable in light of the current financial challenges faced by state owned entities and the country as a whole. At the time you took this decision, Eskom was facing financial challenges as it is facing financial challenges today. Why must it take a shareholder representative to pick up the obvious when there is a board paid to look after the company?

Mr Khoza: I think with the pension, if I may explain, I don’t think it followed the right channels when it was submitted and approved. At no stage was it approved at a board level or even at the People and Governance (P&G) board committee, the full amount. Therefore we were not aware of the amount.

Adv Vanara: When did you become aware?

Mr Khoza: We only became aware of the amount when it was published in the newspaper.

Adv Vanara: When was that?

Mr Khoza: It was somewhere in April. I think the 20th or 22nd.

Adv Vanara: So the board had taken a decision in February 2016 to have this pension arrangement for Mr Molefe, and when Mr Molefe came around November with a request for early retirement, you approved this amount. Let’s go back to the P&G meeting. When you did all these pension arrangements, did you ever consider the financial implications of this arrangement?

Mr Khoza: Yes. At the time when we were considering the pension arrangement where we said we are going to buy the services, we did consider the service. Hence, it was on condition that he complete the five year period. There was a condition that was written in the letter sent to the Minister that if he complete the five year period, even in the minutes on the day that was deliberated, it was taken into account that he was going to complete the first five years. It was clear. The implications in terms of the cost was going to be very limited if he had completed the five years.

Adv Vanara: You are still not answering the question, acting Chair. That decision, whether he would have left 10 years later, the cost would have been minimal compared to what happened in this particular instance, but there would have been a cost implication. So when you took the decision, were you advised of the cost implication of the decision that you took in February 2016?

Mr Khoza: Yes, we were advised in terms of the financial impact. But taking into account that he was going to serve the five years, with a possibility to extend the five years, and based on the ability of the individual to do the job or exercise his duties and the impact he would be having on the company at the time when we assessed the thing. To retain him on those bases, it did make sense because we never expected him to terminate his contract before he completed the five years or get exemption.

Adv Vanara: The letter that Mr Minnaar presented to P&G, and I see you quote him from what I seem to understand to be the resolution of that meeting. It is a meeting of November where Mr Minnaar brought the letter to a P&G meeting. 6.16, page 20: “Mr Molefe’s retirement was discussed at a special P&G committee on 21 November 2016. The meeting was not quorate and therefore could not make any decision”. That is what you say, and that is what the minutes of the meeting say. Do you agree with that?

Mr Khoza: Yes.

Adv Vanara: And during that meeting, the terms of the retirement letter were noted. They were not approved because there was no quorate meeting, and support had to be taken further through the process. What do you understand by that?

Mr Khoza: The letter that was read was a letter that was going to be coming from Dr Ngubane as the Board Chairperson to Mr Molefe after the Pension Fund had already approved his pension. It was read to this particular meeting, it was not a submission. The letter of retirement coming from Molefe and the conditions of it were never read to the board. The letter coming from Dr Ngubane to Mr Molefe, after the process had gone through the retirement fund, was read there in the meeting. But in terms of the process, because the meeting was not quorate, it could have either been taken to the next meeting or P&G, or to the board because in terms of the MOI, anything that pertains to the Chief Executive (CE) has to be taken at a board level. It was not seen in that particular meeting but it was mentioned. The meeting was intended for something else. It was mentioned, hoping that it would be taken further to the right levels.

Adv Vanara: I accept that, and that’s my understanding of the testimony of Ms Venete Klein who was chairing that meeting which stands in stark contrast to what I heard this morning from Mr Anton Minnaar. This is the point that I want to correct you, it could not be at this time that the Pension Fund had already started processing the pension and this the reason why it could not have started processing the pension. The board would have to write to the Pension Fund after it has accepted Mr Molefe’s request for early retirement to communicate to it that Mr Molefe had gone on early retirement. Before that, the Pension Fund could not have proceeded. It cannot be accurate for you to say that the Pension Fund had already started processing the pension. What is your take on that?

Mr Khoza: My take is that if a person wants to take early retirement or whatever form it comes in, it goes to the promoter, and the promoter takes it to the Pension Fund whether the person qualifies, and the Pension Fund says “Yes. It is acceptable”. Then once they have accepted it in principle, you are able to tell the individual that the Pension Fund has approved your pension in principle, and that was the issue in this particular case.

Adv Vanara: No Mr Khoza. You are completely wrong. Mr Sbu [Luthuli] testified here that what initiated the internal processes within the Pension Fund was a letter that came from Dr Ngubane that said, “Mr Molefe has been granted an early retirement and you may proceed to process his pension”. This letter that Mr Minnaar, which you correctly said, was served in a non-quorate subcommittee meeting. In any event if it was quorate, it needed to go to the board because you needed the board’s decision to accept or not accept the request for early retirement. It was not a decision for Dr Ngubane to make because he is not an executive chairperson. So, you say this letter did not go to the board, it was not approved by P&G, so that letter that Dr Ngubane wrote to Mr Molefe accepting his early retirement cannot have any status in law. What is your response to that?

Mr Khoza: Even though I cannot comment on the letter, as I said, as far as I am concerned, the board never approved it. And the P&G, where it was tabled, was not quorate. I cannot comment on that letter because I have not seen that particular letter.

Adv Vanara: But what do you make of the conduct of your official who was seated here this morning, who knew that P&G did not quorate; who knew the resolution of February 2016 with its defects that P&G did not approve and that it still had to go to the board, which you know now the board did not see, but it was sent to Dr Ngubane, and Dr Ngubane for whatever reason signed it and it was sent to Mr Molefe. What do you make of that conduct of an official at Eskom?

Mr Khoza: I think it was an administrative error on their conduct.

Adv Vanara: Was it for the first time that you know of this conduct of Mr Minnaar?

Mr Khoza: No, it is not the first time. On the document that was investigated in terms of destruction of documents, it was raised.

Adv Vanara: In terms of the destruction of documents?

Mr Khoza: There is an investigation that investigated destruction of documents that yielded for the person doing the investigation to check all the documents in the Company Secretary [office], including that particular incident. And that particular investigation has found that Minnaar did not act properly, and also the Company Secretariat did not follow the process.

Adv Vanara: You are scaring me now, acting Chair. When you say there was an investigation on the destruction of documents. Is that what happens at Eskom?

Mr Khoza: I think the Honourable Member raised it in Parliament saying, “There is an issue of destruction of documents at Eskom” and we instituted an investigation and the investigation was going to look at the documentation we had because it was during the same time as the retirement and reinstatement of Mr Molefe; whether there is anything that happened in our office to make the Honourable Member make such a statement.

Adv Vanara: Lets go back to my initial question, now that you knew of this conduct of this official that contributed clearly to the saga of the R30 million. What actions if any did you take?

Mr Khoza: When the investigation was tabled to us, we handed the information to the interim CE at the time to take the corrective action for both people that were identified.

Adv Vanara: Who was the CE, and what actions if any did he or she take?

Mr Khoza: It was Mr Dladla at the time. I don’t know whether it was implemented. I am not sure. I don’t know if the Audit Committee has picked up anything. Action was taken and instruction was given at the Audit Committee.

Adv Vanara: Action was taken?

Mr Khoza: The instruction given to the CEO at the time was taken at the Audit Committee at the time to take corrective action on the individuals that were mentioned.

Adv Vanara: And you heard this morning, Mr Minnaar left here very clear that process wise there was nothing wrong with that transaction. What is your take on that, today he was very firm on that stand that nothing wrong procedurally happened with that transaction, what do you say about it?

Mr Khoza: I have noted it, but as I said, it was investigated, instruction was found for him to be given corrective action.

Adv Vanara: The four executives that were suspended, the decision or idea to suspend these executives was not the board’s idea. Am I correct?

Mr Khoza: It was a board decision.

Adv Vanara: I accept it was a board decision. The minutes indicate as much. I am saying the idea or decision to suspend the executives was not the original idea of the board.

Mr Khoza: Yes,, it was not an original idea of the board because the board was new, but they took the cue, guidance and input from Mr Tsotsi.

Adv Vanara: I am glad you are mentioning that it was the idea of Mr Tsotsi, I think he is on record to admit that, though it was not his idea. It is an idea that generated from Durban. But at least he has taken responsibility for introducing it to the board. This is what I find strange, in your statement you spend considerable time attacking Mr Tsotsi’s testimony and say he is lying when he presents a view that says he was hesitant to have these four executives suspended. Did I understand you correctly?

Mr Khoza: Yes,, you are correct.

Adv Vanara: If he was hesitant, are you saying that he was not hesitant that these four executives be suspended?

Mr Khoza: He was not hesitant. He is the one who convened the meeting and informed us, and even told us he has documents to support his argument - even though he mentioned the Presidency and the others.

Adv Vanara: And you were persuaded by him to suspend these four executives?

Mr Khoza: Yes. He did explain taking into account the problems that the company was experiencing at the time. He had a document that was indicating the possible charges of each and every one that was handed over to us, and it made a lot of sense after he handed over that particular document.

Adv Vanara: But on page 26, paragraph 7.12 which seems to be capturing the rationale of you and your colleagues who were not in Durban, you say “board members raised a number of objections, including that they were not comfortable with making a major decision such as this based purely on a two page document. And the concern was that for a period of three months both the board and management’s focus would be taken away from solving the matters at hand. Others felt there were insufficient facts placed before the board to make such a far reaching decision. Members also felt that if the Chairperson said this was a request from the Presidency, this would have been a directive from the Presidency or shareholder representative in which case the resolution should state that the inquiry was a request from the Presidency”. In that line you are clearly distancing yourself from this particular decision. You are even prepared that it should be recorded as such. In other words, the board should be excluded, and from where it comes must be identified. What is it that then moved you from that position which sounds plausible and rational?

