BUSINESS DAY TV: Supply is important, not the Eskom board’s CVs
Xolani Mbanga from the Energy Intensive Users Group talks about the appointment of four new directors to Eskom’s board and its new acting CEO, Johnny Dladla
BUSINESS DAY TV: A new board at Eskom and fresh allegations of dubious contracts at the parastatal. Public Enterprises Minister Lynne Brown added four new directors to Eskom’s board on Friday, rather than opting for an entirely new board as many had expected.
And it will be the board’s job to ensure contracts, such as the one that was awarded to Chinese firm Dongfang, despite being more expensive than rival bids, don’t fly below the radar. Xolani Mbanga is the CEO of the Energy Intensive Users Group (EIUG) and he joins us in studio.
Xolani, so, your thoughts on the new board. Are you content with the four members that were added to it or would you have preferred to see an entirely new board at the parastatal?
XOLANI MBANGA: Firstly, the EIUG and Eskom are tied or joined at the hip. We use about 40% of Eskom’s energy so it’s important that we see stability within the board. So we don’t have a problem with the current four members. We, however, think that the minister can add four additional new board members, which could have more experience in the energy sector.
BDTV: Okay, so you’re comfortable with what stands. She has left Anoj Singh in his place, Zethemba Khoza, who served on the Gupta board as well, still holding his position. Do you see that as being fair or naïve?
XM: What is more important for us is the price of energy, is the consistency of supply, is the reliability of supply. If any of these three things are not met then we have a problem with it. So we don’t have a problem with the CVs of the new board members. We think they will bring value and create more stability within Eskom.
BDTV: So when you wake up and see a headline about the Chinese firm Dongfang pocketing R600m from a rigged Eskom deal, that surely adds to the price for the end-user, so that does affect your members?
XM: It does. Anything that is not consistent with the Public Financial Management Act (PFMA) affects us. We need to know that there is clarity in terms of how Eskom prices itself and how the National Energy Regulator of SA (Nersa) prices themselves. So again, for us, unless there is a pure investigation that will prove to us that there are some shenanigans going on there we can’t comment. But we think that what the minister says … let’s open and see how the Eskom contracts are and let there be a full investigation.
BDTV: Do you expect the current investigations into Eskom contracts to deliver any meaningful results?
XM: We have no reason to think that they would not. We think that if it’s fair and if the results are quite clear, and if the outcome is quite clear, we will support whatever decision will be made.
BDTV: What would you like … you said you weren’t uncomfortable with the four new board members, they do bring accounting experience, auditing experience to the board. What would you like to see in the other four board members that still have to be appointed, because this is a massive, mammoth of a company, it’s a complicated company and you would want to see some industry expertise, I’m sure?
XM: Absolutely, and we are convinced that there are enough people within the country that have experience in the energy or power sector, so we don’t have a problem in saying that Eskom can invite some of our users to become part of this.
BDTV: Some of your members perhaps?
XM: No, I’m saying there are those that are no longer within the industry but there is currently no shortage of experienced people within the country.
BDTV: We’ve been reading loads of reports on all that’s been transpiring within Eskom and with that has come a lot of commentary as well. Among the comments out of analysts has been … analysts whose speciality it is to understand SA’s state-owned companies complaining that Eskom’s financial arrangements are opaque and its true financial situation is unclear. Do you think we need more clarity on that front?
XM: Absolutely. I cannot emphasise that more. It’s important for Eskom to build its build-programme, it’s important for Eskom to be sustainable in terms of cash flow. It’s important for us to see with clarity how Eskom uses its finance because the absence of that has a dire constraint in terms of ourselves. We have some of our sectors that are very much needing Eskom to come clean in terms of its price path. If you don’t have the clarity in terms of price path, we can’t plan, we can’t say what would be happening in the next five years, 10 or 15 years. So price path is very important for us.
BDTV: Your thoughts on the new acting CEO Johnny Dladla? He’s the third CEO this year, we had Matshela Koko, we had Brian Molefe back very briefly, and now Johnny Dladla. Many are saying he has a solid reputation and he has experience. Does he increase your comfort levels?
XM: Yes he does. We think he has good experience within the power sector, we think 20 years is quite a good innings. We are then comfortable with him and want to continue to work with the Eskom leadership in future.
BDTV: I want to go back to the experienced members of this board that now sit, and go back to Anoj Singh, Zethembe Khoza and Pat Naidoo as well, with them holding most of the experience within that board. Do you not see that path to clarity being a little rockier than it should, because one assumes with their experience they take hold of the reins, disclosing what they want to and keeping to themselves, what they want to too, I guess?
XM: We meet with Eskom most frequently: we meet with Eskom leadership, we meet with Eskom management to look at these issues, we look at price path, we look at consistency, we look at the reliability of supply. If we see that there is any reason that would make us doubt that, we will certainly stand up and make a noise about it. But we’re suggesting that, on top of the additional four new board members, it would be prudent for the minister to add four more members who have knowledge about this industry to augment the board. It is very important for us to have stability in the board, in the operations of Eskom and in the finances of Eskom.
BDTV: So with the fresh board do you believe that Eskom needs a fresh business plan, just given the very changes that we’re seeing within the energy environment in SA, do they need to actually revise their strategy?
XM: The world has changed, it’s not only within SA. The world has changed in that there is less relationship now between the growth of GDP and the growth of energy. So we need to understand how do we make sure that we keep costs in terms of operations, because energy as a basic backbone in SA, it’s quite important that we should maintain those costs as low as possible. So it’s important for us to know exactly what the cost imperatives are, what increases tariffs, what increases levies, so that we are able to plan better.