In our submission to the public protector, we indicated that South Africa’s power utility Eskom is in a dire financial situation due to the systematic encroachment of private hands and politicians.
Eskom has accumulated debts of close to R500 billion as a result of greed and total disregard of the Public Finance Management Act. The bulk of the debt is as a result of three main contracts Eskom has had to fund through the years at the expense of its mandate of providing reliable power to the country:
1) Introduction of Renewable Energy Independent Power Producers (RE IPPs) in South Africa.
2) Eskom New Build Medupi Coal-Fired Power Station.
3) Eskom New Build Kusile Coal Fired Power Station.
Eskom is a state-owned entity (SOE) that benefits from an implicit guarantee from the state and has successfully led South Africa’s electrification in line with developed countries. It plays a significant developmental role in the economy in terms of job creation, industrial development, support for South Africa’s abundant coal supply, and creating low-cost energy for heavy industry/mines/manufacturing, thus creating a ripple effect of jobs.
The power utility is constantly in the public eye because its inefficiencies are felt immediately by the public, whereas other SOEs, such as Transnet or Denel, could have an operational catastrophe and the public wouldn’t know for months.
Eskom is also a monopoly, which provides an essential social good for the majority who are poor and unemployed, which makes it a natural target for privatisation.
There’s also a case for private sector participation in energy generation, even unbundling, however not at the pace and manner it is happening, and with such an incompetent board.
There are external forces determined to see through the privatisation of Eskom. It is, after all, in Public Enterprises, where state-owned companies are housed in preparation for sale, and not the Department of Energy, as would be expected. Enter the current board and management.
The King Code of Corporate Governance, which is applicable to Eskom under the Companies Act, defines a board as the governing body that has primary accountability for the governance and performance of an organisation. Eskom has gone from a R2bn loss to a R21bn loss. Between the Doctor, the Chemist, the Conflict in BLSA and the other board appointments, this board is completely out of its depth.
A general rule of corporate governance is transparency, accountability and separation of duties. Not at Eskom: Eskom re-wrote the book on corporate governance when it made Jabu Mabuza chief executive and chairman, while he’s a service provider.
Who does Jabu Mabuza report to, and is this not a conflict of interest?
His appointment as chairman and chief executive would be reasonable if he was a shareholder, but Eskom is an SOE, which is completely different from the listed companies.
One would assume that given Eskom’s place in the economy with a highly specialised function, there would be consideration of expertise in the appointment of the board.
We cannot allow Eskom to die because of greed and incompetence.
* Phasha is the chairperson of the Anti Poverty Forum (APF).
** The views expressed here are not necessarily those of Independent Media.