Mr Khoza: That was an initial response to the matter when it was raised. But as he kept on motivating it and given us additional charges on the individuals, and he did convince the board then that there are issues and he even gave us the guarantee that there is a document pertaining to that, and he was going to give it to us. It was then clear to say that he has a document, something is being investigated that he is sitting with, it is only these other ones that he is showing to us. All that we are doing here is a first reaction to the statement because most of the board members were new at the time.

Adv Vanara: I accept that, unless you are telling the Committee that the only reason that ultimately persuaded you from being moved from the strong position that you seemed to have held, was Mr Tsotsi repeating the same thing because I am still to find what is it that moved you from what seems to be a very strong and rational position to being persuaded by Mr Tsotsi.

Mr Khoza: As I said, he came up with a document with the charges which were pertaining to the individuals mentioned, and when we go through the document, it made a lot of sense. Initially we did not have the document and he was just explaining to us, but since we were just called the day before about an input and resolution that he wanted us to take the following day, hence it was the first reaction.

Adv Vanara: When were these charges brought, and against whom, and what were the charges?

Mr Khoza: I think I can forward the charges to you. I did not record it here because it was never given to individuals, and because eventually most people had taken a package before the completion of the process and also the board at the time did not want to deal with the individual at the time. They wanted to look at how we are going to stabilise the organisation first, and then look at the issues. I can forward that to you.

Adv Vanara: In that meeting, there are at least three people that have testified who were at that meeting, Ms Venete Klein, Ms Naidoo, and Mr Tsotsi. What was clear from the three of them is that there was nothing that could be pointed to as wrongful conduct of those executives. So where are you getting the charges from?

Mr Khoza: We got them from Mr Tsotsi, and from his support. Dlamini was his support.

Adv Vanara: My problem is that you seem to be the only one who knows that there were charges because the others that testified are clear that there was no misconduct against those officials that is why they were not to be investigated. The only reason they were to be asked to excuse themselves was so that they could not interfere with the inquiry. So where are you getting the charges from? My problem is that you can’t even recall what the charges were.

Mr Khoza: I can produce the document with the charges to you. I will send it to you. I can’t comment on the other people’s understanding.

Adv Vanara: So according to your knowledge, the officials were suspended because there were charges pending against them?

Mr Khoza: There were charges that were crafted that Mr Tsotsi had with him. When we agreed to suspend people, all of them were told there were no charges against them.

Adv Vanara: But then why do you continue suspending when the charges were the reason that moved you to be persuaded by his persuasions?

Mr Khoza: As I said, Mr Tsotsi said, “Let’s put it clear to say we want the investigation to be unfiltered and not to be hindered or impeded. Therefore these people will be moved because they are in the areas we want to investigate”. That is how it went out in a statement on the day.

Adv Vanara: Basically you were managing the South African public with that statement. But what moved you at that meeting was because Mr Tsotsi had produced charges. Now when Mr Tsotsi himself says, “Now look, there are no charges” why do you then say “Wait a minute. Why are we then suspending these officials?”

Mr Khoza: Even though we did not want to charge them there and then, that is why I said he gave these charges to us. Even though he did not charge them there and then, he was managing the public, but we knew that they were going to be charged.

Adv Vanara: It would appear that you were the only one who knew that they would be charged.

Mr Khoza: When I produce the email with the charges, it will be clear, to indicate that it was sent to other board members.

Adv Vanara: You see, there is evidence of three people that contradict exactly what you are saying.

Mr Khoza: I can only produce the document because I can only utilise the documents in the archives of the company.

Adv Vanara: Paragraph 7.21 on page 28. You say that board members pointed out that it would be of great concern especially in the market for Eskom to suspend the FD (Finance Director) and CE at the same time. That was the apprehension that you and your board seem to have held, and coincidentally that is what Mr Tsotsi also testified that he had those same apprehensions. And you indicated where you were addressing the downgrade, where you say on page 30, 7.31 second paragraph, In their response, Standard & Poor (S&D) stated: “The negative outlook reflects our opinion that material execution risk remains associated with the government's support plan, and that Eskom's operating performance has not yet stabilised due to rising costs and the very tight generation capacity margin in South Africa.”. That was over and above the suspensions. In your apprehension of this downgrade, what was significant, was accepting the downgrade under the circumstances which Eskom found itself. By suspending, you are taking the risk of a downgrade.

Adv Vanara: Mr Matona was new in the company. What was the reason for him to be suspended?

Mr Khoza: I can’t go line by line per individual. One of the issues that Mr Tsotsi raised was that he was not up to grips with the business.

Adv Vanara: But how was he going to interfere with the investigation?

Mr Khoza: Because some of the investigations were going to be done around the four executives in terms of the liquidity, load shedding, and all other issues that were pending at the time.

Adv Vanara: If I have been in a job for three years and there is suspicion that there might be something wrong in my area, it will be understandable to ask me to step aside. But if I am in a job for three months for problems that pre-date my existence, on what possible grounds can it be inferred that I contributed to problems that pre-date my existence?

Mr Khoza: I think that as the accountable head at the time. It is only that I could not bring the other documents which indicate the distribution of charges per individual because I thought it was not good to mention things in public that were not given to the people when suspended. It was a working document, behind the scenes, by the board. Maybe I could have answered further.

Adv Vanara: You see acting Chair, the difficulty that I have with this response of yours is that I have had an opportunity to read the papers that were filed by Mr Matona at the Labour Court challenging the suspension. And one of the issues he raises is his not being told the reasons of the suspension. And you in those papers not coming and saying “this man was facing these charges”. Why did you in a court of law not state this particularly when this man is taking you to court challenging your decision; and find it within yourself to play open cards with the court?

Mr Khoza: I think people that were representing us in court maybe. As I said, I was not directly involved at the time when it went to court so I don’t know what happened there.

Adv Vanara: So that is the attitude of Eskom non-executive directors at Eskom. There is a R1.6 billion guarantee, “No, it is Anoj Singh, we didn’t know about it!” Your case is presented in court where you sign affidavits, “It is the problem of the lawyers”. When are you going to take and own up to your responsibilities?

Mr Khoza: As I said, certain people were allocated to deal with the matter when it went to Labour Court because we have the legal department that takes on the issues and gives feedback to the board. Not that we are not taking ownership. We do take ownership.

Adv Vanara: Acting Chair, it is not a lawyer that deposed to an affidavit in response to Mr Matona’s challenge of what he had perceived as his unlawful suspension. It is your Board chairperson whom you say was the one who was listing charges. I am asking, if there were charges, why when that decision was challenged did the Chairperson not state the reasons for Mr Matona being placed on suspension?

Mr Khoza: I cannot comment on that because the Chairperson did not come back and give us feedback as a board.

Adv Vanara: Paragraph 28. I find this paragraph in direct contradiction to that which you just tried to defend because this is what you say: “the stepping aside of the executives was for a period of three months only, which was understood that they would come back in view of the fact that there were no findings of wrong doing against them as yet“.

Mr Khoza: Exactly. That was extracted from the minutes because when they were put aside, the only communication that was communicated to them was that we were told there was nothing wrong with them. We had just put them aside until the investigation was through. But behind the scenes he had given us the charges. This is what was communicated and this is documented and ‘minuted’ in the minutes.

Adv Vanara: This was the decision of the special board that these people were to return after three months because you say that was the decision of the special board. Correct?

Mr Khoza: It was mentioned that they are set aside not to interfere with the investigation. The investigation is for three months. After three months, they are will be returned.

Adv Vanara: When Mr Matona takes you to court, he clearly must not have understood that there was nothing against him, and it is just a way of saying to him, “Go stay at home, we will pay you for doing nothing. We will get somebody to act on your behalf and pay that person”. But clearly when he took you to court and you knew that you had nothing against him and you want him to come back in three months’ time, why don’t you sit him down and say “Look chief, I think you are overreacting. The intention is not really to suspend you. It is just to allow for this investigation”. Why don’t you engage with that because you are the one at CCMA leading the charge and making it clear that you wanted nothing of him back at Eskom?

Mr Khoza: I think that was the communication that was supposed to happen between the Chairperson and Mr Matona. Maybe the feeling that Mr Matona had is the feeling that they know the relationship between the two of them.

Adv Vanara: Acting Chair you can’t personalise this thing. This is the board’s decision and you are personally involved in telling Mr Matona during the CCMA proceedings that you don’t want him back at Eskom, you are prepared to pay him out of the contract. Now I am saying if the intention was always that the executives come back, when he took you to CCMA, why don’t call him aside and say “Let’s not get lawyers involved here. You are our CEO. Don’t take this thing personally. You are coming back in three months’ time. Stay at home, we will pay you everything. Go on holiday”. Why don’t you do that?

Mr Khoza: As I indicated. Matona could have liaised with the Chairperson which was Mr Tsotsi on that. It is unfortunate that communication did not take place.

Adv Vanara: Maybe Mr Tsotsi must take the fall for the labour matter. But when you were personally involved at the CCMA, why did you not communicate that to Mr Matona?

Mr Khoza: Was I personally involved?

Adv Vanara: Yes. Yourself and Ms Klein as members of P&G.

Mr Khoza: No. I was not involved in the CCMA myself.

Adv Vanara: Immediately after these suspensions when Mr Tsotsi had persuaded you, you were up in arms against him with all manner of accusations against him. Amongst those, that he had lied about the reason for the suspension of the executives. Is that correct?

Mr Khoza: Yes.

Adv Vanara: And you managed to get the problematic guy out of the way in that you threatened Mr Tsotsi with the vote of no confidence, and at midnight he resigned. Correct?

Mr Khoza: Yes. I think there was a clear charge sheet.

Adv Vanara: I am glad you say there was a clear charge sheet. In other words, you were persuaded about the strong case that you guys had against Mr Tsotsi.

Mr Khoza: It was based on confidence because we took him in confidence. He said there was a document but he did not produce the document. That was one of the charges listed.

