EDITORIAL: Still no Eskom solution in sight as Brown does the odd thing again
The new board is insufficient to take forward the large, complicated energy company clearly sitting on a mountain of corruption
Public Enterprises Minister Lynne Brown has again done the odd thing that has become normal practice for cabinet ministers in SA. She has appointed a collection of people to sit on the board of one of the most important firms in the economy who are entirely unsuited to the job.
The four new appointments to the Eskom board are an academic, two entrepreneurs with scant corporate experience and a fourth with a number of qualifications in the auditing and accounting realm but also with no big business experience.
Eskom is a large, complicated company. Its financial position is particularly precarious. It is locked into large capital-building programmes that require it to take on an increasing debt burden at ever-increasing cost. Even analysts whose speciality is to understand SA’s state-owned companies complain that its financial arrangements are opaque and its true financial situation is unclear.
Even more serious is that the company is clearly sitting on a mountain of corruption, the details of which are now beginning to emerge from all sorts of sources. In today’s Business Day, we carry the story of how Eskom — led by chief financial officer Anoj Singh — paid R1bn more than it should for a replacement boiler for its Duvha power station by awarding the bid to a company that never even made the short list of the tender committee. On our website today, we carry a painstaking reconstruction of exactly how this tender was cooked by executives and directors who changed the rules as they went along.
Singh has emerged as a key Gupta man who has done the family’s bidding first at Transnet and now at Eskom. Brown has left Singh in his place, using the same excuse as she did for Brian Molefe that these are "untested allegations". She has also left Zethembe Khoza, who has served on the Gupta board, in place and made him acting chairman. Pat Naidoo, a former Eskom employee and the only one of the board with experience in the business, has also retained his position. Naidoo’s most notable achievement has been his passionate defence of Molefe.
How does Brown expect that her new crop of directors, who lack corporate experience and do not have a financial background, will fare? It will be up to Khoza and Singh to show them the ropes. Their knowledge and insight will depend on what Singh and Khoza want to share with them.
It is hard not to think that these appointments have been set to fail
No matter their good intentions or their impressive academic skills, it is hard not to think that these new board appointments have been set up to fail or, at least, not to succeed. And perhaps that is the point. While those appointed to state-owned companies’ boards used to be the wisest and the most experienced, in the past seven years, they have tended to be unknown and their links to political factions only begin to emerge later, when governance is falling apart.
There are three things that Eskom plainly needs for its future: a clean-up, a financial strategy and a business model to deal with a rapidly changing energy environment. While the first is most pressing, the last is most important and difficult.
The row between Eskom and independent power producers of renewable energy has brought this into sharp focus. While the cost of producing renewable energy is rapidly falling, Eskom remains locked into a strategy that has been overtaken by time and technology.
The response of its board and executive leadership has been to attack the threat of change.
The government and Brown, in particular, caught up in the internal factional looting spree, have shown no leadership. Ever since she came into office in 2014, Brown has spoken grandly of "the end state of Eskom". But she has yet to offer us or Eskom any direction. The new directors on the board should insist that she do so.