Adv Vanara: So the majority of the board members must have felt that Mr Tsotsi lied to them about the reasons for the suspension of these executives. That is one of the charges. Correct?

Mr Khoza: Yes.

Adv Vanara: Now he is gone and these executives are still on suspension, and you have established that there was no basis for them to be suspended. Why don’t you go back to them and ask them to come back to their jobs?

Mr Khoza: I think there was a team sent by the board because some of them requested to talk to certain individuals from the board and they were identified from the board to speak to them. Two of them did not want to come back and decided to settle with them.

Adv Vanara: This quick pronouncement that the two of them did not want to come back as if they were told, “You have done nothing wrong. We are just putting you on ice”. Mr Matona challenged his suspension in the Labour Court and subsequently at the CCMA. At the time of the CCMA proceedings, Mr Tsotsi had then left left Eskom. The Chairperson at the time was Dr Ngubane, so you had gotten rid of the man that misled you and you knew that these poor souls had done nothing wrong. If what you are saying is true, why did your representative that was dispatched to Mr Matona not say, “Come back home, Tsotsi had lied to us”?

Mr Khoza: I cannot comment on behalf of Dr Ngubane because I was not privy to the discussion that took place at the time.

Adv Vanara: There is a problem with this unexplained behaviour of the board. It created most of the problems that Eskom is facing today. You have a Finance Director who yourself are blaming for having arranged a R1.6 billion guarantee against your knowledge. You have a CFO that you have suspended for having paid R600 million to a company that had no relationship with Eskom. You are in court today fending off challenges from your Group Chief Executive who was fingered in a report by the Public Protector, who got R30 million that nobody can explain today. Is this coincidence?

Mr Khoza: I don’t know what your question is.

Adv Vanara: Is it by coincidence that you fired or made innocent souls leave Eskom, and the people whom you replaced them with have brought Eskom to where it is today, and thanks to the media because according to you and Mr Minnaar, if these things were not coming out of the media, it would have been good for Eskom because Eskom would not have been suffering reputational damage.

Mr Khoza: I don’t think it is good to draw a comparison between the two. If you look at the company at the time when the previous executives were there, it was also in a crisis at the time due to load shedding and financial sustainability. The escalation of costs in the Build programme, and the escalation of energy costs, plus the information and charges that Mr Tsotsi had on those individuals. I cannot say they were innocent because those things were not tested. In the same breath, I cannot say the current one is coincident or not coincident but I think if it is the behaviour of the individual that gets caught in the investigation, it will be dealt with accordingly.

Adv Vanara: You see, I have a problem with you, acting Chair, when you keep going back to the charges because you were persuaded that there were no charges. That is why you got rid of Mr Tsotsi. So what charges are you referring to that these people were facing?

Mr Khoza: The charges were mentioned on a list. The only thing that he did not bring forth was the report. The board wanted the report so that they start executing based on the charges. But it doesn’t mean the charges were not there.

Adv Vanara: So if the charges were there, how could you then charge Tsotsi that he misled you about charges that were not there?

Mr Khoza: He promised to give the report. And he did not give the report.

Adv Vanara: What report?

Mr Khoza: The report of the investigation. He said there is a report which is already in place and he was going to give it to the board. But he did not give it.

Adv Vanara: What was the report going to be on?

Mr Khoza: It was containing some of the findings that were found in the company pertaining to the executives that were put on suspension.

Adv Vanara: So when he could not produce the report, you came to the conclusion that he had lied to you which is one of the charges that he faced. Is that correct?

Mr Khoza: Correct.

Adv Vanara: So how can you still say there were charges, because that is contradictory? Either you believe Mr Tsotsi, or you don’t believe him.

You are challenging Mr Tsotsi’s statement in paragraph 30, 7.33 you say: “In paragraph 4.3 of Mr Tsotsi’s statement he indicated that he was on the line with 52 individuals trying to fend what was essentially an indefensible position regarding the suspension of individuals. Based on the fact that he is the person who came to the board with the suggestion of the inquiry and the suspension of individuals, Mr Tsotsi knew that this statement was factually incorrect”. What I am trying to find out is, what part of Mr Tsotsi’s statement are you saying is factually incorrect?

Mr Khoza: One of the things he said is that the only people he was aware had to be suspended were the three executives except the FD, yet he’s the one who came up with reasons the FD has to be suspended.

Adv Vanara: You are saying here that what you are challenging as factually correct is what Mr Tsotsi says of his statement, that he was on the line with 52 individuals trying to defend what was essentially an indefensible position regarding the suspension of individuals. On what basis are you challenging that statement, if you are not challenging it, that is fine?

Mr Khoza: As I said, it was factually incorrect that he was not aware of the suspension of the FD.

Adv Vanara: So you are not challenging Mr Tsotsi’s statement that he was on a line with 52 individuals, trying to defend what was essentially an indefensible position regarding suspension of individuals?

Mr Khoza paused for a few seconds.

Adv Vanara: No need to be embarrassed or ashamed. If you are not challenging it, you are not challenging it.

Mr Khoza: I am not challenging it, but you said he was not aware about the FD. That makes me concerned.

Adv Vanara: Let’s go back to the Tegeta deal. The meeting of 11 April 2016, I see in your statement you do not deal with the convening of that meeting. Why do you not deal with it?

Mr Khoza: I think it was with the facts for the meeting and the reason the meeting took place. But I know the meeting. I did advise the Company Secretary then that I was phoned by the CPO/Commercial Head about the urgency of the meeting and if he was aware of it.

Adv Vanara: What is it that could not have waited for the 13th given that it was already the night of the 11th and that the 12th was a subsequent day and the meeting was scheduled a day later. Why could that not have been dealt with then?

Mr Khoza: The urgency of the coal at the time. The technical team declared that there would be a shortage of coal three months before and we kept on monitoring it. On that day, even though it sounded like we started in the night, he called me during the day and we were debating as to what we would do to secure coal. The dilemma was that the contract of delivering about 600 tonnes by Tegeta or Umsimbithi was coming to an end on the 15th yet there was a shortage of coal because Umsimbithi had some sort of a strike and they could not deliver enough coal at the time and the coal reserves were short, and that could have led us to load shedding. Hence we called the meeting to deal with this matter urgently because the contract was going to end on the 15th. We needed a couple of days before the contract expired because if it expired, it was not going to be easy to renew it.

Adv Vanara: So Umsimbithi was the urgent issue. And why did the prepayment to Tegeta happen?

Mr Khoza: Umsimbithi had a strike so they could not deliver enough coal, and Tegeta on the other side had the ability to deliver more quantities than what was required, or contract them on more quantities than the other one, to cover for Umsimbithi, so they can help us on the stockpile. But they needed a cash injection.

Adv Vanara: Must again this Committee see this as another coincidence that this emergency comes on the day that Mr Salim Essa calls the business rescue practitioner informing him in the morning at 10 o’clock that Tegeta is short of R600 million to finance the deal. Is that coincidental?

Mr Khoza: I cannot comment on that. We will deal with the request as management brings them to us even though we do not know the supplier. But the urgency of coal is what was raised with us and the fact that the contract was coming to an end on the 15th became a concern. Based on the urgency, and the requirement for security of coal was key at the time of discussion.

Adv Vanara: The prepayment of coal. What was your understanding of this prepayment? Can you take the Committee through that so someone who was not at this meeting can get an understanding of what it is the Board Tender Committee (BTC) was required to approve?

Mr Khoza: I think we were required the payment of coal, and the number of tonnes was indicated. I think it was about 2800 tonnes or something was supposed to be purchased to prepare for winter because the stockpile was very low at the time due to the strike taking place at Umsimbithi. We did not have enough coal.

Adv Vanara: But at the time, Tegeta was not the owner of OCM, and Eskom wanted coal, and the people who had coal was OCM. Why did you not prepay OCM?

Mr Khoza: I don’t have those details, but at the time our supplier was Tegeta, Umsimbithi, and others that were supplying us coal. The people that were prepared for extension and extra tonnes was Tegeta and Umsimbithi and that is what we were informed in the meeting.

Adv Vanara: But your Group Chief Executive (GCE) was here and explained that you prepaid Tegeta because Tegeta had been the middle person. They were buying coal from OCM. So if you don’t know, then you need to accept what your GCE is telling the Committee.

Mr Khoza: Yes,, those are operational details that I might not have been aware of at the time. I cannot dispute that.

Adv Vanara: Yes,, they are operational, but the problem is that you the board took a decision not allowing yourselves sufficient time to receive a proper submission so that you can go through the submission, consult relevant people, and make the decision. So you consciously took a decision to place yourself in a position where you make a decision without having all the facts. So who do you blame for that?

Mr Khoza: I think at the time Tegeta was our supplier and was willing to give us the coal. I don’t think we can say we did not have the position to make a decision because they were going to be delivering all the 600 tonnes and complete it by 15th and yet the contracts were being extended as we had to accommodate the further tonnes that we needed for the winter. It was important because if we were going to use gas, it was going to cost us more. Even if we approved the payment, it had certain conditions to protect the company in terms of say, the finance guy was asked to make a business case to indicate what are the benefits. We also negotiated a discount and made sure it is delivered on time, as well as security for the money we have paid.

Adv Vanara: Which take me to my next question. You wanted a guarantee. Did you get the guarantee?

Mr Khoza: Yes. There was a security contract signed between us and Tegeta by the CFO.

Adv Vanara: What form did the guarantee take?

Mr Khoza: I do not have the details of the contract, but what I know is that they signed off certain shares into Eskom, and it was verified by the internal audit.

Adv Vanara: Shares? Surely if you are a non-executive director of the biggest company that drives the economy of the country, you should know about the volatility of shares. Today they are high, and tomorrow they might be higher, the next day they go down. Why did you allow shares as security?

Mr Khoza: This is what was recommended by the CFO to secure the amount.

Adv Vanara: Who was the CFO?

Mr Khoza: It was Anoj Singh.

Adv Vanara: So you are a non-executive director with fiduciary duties towards the company, somebody comes with a recommendation and without applying yourself, you say: “Go ahead”.

Mr Khoza: As I said, we applied our minds about securing the coal that was going to be delivered. But because we were paying upfront, we wanted security. First we were supposed to get a discount, which we did. The second thing was to make sure the amount is secured by holding certain shares so that they are able to guarantee the amount.

Adv Vanara: Was it common practice for Eskom to take shares as a guarantee or was this the first time?

Mr Khoza: I cannot comment because I don’t know the history of other securities we were taking in the past.

Adv Vanara: Why did you not consider a guarantee from a reputable financial institution?

Mr Khoza: Maybe it can be one of the options, but at the time because they were delivering coal at a mine which they were already giving us security on, and they were already delivering on it, and it is something that we know, and the documentation was given to us and verified to a certain degree by the external auditors to give us comfort.

Adv Vanara: I would like to hear your comment when I say that the reason you bent backwards was to accommodate Tegeta to have money to pay the R600 million. What would you say to that?

Mr Khoza: I am not aware of that. The only thing that came up as a crisis was the coal, and it was purely based on security of coal.

Adv Vanara: Mr Thava Govender is instrumental in determining the emergency around load shedding. Are you aware that he was not aware of this emergency?

Mr Khoza: I am not sure because he is part of the executives. But it was brought to my attention by the CPO, and the documents were signed by the generation executive which was Matshela Koko.

Adv Vanara: Is it possible that you were misled by the executives in the same manner that you were misled about the R1.6 billion guarantee?

Mr Khoza: Nothing is impossible in life. But the way the document was put to us, it was purely based on business. And I cannot comment on things that happen beyond that, that I was not aware of.

Adv Vanara: I think you have answered the question. So the guarantee, you are on record that you did not know anything about it. You thought you were prepurchasing coal and learned later on that you were lied to. Is that correct?

Mr Khoza: It is correct that initially the R1.6 billion was the issue of purchasing coal up front. We only learned very late that it was converted into a guarantee. But it seems to be an advice received from treasury as well.

Adv Vanara: It would appear that some of your executives lie habitually. How did the Minister, your shareholder, get to produce or respond by misleading Parliament on a question that was asked about Trillian because the Minister is on record that your officials lied to her.

Mr Khoza: Yes. That is correct. And we investigated that and we picked it up and advised the Minister.

Adv Vanara: Who lied to the Minister?

Mr Khoza: It was Anoj Singh.

Adv Vanara: The same Anoj Singh who advised you on the guarantee of shares and not to obtain guarantee from a reputable financial institution?

Mr Khoza: Even though they are interrelated, but I think on this one, I verified on the document the one for the Trillian payment and it was proven that payment was done. It was incorrect. Even though technically they played with the technicalities because the question was asked about Trillian Capital, and yet we were dealing with Trillian Consulting company. But to me it was semantics.

Adv Vanara: I know you don’t want to respond to this question, but you need to respond. The question is very simple, acting Chair. Mr Singh that lied or misled the Minister to lie to Parliament, is it the same Mr Singh who advised you at BTC to get shares as a guarantee and not a guarantee from a reputable financial institution, that is the question?

Mr Khoza: Yes.

Adv Vanara: He is on suspension now. For what?

Mr Khoza: He is on suspension for breaches of the fiduciary responsibilities in terms of the reportable matters that yielded qualified audits.

Adv Vanara: What are those breaches of fiduciary duties?

Mr Khoza: It was some sort of irregular expenditure that was listed.

Adv Vanara: You have to give the Committee more than that, acting Chair. I know it might sound very embarrassing, but it is your employee.

Mr Khoza: As I said, reportable issues come up on our financial statements on “052”, and all that was listed there is quite a lengthy list that I do not have here. I can make it available.

Adv Vanara: When was he suspended? 27 September?

Mr Khoza: It is around there. I am not sure of the date.

Adv Vanara: When did you discover that he had arranged a R1.6 billion guarantee, a matter that he did not have a competence to arrange?

Mr Khoza: That we were able to pick up on the date when we announced the results.

Adv Vanara: Which was when?

Mr Khoza: I can’t recall the date. I can come back to you with the date.

Adv Vanara: Was it July?

Mr Khoza: It was on a date when we announce all the company results.

Adv Vanara: Your mid-year results?

Mr Khoza: Yes.

Adv Vanara: That would be around June, July.

Mr Khoza: The final results.

Adv Vanara: But July.

Mr Khoza: It is around July, yes.

Adv Vanara: And when did you pick up that he was fingered in the Bowman’s report in respect of the Trillian-McKinsey relationship and the payments that were made to Trillian?

Mr Khoza: We are aware of the report, and the allegations that were made.

Adv Vanara: When did you get that report? When was the Bowman’s report?

Mr Khoza: I think the outcome of the Bowman’s report was after he was suspended.

Adv Vanara: The lying to the Minister, is it part and parcel of the reasons for him to be suspended?

Mr Khoza: It is one of the charges.

Adv Vanara: When is he going to be disciplined?

Mr Khoza: At the moment we have senior counsel looking at the matter of Trillian and McKinsey and crafting the charges for us and the findings. That one is one of the charges that will be added.

Adv Vanara: Let’s get to Impulse. Mr Koko. What are the charges that he is facing?

Mr Khoza: From the Impulse point of view, it was charges of conflict of interest and other charges in terms of abuse of power.

Adv Vanara: Is it correct that after you had received the Cliffe Dekker Hofmeyr report on Impulse you sourced and obtained a legal opinion from senior counsel. Is that correct?

Mr Khoza: That’s correct.

Adv Vanara: And that the advice had draft charges in it?

Mr Khoza: The initial Cliffe Dekker report stated that there is nothing wrong found against him, and because of the noise taking place at the time, we went and sought help of senior counsel. Then senior counsel indicated, “In an investigation, they don’t cross question the witness, we have to give him a platform where he can be cross questioned so that we clear ourselves or he clears himself”. And hence from the advice of senior counsel, the charges were drafted.

Adv Vanara: Is it correct that senior counsel in his annexure to his opinion, as an annexure to his opinion had attached draft charges?

Mr Khoza: That’s correct.

Adv Vanara: And that those draft charges having been received by your head of legal were served before the Audit and Risk Committee?

Mr Khoza: That’s correct.

Adv Vanara: And the charges Mr Koko is facing differ materially from charges that were approved as recommended by head of legal from senior counsel. How do you explain that?

Mr Khoza: I am not aware because I have not seen the charges after that. It is only that the Audit Committee approved the charges from the senior counsel as they are. They were handed over to the CEO at the time which is Mr Dladla, who served Mr Singh.

Adv Vanara: Now that you know that the charges are different, what do you intend to do about it?

Mr Khoza: I will go back and look to see what the differences are, because we are not aware that the charges were changed.

Adv Vanara: Do you know the charges that he is facing?

Mr Khoza: As I said in principle, it is the charges of conflict of interest which has a number of issues listed. And there were additional charges in terms of the whistleblower letter which was talking about the abuse of power.

Adv Vanara: Do those charges include misconduct, negligence in the performance of his duties?

Mr Khoza: I haven’t seen the charge sheet.

Adv Vanara: So one of your senior executives who was the acting Chief Executive is facing a disciplinary hearing and the acting Board chairperson doesn’t know what the charges are.

Mr Khoza: As I said the charges approved by the Audit Committee were the charges that were supposed to be on his charge sheet.

Adv Vanara: When Mr Singh went on suspension, you wrote a letter to the Minister expressly asking the Minister to give Mr Singh access to the records of minutes to the board. Why?

Mr Khoza: No. I didn’t.

Adv Vanara: So you didn’t write a letter to the Minister asking for permission that Mr Singh get access to the minutes of the board?

Mr Khoza: Correct. I never asked that.

Adv Vanara: The chairperson of the Eskom Pension and Provident Fund (EPPF) was here testifying that after the Committee communicated its decision to hold this inquiry, you had communicated with the Pension Fund, offering that you would pay for their legal costs. What was the basis for that?

Mr Khoza: Paying the legal fees for the Pension Fund?

Adv Vanara: Yes. There is a letter. It was read on record.

Mr Khoza: I don’t know.

Adv Vanara: The letter that you signed, you don’t know about it?

Mr Khoza: I really don’t recall that letter stating that we are going to pay for the Pension Fund.

Adv Vanara: Now that you don’t recall now, if you were to recall outside of this meeting, what could possibly be the reason that you would have offered to pay for their legal costs?

Mr Khoza: No. I really don’t recall.

Adv Vanara: I accept you can’t recall. But there is a letter on record. You just can’t recall. You are not disputing the existence of the letter, so I am asking if you were to step out of this meeting and recall, what could have been the reason that you would likely think of doing that.

Mr Khoza: No. There is no reason for the Pension Fund.

Adv Vanara: Are you aware of the Bowman’s report and its contents?

Mr Khoza: Yes.

Adv Vanara: Are you aware of the G9 Forensic report and its contents?

Mr Khoza: Yes,, I am aware.

Adv Vanara: Those reports, including the Oliver Wyman report, you must be aware of that?

Mr Khoza: Yes,, I do.

Adv Vanara: Those reports paint a picture of unprecedented levels of looting at Eskom. Would you agree?

Mr Khoza: Yes,, they did mention certain names of people and certain actions that should be taken. We have taken them for review by senior counsel for guidance.

Adv Vanara: I am not asking what you have done with the reports. I am asking if you are aware that those reports present an unprecedented level of looting at Eskom.

I am not asking what you have done with the reports. I am saying are you aware that those reports paint a picture of unprecedented levels of looting of state resources. Are you aware of that, or are you not?

Mr Khoza: I am aware of that as they are written of course.

Adv Vanara: And this happened under your watch as the acting Chairperson of the Eskom board?

Mr Khoza: I think the transaction took place before I was acting Chairperson. I am not denying that it happened, that is why we have taken it for review.

Adv Vanara: In light of those reports and the decisions that you and your board took which contributed to downgrades, not once, we had one recently, which point to corporate governance challenges which you seem to be agreeing with. You have now gone to NERSA for an electricity price hike. How do you explain your request to NERSA that South Africans must finance some of the looting happening under your watch?

Mr Khoza: I think the looting and mentioning of statement at the moment is not tested, hence we took it for review to explain those things because the processes that were followed were followed through all the governance that was in place. We noted the things said by G9 and the Bowman’s report, but we are taking them for review. And the issue in terms of the NERSA application is based on methodology between us and NERSA. It has nothing to do with that one. It might sound ridiculous but it is following its own adjudication processes. They are going to be working on it.

Adv Vanara: Just explain to the Committee what you mean when you say you have taken these reports for review?

Mr Khoza: We are still investigating the grounds of the reports, the accuracy of the reports, and the value for money issue. And senior counsel is looking at it.

Adv Vanara: So you commissioned reports, you pay for these independent companies to conduct investigations and when they give you the outcome, you review?

Mr Khoza: Eskom has certain procedures within the organisation, certain governance, and certain people that are implicated that turn around certain decisions that they have taken. So you need to be able to verify people as they were presenting via the governance structure whether they are saying the correct things. And there were people given the power to verify certain data which they confirm that say value was created but they now dispute that no value was created. It is a question that you need to verify that particular data.

Adv Vanara: Let’s try and get an understanding of what you actually want to review. Are you reviewing the billion that was paid to McKinsey?

Mr Khoza: Yes,, of course.

Adv Vanara: But what are you reviewing? McKinsey says they received the money, and in any event they are not interested in dirty money. They have offered the billion back, so what are you reviewing?

Mr Khoza: It is easier said than done because when we approached them to pay the money, they said they will only pay it after the court order.

Adv Vanara: But how do you review when you have issued a letter of demand based on one of the reports?

Mr Khoza: Yes,, it is based on one of the reports. As soon as you discover that you might have lost money, the best way is protect that money is if you demand the money to be paid before it prescribes or whatever action is taking place. And then you go and dig so that you prepare the right documentation for your case if you have grounds to claim the money back.

Adv Vanara: I don’t know who is advising you Chair legally, but I just don’t understand how a letter of demand can interrupt prescription. What do you derive by sending the letter of demand?

Mr Khoza: The demand is only to indicate to say you owe me something.

Adv Vanara: But how can you say you owe me something when you are disputing that this person owes you money, you are still reviewing that decision?

Mr Khoza: But it is because the people, which we said owe, disputed that decision.

Adv Vanara: Is this the kind of decision making made by non-executive directors at Eskom?

Mr Khoza: It is not a decision that was made by the non-executive directors. It is a decision that was discovered by management and they went and wrote a letter of demand by management.

Adv Vanara: So as far as the board is concerned, you are opposed to this letter of demand having gone out. What you are interested in is just a review?

Mr Khoza: No. we are not opposed and we never said we are opposed to the letter of demand. When it was brought to our attention it was to verify the accuracy of the demand because to go through a lengthy legal process without verifying the accuracy of the data might cost you more money.

Adv Vanara: Are you challenging or reviewing one of your reports that indicate that Trillian was paid R30.66 million without having rendered a service?

Mr Khoza: We review the whole amount of R1.6 billion because at the time we had a contract with McKinsey and Trillian was perceived as the subcontractor of McKinsey, so the calculations were done with McKinsey, and then it was paid to Trillian. The agreement was that it must be paid to Trillian directly.

Adv Vanara: I am really at a loss to appreciate why you even took a decision from the first instance to get these external service providers to conduct these investigations when you are clearly of the view that there’s nothing wrong at Eskom.

Mr Khoza: We never said there’s nothing wrong at Eskom. But also if you recall the G9 and Bowman were commissioned by the CEO at the time for fact finding, and then they found certain things that might be wrong. But Bowman did not complete its own report, and latches onto information that was on the G9 report.

Adv Vanara: So one of the reports that you are reviewing is the report that says you paid illegally R564 562 000 to Trillian?

Mr Khoza: Yes.

Adv Vanara: What is it in the report that does not satisfy you?

Mr Khoza: The report was not concluded. It did not come to any conclusions. It identified the areas of concern and said “these are the areas, and this is what we perceive on this particular amount”. But on the other side, there was concrete evidence that management came up with which said this value was created, and to a certain degree Oliver Wyman also confirmed that there was value created so you have to verify within your own structures whether they are telling the truth or not, and whether the agreements we put in place were right. Because of McKinsey contract, at one stage they realised that certain costs were escalating. Certain issues in terms of the sole source came up, and other matters which forced them to reach a settlement. There were conditions before reaching a settlement. All those things need to be reviewed to say we had a valid contract, a subcontractor, a settlement agreement, and how all these things tally up with the information that comes up like that.

Adv Vanara: So everyone says Trillian did not have a contract with Eskom, yet you still need to review that, you don’t have that as a fact?

Mr Khoza: We are aware that it is a fact that they did not have a contract with us, but they were subcontractors of McKinsey that had a contract with us.

Adv Vanara: But your minutes of the decisions that you took, let me read one of them. Please tell the Committee why you find it difficult to accept this, “The payments that were made to Trillian approved by the board after a submission which clearly stated that the monies must be paid by McKinsey to Trillian. And the BTC decision on 9 December 2016 for a meeting that was to take place on 13 December 2016. And this is an update on the settlement of McKinsey’s contract to obtain authorisation for the negotiation and conclusion of the settlement agreement. Authorisation sought and given was for a further interim payment of R134 million to a BEE partner”. Who was this partner?

Mr Khoza: It was Trillian.

Adv Vanara: What was the basis for paying?

Mr Khoza: There was R800 million paid based on the assessment they had at the time. It was a shortfall in terms of the calculation of that R800 million.

Adv Vanara: The question is what the reason in law was for Eskom to pay that amount if you did not have any contractual relationship with Trillian?

Mr Khoza: As I said, we had a contract with McKinsey. McKinsey had a subcontractor which is Trillian and they negotiated. Unfortunately they could not conclude, and they told us, and after that they gave management a letter to pay Trillian directly. Hence management came in there fully aware to say this is what they have agreed, and this is what McKinsey has calculated in terms of the process they were following and the tools they were using to verify the value. They calculated that this value is due to their subcontractor which is Trillian.

Acv Vanara: McKinsey had written a letter to Eskom saying you can pay Trillian directly, but upon us given you confirmation of value for money. They have never given any confirmation, so on what basis did you pay?

Mr Khoza: According to the reports we got. The standing committee sitting between McKinsey, Trillian and our management, there was value for money.

Adv Vanara: But you say the basis for you to pay is the relationship that you have McKinsey, and which McKinsey has with Trillian, and on the basis of a letter that McKinsey had written to you. I am saying that the condition that McKinsey has given for payment did not happen, so why does Eskom pay Trillian?

Mr Khoza: Maybe I am missing you in terms of the details because I don’t know those details if McKinsey said so. As far as I am concerned, all those calculations and reconciliation were done by McKinsey.

Adv Vanara: There is a letter which comes from Eskom and goes to McKinsey. It says “Eskom has considered, pursuant to meetings and correspondence exchange with McKinsey. The settlement of the Top Engineers programme also known as the Top Consultants programme for the period December 2015 to 15 July 2016, based on the terms of the Service Level Agreement (SLA). We confirm that on 16 June, a termination notice was issued by Eskom to McKinsey, and the SLA was subsequently terminated on 15 July. As a result of the termination, the BTC mandated Eskom to consider the settlement amount payable to McKinsey for services rendered for the period up to and until 15 July 2016 on the risk based principles. After due consideration and without admitting any liability, Eskom is prepared to offer in full and final settlement an amount of R461 million in addition to the R937 630 000 already paid by Eskom to McKinsey and its BEE partner on 11 August. The total amount to McKinsey and its BEE partner for the services rendered in terms of the SLA risk is R460 million plus R937 million totals to R1.3 billion. This settlement is in lieu of all claims by McKinsey and its BEE partner”. Notwithstanding this, there is a further payment of R134 million subsequent to that. What is that you must still investigate when you get a report that says after that full and final settlement, you continued to pay R134 million?

Mr Khoza: I might not have the details of that one, but I only know that the final settlement paid is R1.399 billion. And I don’t recall any extra amounts that were paid.

Adv Vanara: One of the contracts that Trillian gets to be paid on is this R30 million in respect of the first contract in January 2016. Trillian was not in existence in January. If it was in any existence, they were still trying to establish an office. How does Eskom get to owe a company that is nonexistent?

Mr Khoza: I don’t have those details because I only know them at the master agreement level.

Adv Vanara: But these are reports prepared for you. You don’t know these things and yet you take decisions to review these reports?

Mr Khoza: That letter you are reading now, I don’t know if it is a submission or settlement agreement that was signed.

Adv Vanara: This is one of the reports. You remember the 48 hour report that was signed on instruction by one of your non-executive directors to the Minister?

Mr Khoza: Yes,, I know about that report.

Adv Vanara: It is in that report which is nothing but a summary of the Bowman’s report – which is a report you are taking on review. So you are taking a report on review and yet you don’t know its contents?

Mr Khoza: No, that 48 hour report was prepared by our legal head because it was responding to a question by the Minister. It was not a final settlement report.

Adv Vanara: Let’s move to the meeting on 2 March 2017. This is the meeting that took place between 12 and two o’clock in the afternoon. We were played the clip and if you want we can play it again. This is where the board initially received a report from P&G on the external recruitment process of the GCE, but immediately after that agenda item was the suspension of Mr Koko. Do you remember that meeting?

Mr Khoza: Yes.

Adv Vanara: At that meeting it is yourself, Dr Ngubane chairs that meeting, Dr Naidoo was at the meeting, Ms Mabude is at the meeting, and Ms Klein. I am going to summarise the meeting. It is very clear at that meeting that a decision is taken to suspend Mr Koko. Mr Khoza, the only issue you have is that he must be afforded an opportunity to be heard. Do you still remember that meeting?

Mr Khoza: Yes, I remember.

Adv Vanara: And Dr Naidoo’s view is that let’s not suspend the fellow, but let’s remove him as the acting chief executive and lets appoint Mr Khoza as the acting GCE. And the reason that we must give for our conduct is that not all of these wrong things he is accused of, but we are advertising the position of GCE soon and he might apply for the position. Still remember that?

Mr Khoza: I recall.

Adv Vanara: So convinced were the five of you, or at least the four that you needed to suspend him on the day because you could not wait for the next day so you convened a meeting at six o’clock. Do you still remember that?

Mr Khoza: Yes.

Adv Vanara: To suspend him. Remember that?

Mr Khoza: Correct.

Adv Vanara: And a letter of suspension was prepared for him to be suspended. Are you aware of that?

Mr Khoza: I am not aware of the letter of suspension.

Adv Vanara: I am telling you because the Company Secretary had prepared a letter of suspension and had given it to Dr Ngubane. Do you find that strange?

Mr Khoza: I find it strange because the process said we must give him 48 hours. We must serve him with the letter and tell him the charges and he must respond within 48 hours.

Adv Vanara: No, no. Unless you want us to go back and replay that record which we can? The only issue that you raised was for him to be afforded an opportunity that afternoon to state his case. But that meeting had agreed that it was just a matter of compliance with the matter of process of giving him an opportunity, but otherwise he was already suspended. That meeting is very clear. There was no 48 hour notice.

Mr Khoza: I hear you.

Adv Vanara: And indeed the six o’clock meeting did take place. The question is why was he not suspended at six o’clock having been called to the meeting because the meeting did take place?

Mr Khoza: We are trying to pick up the reason, but I think somehow it was decided not to suspend him.

Adv Vanara: Clearly that was the decision because he wasn’t suspended. What is important is what changed the board from its decision in a meeting between 12 and two pm, and what changed the board between two and four pm not to suspend him?

Mr Khoza: Even though I might not recall all the details on that particular day, I think Dr Ngubane decided not to go ahead with the meeting.

Adv Vanara: Mr Qoma testified before this Committee. You remember the strategic document that he had prepared for the board which was around reputational management of the Eskom board. Remember that?

Mr Khoza: Yes, I recall.

Adv Vanara: He testified that before that document had been served before the board he had a discussion with you in Durban around that document. You still remember that meeting?

Mr Khoza: Yes, I recall.

Adv Vanara: It was at your house. You had invited him to your house in Durban.

Mr Khoza: That’s correct.

Adv Vanara: He says “At your house you agreed with the views expressed in the document but you told him this document was no good as it was not going to fly. And the reason you gave him was that the Minister is captured by the Gupta family. Do you remember that?

Mr Khoza: I don’t recall saying that. And I never said it

Adv Vanara: Further, that you yourself were captured by the Gupta family.

Mr Khoza: I think he is lying. I never talked to it. He came with the document and the document he brought on the 14th. I was in the office. I only assumed that function on the 13th, and he came on the 14th with the document, which is clear that the document was already prepared. On that particular weekend I was going home because I had a graduation for my kids. He said because he is going down and there is a document I need to sign, he will come to my home. So when he came to my home there were a lot of people as we had a function at home. It is clear that the only thing he brought up in the document was that he was complaining about Mr Molefe, Mr Koko, and Mr Singh. And I said, “Do you have any evidence of wrongdoing by these people? I am not disputing that they are in the media, but do you have any investigation?” He said there is no investigation. And I said that it is not easy to deal with people without any investigation, but I am taking the report as an advice and guidance, and nothing else.

Adv Vanara: And this is the testimony that he led here. And to make the point that you yourself and the Minister were captured by the Gupta family, you made an example of that meeting of 2 March 2017 where you told him that “on it becoming apparent that the board has taken the decision to suspend Mr Koko, you yourself phoned one of the Gupta brothers that this board is about to take a decision to suspend Mr Koko and that they should intervene.” What do you say to that?

Mr Khoza: That’s incorrect.

Adv Vanara: Further, to prove that the Minister was captured by the Gupta family, you told Mr Qoma that one of the Gupta brothers phoned the Minister and the Minister phoned Dr Ngubane who was chairing the meeting to stop the suspension.

Mr Khoza: That’s not correct.

Adv Vanara: You yourself cannot give a plausible reason why notwithstanding a clear position that the board was ready to suspend Mr Koko, he was not suspended.

Mr Khoza: As I said, we had a discussion of the document which was coming like an anonymous letter they presented at the time which had quite a number of allegations. As I said we did debate, but based on what the factual and strong allegations imposed, we could not oppose there and then. But I don’t know the reasons why Dr Ngubane decided not to carry on with it.

Adv Vanara: But Dr Ngubane was not an Executive Chairperson. Dr Ngubane cannot in the middle of a meeting where there is consensus to suspend, stop the suspension. Why would you not have raised an issue with him about stopping the suspension?

Mr Khoza: If I recall, that meeting did not sit in the afternoon. We came to the meeting late in the afternoon.

Mr Khoza looked to Dr Naidoo and whispered: “Did Koko come?”

Dr Pat Naidoo responded: “No, he did not come”.

Mr Khoza: The meeting did not sit, and I don’t know what happened but the meeting did not carry on.

Adv Vanara: But you said Dr Ngubane decided not to suspend the guy.

Mr Khoza: What I am saying is that as a chairperson, it [12 o’ clock meeting] was driven by Venete Klein who had the document. Later in the afternoon somehow we were disturbed and the meeting did not take place. I don’t recall the debate late in the afternoon. I recall the debate during the day.

Adv Vanara: But Ms Klein recalls that the meeting did take place, and you seem to have recalled that the meeting did take place because you say Dr Ngubane is the one that took the decision not to suspend.

Mr Khoza: I am not saying Dr Ngubane took the stand, but the meeting did not progress and therefore it was up to him at the end of the day because the meeting was already convened to execute.

Adv Vanara: The meeting was convened. The question is why did the meeting not sit if you say the meeting did not sit, when you were there to execute the mission?

Mr Khoza: I really don’t recall that.

Adv Vanara: If you, the people that ought to have been in the meeting, do not know what the reason was the meeting did not sit, or if it sat, why the decision to suspend was not taken, then the Committee must accept what Mr Qoma’s testimony is.

Mr Khoza: No, I don’t think we can accept what Qoma said because really, even though I heard about it, I wasn’t around when it was said. It is really out of order. He came to me on the 14th, and I think I had just been advised that on the 13th I would be assuming the role. It was early in the morning, and it is shocking what he is saying. He is making up stories.

Mr Khoza: Whilst you want us to believe he is making up stories, there is a meeting here that cannot be explained why a decision was not taken.

Mr Khoza: I’ll check the minutes if it was minuted because I don’t recall that.

Adv Vanara: In the interest of transparency and fairness given that you have phones that Eskom probably provides, are you prepared to share with the Committee the telephone records of your phone around 2 March 2017?

Mr Khoza: With pleasure!

Adv Vanara: And the Committee I am sure will take the offer. The records of the meeting of 9 February 2016 when the pension proposal for the GCE was discussed shows that Mr Molefe was present at the meeting. Do you still recall that, the P&G meeting on 9 February 2016 where you were discussing the pension fund arrangement?

Mr Khoza: I will have to check the records.

Adv Vanara: You are still checking, but I am telling you, I have read the minutes, and he was there. How do you continue in a meeting discussing something that affects one of the attendees of that meeting without his recusing himself?

Mr Khoza: I think the proper procedure is for him to be recused. If not, then there was a procedural mistake.

Adv Vanara: You were there at that meeting. Why didn’t you ask him to recuse himself?

Mr Khoza: That’s why I just want to check on it.

Adv Vanara: You say you didn’t write a letter, Eskom board didn’t write a letter to the Minister. Let me read the letter to you. This letter is addressed to the Honourable Minister Ms Lynne Brown: “Eskom Group Chief Financial Officer. I confirm the decision taken by the board on 27 July 2017 to place Mr Anoj Singh the Group Financial Officer on special leave to enable an independent and transparent investigation to be conducted into the role at Eskom in the events leading up to the qualification of the company’s audited financial statements, and the control failures around the company’s contract management. Mr Calib Cassim has been the interim appointed Acting Chief Group Financial Officer with effect from 28 July 2017. This appointment was approved by the P&G at a meeting on 16 August 2017. In terms of the memorandum of incorporation, the appointment of the Group Chief Financial Officer is required to be approved by the Minister, but the memorandum of incorporation is silent on the appointment of an Acting Group Chief Financial Officer. In our view this appointment may be made by the board without the permission of the Minister being required. We would also like to bring to the Minister’s attention that Mr Anoj Singh is currently an executive director of the board of Eskom, and in our view is entitled to receive all invitations and attend all meetings for the period he is on special leave unless the Minister directs otherwise. Under the circumstances, we humbly request the Minister to:
Confirm that Mr Calib Cassim’s appointment as Acting Group Chief Financial Officer may be approved by the board, and does not in addition require the Minister’s approval,
Or approve in principle the appointment of Mr Calib Cassim as Acting Group Chief Financial Officer if the Minister is of the view that such approval is required to be approved by the Minister;
Or confirm that the Minister is in agreement with our view that Mr Anoj Singh is entitled to receive invitations and attend board meetings during the period he is on special leave until the Minister directs otherwise.
This is signed on your behalf as interim Chair on the first of September 2017. Do you remember that?

Mr Khoza: Yes, we know the letter.

Adv Vanara: You now know about the existence of the letter?

Mr Khoza: No. I know the letter.

Adv Vanara: But you didn’t know about it earlier on because I didn’t read it.

Mr Khoza: You indicated that I requested him to have access to board minutes. The spirit of this letter was for the Minister to indicate because in terms of the MOI she appoints the board members, and he is a board member by being the CFO. At the time he was on leave, he was not suspended so he was entitled to come even though we did not invite. So we requested the Minister to clarify his role whether he is now on suspension and she takes him out and puts Calib inside as an acting executive director. That was the intention of the letter.

Adv Vanara: Why when I posed the question, didn’t you say, “I don’t know what you are talking about, what I know is a letter that addressed this specific issue which is not far away from what you are saying because if you wanted him to attend the meetings and to have access to the minutes then it is more than the minutes, he was going to participate?

Mr Khoza: Your initial question was that I have requested the Minister for him to have access to the minutes and board details. That I did not do. As I said, I was explaining to the Minister this is an executive board member, and by virtue qualifies for this and this. I need guidance and clearance because the MOI says only the Minister can appoint the directors and remove them.

Adv Vanara: I understand that. If you felt that what I was asking is closer to what you know, why didn’t you say that? Why didn’t you say “No. we didn’t write that letter. This is the letter that we wrote”.

Mr Khoza: The way you asked it, you put me off because I did not write a letter with that spirit the way you asked it. That letter I understand, I know it.

Adv Vanara: Is the reason you have taken the Bowman’s report on review because that report fingered the four members of the BTC in some of the wrongs that happened?

Mr Khoza: No.

Adv Vanara: If that report fingered some BTC members, did you sit in a decision that said let’s review this report?

Mr Khoza: No, I don’t sit. It’s done at the Audit Committee.

Adv Vanara: So if we were to get those minutes, you wouldn’t be at those meetings?

Mr Khoza: I don’t sit at Audit Committee, but sometimes I do attend the Audit Committee, but I have no decision making on it.

Adv Vanara: And you are saying the Bowman’s report didn’t go to the board?

Mr Khoza: Yes, the Bowman’s report hasn’t gone even to the Audit Committee because it was not a complete document.

Adv Vanara: Who then took the decision to have this report reviewed?

Mr Khoza: The Audit Committee took the issue of McKinsey-Trillian to be reviewed. Not specifically the Bowman’s report. Bowman’s falls in specifically because it also hinted at the issues that were taking place as a fact finding, and the G9 also indicate certain things that were happening on the McKinsey contract. The review is based on the contract after Oliver Wyman came back and said they did not verify all the matters that were sitting there as well. This leads to the document written by our head of legal which went to the Minister, and it had some inaccurate facts in that document that needed to be reviewed.

Adv Vanara: Given that this Bowman’s report was fingering some of the BTC members and recommending that the Minister take action against those non-executive directors, did this report go to the Minister?

Mr Khoza: Yes, it did.

Adv Vanara: The fine of R2.3 billion on Optimum Coal Mine, the BTC accepted a R500 million settlement against what your head of legal had recommended, a R700 million settlement. Why did you accept that figure?

Mr Khoza: I think the claim initially was R2.1 billion that was claimed. The head of legal with external legal representatives from Cliffe Dekker came to BTC and indicated they cannot justify the other amount. The only amount they can talk about comes to about R500 million. And the only resolution taken after long deliberation to find how it happened was that they had to prevent suspensions etc. with a long debate. I think the resolution of the BTC was that you can settle nothing less than R500 million. We did not give them a figure. We said it is anything between R2.1 billion and R500 million.

Adv Vanara: And having agreed to this settlement, what were the payment terms, is it correct that the R200 odd million is spread over the contract period which ends in December 2018?

Mr Khoza: I think the terms of settlement did not come back to the board at the time. We gave them the parameters and litigation and claims can be settled by legal. The only thing we took a decision and said it should be nothing less than R500 million. We can only quantify R500 million.

Adv Vanara: Chair, particularly yourself. You were the BTC chair and these are the transactions you presided over. You presided over the prepayment on 11 April 2016, remember that?

Mr Khoza: Correct.

Adv Vanara: And it is that meeting that enabled Tegeta to have funds to pay the balance of the R600 million. You might not have known at the time, but ultimately that is what happened.

Mr Khoza: Correct. I didn’t know that.

Adv Vanara: You are the same board committee chairperson who presided over the prepurchase of coal. Am I correct?

Mr Khoza: No, it was done at the Investment and Finance Committee (IFC).

Adv Vanara: Sorry about that. The McKinsey-Trillian R1.6 billion transaction, you were the BTC chair and part of the approval process.

Mr Khoza: That’s correct.

Adv Vanara: You were also presiding over the reduction of that fine to R200 million?

Mr Khoza: Correct.

Adv Vanara: You also presided over the Dongfang R4 billion tender which was later found wanting in a court of law. Correct?

Mr Khoza: Correct.

Adv Vanara: And Trillian was your advisor in that transaction, correct?

Mr Khoza: Not to advise the board.

Adv Vanara: To advise whom?

Mr Khoza: Maybe it was at management level because we never appointed Trillian to go and advise.

Adv Vanara: The point I am making is you were chair of BTC that appointed the Dongfang R4 billion tender.

Mr Khoza: Yes, we did, but not on the advice of Trillian. It was on the advice of management and the evaluation of the tender.

Adv Vanara: In all of these transactions you were either lied to or there’s some explanation to explain these things away from you. Is that what you want the Committee to believe?

Mr Khoza: Not necessarily. It is only that as a board person you do not sit every day. You depend on the executives for information they give to you. You depend on the corporate governance that takes place because on a tender document you have the probity that takes place, you have internal audit auditing the process step by step, you have legal that confirms that all legal things have been taken into account, and you have relevant group executives that sign the document at the end of the day. That is the governance that takes place within the organisation that you have to rely on. You cannot expect to say all those people can be wrong at the same time. The questions and probing take place to verify certain data, but the whole data is collated and done by management.

Adv Vanara: Let us just go through some of the lies told by Eskom under your watch. We have the one on record where the Minister was lied to, remember that?

Mr Khoza: We recall that.

Adv Vanara: Remember the letter from the Oliver Wyman attorneys challenging your media statement issued by your spokesperson?

Mr Khoza: That’s correct.

Adv Vanara: Which Oliver Wyman challenged as factually inaccurate. Remember that?

Mr Khoza: That’s correct.

Adv Vanara: And you had to issue subsequent statements to correct that.

Mr Khoza: That’s correct.

Adv Vanara: You remember that you and the board itself, and this is what Ms Klein reminds you of on 2 March 2017 that you knew as a board when you recommended Mr Koko to the Minister, you knew of his behaviour or lack of inter-personal skills. Remember that?

Mr Khoza: Yes, there were concerns about his behaviour.

Adv Vanara: And that you as a board expected your shareholder to make a decision on whether or not to appoint that individual without disclosing all the facts to the shareholder. Remember that?

Mr Khoza: I think the concerns were raised, saying it did not necessarily to hinder his ability to do the job. And that his competency to do the job was not an issue, but the fact that other people might have complained and heard about it. It was raised, and it was the issue he was called in about before he was appointed and he was coached by the board.

Adv Vanara: Ms Klein is on record that notwithstanding that, you did not disclose it to the Minister. Did you disclose it to the Minister yourself personally?

Mr Khoza: There was no need because we already managed it and coached the person.

Adv Vanara: But if the Minister was to make a decision on the suitability of any individual for appointment, are you saying it was not necessary for the Minister to know all the facts?

Mr Khoza: It is correct that the Minister has to know all the facts if the facts are correct. But it was taken as allegations and rumours that people hear about him. There was no factual finding against him hence we called him and we asked him and then we guided him, and I think that would suffice.

Adv Vanara: Notwithstanding that there was no finding against him, you deemed it appropriate to speak to him. So why did you not disclose that to the Minister to make whatever she would have made out of that?

Mr Khoza: I think if they had just been allegations and had no findings then you don’t have to report them as facts or you have to raise them to the person because the board felt he had competence and skills to do the job. The only thing is that there was a concern from certain board members that sometimes he does not have good human relations. There was no grievance raised so the decision was to call him and tell him that these are the things he has to take into account with running the position. And there was no need on my side to pass information which was not factual to somebody else.

Adv Vanara: What I find strange with that response is that immediately after the Minister appointed him, you people went running to Koko and told him, “We are watching you. Don’t do these things you are accused of”. That is the testimony of Ms Venete Klein. If this was an insignificant incident as you want us to believe, why would she have done that?

Mr Khoza: I cannot comment if she went there. But I recall that on the same day he was appointed, he was called in and he was guided in front of the whole board that was available on the day.

Adv Vanara: After you had appointed him you indicated to the Minister that the reason you brought him back was largely due to a legal opinion you obtained from senior counsel. The Minster requested you to provide her with that legal opinion, and you refused to provide her with that legal opinion. Why?

Mr Khoza: I think that discussions were taking place between the Minister and Chairperson, and Company Secretary. It was not a board resolution. I cannot comment because I was not there.

Adv Vanara: Mr Tsotsi left after this thing and you became the acting Chairperson, and there was a court case where the Minister cites that Eskom refused her access to the legal opinion that they wanted the Minister to rely on. You were the Chairperson at the time. What did you do knowing that your shareholder representative was being denied documents by your board or officials serving under your board?

Mr Khoza: I don’t recall. After I started, it was never requested from me.

Adv Vanara: I am not saying it was requested from you, I am saying the fact that the Minister was here last week and she repeated these things that she was denied access to the legal opinion. Not only the Minister, but the Inter-Ministerial Committee, a group of ministers is denied access to a document in possession of a board you are part of. What should we make of that?

Mr Khoza: As I said, maybe the Minister’s meeting takes place between the Company Secretary and the Chairperson then, and they refused to do that. Definitely it was not a board resolution, and it was not discussed with the board. I heard the Minister mentioning it as well.

Adv Vanara: The other lie that has to be corrected, and Ms Mothepu is on record exposing the lie when Eskom denied that it had a contract with Trillian. She agreed there was no contract, but Eskom in a statement issued by your spokesperson, denied that it ever paid monies to Trillian. But today we know that you paid in excess of R500 million. Remember that lie?

Mr Khoza: That’s correct. It was raised, and the spokesperson depended on the information coming from the division at the time. When we discovered that it was paid, we did share it with the public on the date of the results.

Adv Vanara: The point I am making is that there is a culture at Eskom of repeated lies and that if you do not have something to prove the wrongdoing, it will forever be denied. There is no integrity at Eskom. What is your comment on that?

Mr Khoza: I don’t think so. There are a lot of good people in Eskom running this organisation and waking up on a daily basis to serve this nation. There might be certain individuals who might be in critical positions that are able to share the wrong information, but you shouldn’t state it as if it is the company culture.

Adv Vanara: I fully accept that. It is just a handful of individuals that are tarnishing the image of the organisation. The problem that I have is that you went out of the way to get a reputational manager in Mr Qoma, you headhunted him. Yourself and Ms Klein. Remember that?

Mr Khoza: Correct.

Adv Vanara: And when he advises you, I accept you told him there is no evidence of wrongdoing, and he wasn’t saying he has found people guilty. He was advising you of the effect Mr Molefe’s association with Eskom was eating into the body of Eskom. And that the issues surrounding Mr Singh were eating into the body of Eskom. The issues raised around Mr Koko were eating into the body of Eskom. And what did you do about that? You took a decision that he must be dismissed?

Mr Khoza: He is not dismissed. He is still at work. On my conversation with Mr Qoma, I did say I am taking this as advice because I was just coming in. I will monitor this and we are going to be working on it. Also because we did not have facts, we said certain things are going to come up and we will pick it up. I don’t think he took it in a bad light. He might have taken it in a bad light if he expected me to jump and suspend people just because of the memorandum that he had.

Adv Vanara: But this report of his was served in one of your board meetings. Correct?

Mr Khoza: Yes, it was discussed.

Adv Vanara: And one of the people at the meeting was Mr Singh. Correct?

Mr Khoza: Yes. He is a board member so he was there.

Adv Vanara: Notwithstanding that, the report dealt with him amongst others.

Mr Khoza: Correct. It was already leaked. It was public information.

Adv Vanara: You said, with Mr Molefe, if you knew that Mr Molefe was at the P&G on 9 February when you were discussing his pension arrangement, you would have asked him to leave. Now you are at a board meeting with Mr Singh discussing a report that implicates Mr Singh, you don’t bother to ask him to recuse himself and you are the Chairperson at the time.

Mr Khoza: Those are two different cases. In the case of Molefe, he was going to be a beneficiary in terms of the outcome. In this one, it was a reputational matter that needs people to identify the behaviour and change. And I don’t see the conflict because they are the ones who talk to the public and implement the issues raised there in the document he shared.

Adv Vanara: That report was urging you to sever ties with Mr Anoj Singh because of the bad publicity he was bringing to the organisation. It was immaterial as far as you are concerned that he could sit in a meeting and contribute and critique the same report talking badly about him.

Mr Khoza: It is talking bad about him but in the spirit of improving the relationship of the organisation that collectively as a board we were responsible for.

Adv Vanara: Mr Koko, has he been charged with the reports on Trillian-McKinsey that fingers him in wrongdoing now that he is facing a disciplinary hearing – that your head of legal is saying is a sham?

Mr Khoza: At the moment he is dealing with the disciplinary hearing that deals with the conflict of interest and the abuse of power. If senior counsel finds any wrongdoing out of the findings he is busy working on, it will be added.

Adv Vanara: So its part and parcel of this review?

Mr Khoza: Correct.

Adv Vanara: So you do not believe that there are allegations in that report about him, warranted for him to answer in that disciplinary hearing?

Mr Khoza: As I said, we decided to take it to the senior counsel review to guide us on those matters. It is not that we are disputing anything that is in the report, but it is also that we are not confirming anything in the report. We took it for review and guidance so that someone legally guides us on the implications that may come up and on people that have been identified whether they acted correctly or incorrectly.

Adv Vanara: Ms Daniels testified that the initial evidence leader in Mr Koko’s disciplinary hearing was chosen by you?

Mr Khoza: The resolution taken at an Audit Committee requested me and the CEO to source the evidence leader and then it was taken to procurement and then procurement sourced the individual. It was not me.

Adv Vanara: But how was he sourced when he was not amongst the service providers under your panel of lawyers providing support to Eskom?

Mr Khoza: It was referred to procurement. We followed the procurement process.

Adv Vanara: So again we have a decision that cannot be explained by the Board chairperson. Somebody else must explain it.

Mr Khoza: Not necessarily, but at the end of the day, the Chairperson does not have the executive power to appoint people. They will use the processes within the organisation to identify and appoint people. I don’t think it is denying anything. You take the action, you implement the action. The fact that some employees are not happy, for their own convenient reason, they will come and testify incorrectly. But it doesn’t mean that whatever they say is correct and it must be taken as correct.

Adv Vanara: Is it correct that you have appointed a manager in your office recently?

Mr Khoza: Have I appointed a manager personally in my office?

Adv Vanara: Yes.

Mr Khoza: Yes, we appointed somebody to support in my office.

Adv Vanara: How was the person appointed?

Mr Khoza: He was appointed via the HR process.

Adv Vanara: How?

Mr Khoza: It was handed over to the HR specialist that went out and sourced.

Adv Vanara: Just one thing that I need to verify. In the meeting of 2 March 2017, you are critical of the rotation policy, the rotation of executives. Remember that?

Mr Khoza: Correct.

Adv Vanara: But you just rotated acting CEOs. Why?

Mr Khoza: We indicated in a meeting that because the position is vacant, it is good for us to explore the opportunities to expose more executives to that particular role.

Adv Vanara: What I don’t understand is that one day you are opposed to the rotation, and the next day you do exactly that. Can you explain that contradiction?

Mr Khoza: I am not with you because I don’t recall the other day when I was saying something else and the next day I was saying something else.

Adv Vanara: You have just submitted that on 2 March 2017, one of the things you were discussing strongly was the rotation of CEOs, and you have just recently done that. That is the contradiction I am referring to.

Mr Khoza: I don’t recall where I disagreed with the rotation at the CEO level. I don’t know where that comes from.

Adv Vanara: The New Age deal, you focused on why you didn’t take action against Mr Matshela Koko because he had left. That report had fingered Chose Choeu as one of the culprits. My understanding is that he is still an employee at Eskom. Why has the board not taken action against him? Particularly one of the board members, Ms Klein, did not support the round robin to support that decision because an official was fingered in the report and she felt action could be taken against him?

Mr Khoza: I think that TNA contract was signed by Collin Matjila. Chose was the implementer, but I don’t know how Chose was involved to say he is implicated. It was quite long ago because it was early 2015.

Adv Vanara: But you must have recently gone back to the report. That is why you are able to give us the account of what happened. I am saying in that report Chose Choeu was fingered for misconduct. Your colleague Ms Klein would not approve the round robin decision to keep the matter under the carpet because her testimony is that she was under the impression that there was an official and action still needed to be taken. The question is why action was not taken against him based on the report that you don’t contest. The only reason you didn’t take action against Mr Matjila is because he had left?

Mr Khoza: That’s correct.

Adv Vanara: So why did you not implement the report in respect of the official that is still in the company?

Mr Khoza: I don’t remember that Chose was involved. Maybe I overlooked that.

Adv Vanara: Do you suffer from convenient memory loss, acting Chair?

Mr Khoza: Not necessarily. It is only that these things are quite long ago. It was early 2015 when those reports were done. And on the review now when I was checking the document, I could not pick it up. I am not saying they are right or wrong, but I could not pick it up in the document given to me when we were preparing for this. And we find that it was already implemented, it was just condonement on our part. I am not disputing it might have been raised but I don’t recall Chose’s name being mentioned.

Adv Vanara: I accept that you can’t recall, but can you provide an explanation why one of your colleagues remembers it very eloquently to the extent that it is the reason she cannot support the cover up of this report. Somebody is fingered in this report, he is still an employee and we are not taking action against him. That is why I am not going to support this report.

Mr Khoza: I will follow that one up.

Adv Vanara: In your statement I got the sense that you were making an admission that you found Eskom tough going as a non-executive director. Did I understand you correctly?

Mr Khoza: It is correct that when look at the organisation from the outside and then coming inside and looking at the activities that take place it is quite a challenging job. Initially we thought meetings would be spaced at once a quarter for the board. It ended up happening almost every month and during the night to a certain degree.

Adv Vanara: Before being appointed non-executive director of this board, what other boards if any did you serve on?

Mr Khoza: I only worked in my own company, and after that I was working at Telkom.

Adv Vanara: The question I am asking is did you serve on any board before you became a non-executive board at Eskom?

Mr Khoza: It was the first time serving on a board.

Adv Vanara: Don’t take this personally. I am just trying to understand. With the magnitude of the responsibilities of the board of Eskom, and without the any prior experience of serving on any board, you find yourself on this board. What do you think the Minister saw in you that she didn’t see in other candidates?

Mr Khoza: I cannot comment on the Minister’s side. What I can comment is that when we came in there and realised the work in front of us, we gave it our best shot.

Adv Vanara: No further questions, Chair.

The Chairperson said the Committee would convene on 6 December 2017 at 09:30am with members of the Committee asking questions to the board.

Meeting adjourned.