4 February 2018

South Africa: Power Giant at the Core of SA's State Rot

Johannesburg — The name of Eskom, Africa's largest electricity company, has become synonymous with the worst corruption scandals in South Africa and the utility could well become the final nail in the political coffin of President Jacob Zuma.

Now the new head of the ruling ANC party, Mr Cyril Ramaphosa, has moved in to overhaul Eskom -- as well as ease President Zuma out of office.

In his first major move, Mr Ramaphosa has already appointed a new board and ordered them to sack corrupt executives.

Dire financial results

"We are determined to address the damage that has been done to this institution," Mr Ramaphosa said in a statement released on the presidential website. Rescuing Eskom will not be easy, even after Mr Ramaphosa replaces President Zuma as expected.

The sacking of yet another of its short-lived CEOs this week and the release of dire financial results confirmed the depth of the crisis plaguing the power utility.

Finance minister Malusi Gigaba admitted Eskom represents the single worst crisis facing the government.

"Eskom is the biggest risk," Mr Gigaba said.

"There would be no currency, and no economy for the country if Eskom went belly up."

Parliament in South Africa has for months been probing Eskom over so-called "state capture" -- alleged corruption at South African state institutions.

A damning report published a year ago by the then-ombudswoman Thuli Madonsela first laid bare misconduct at Eskom, a state-owned monopoly founded in 1923.

Ms Madonsela detailed how the Gupta business family, who are close friends of President Zuma, allegedly arranged the 2015 appointment of Brian Molefe as Eskom chief to line up lucrative contracts to syphon off cash.

Officials and former workers appearing before a parliament hearing in recent weeks have made startling revelations of how Eskom executives helped the Gupta family benefit from favourable deals.

Three brothers

Whistle-blower Mosilo Mothepu, who worked for a company advising on the deals, told the parliamentary committee that Eskom was identified as a "cash cow" by the Guptas.

In one case, Eskom paid more than $49-million to a Gupta-owned mining firm Tegeta to help it buy a coal mine from Glencore. The Guptas would then sell the coal to Eskom.

Former Eskom chairman Zola Tsotsi told lawmakers how one of the Gupta's three brothers, Tony, summoned him to a meeting and threatened him with dismissal because he was not "helping" them.

"Tony told me 'Chairman, you are not helping us with anything. We are the ones who put you in the position you are in. We are the ones who can take you out!'" he said.

Respected former Finance minister Pravin Gordhan, who was abruptly sacked by President Zuma last March, sharply rebuked former Eskom executives appearing before the committee.

"You brought Eskom to its knees, the biggest utility in Africa," Mr Gordhan told the utility's former chief financial officer Anoj Singh.

All implicated executives have pleaded innocence.

"There are hundreds of decisions taken at Eskom that the CEO will not know about or know the details of," said Mr Molefe.

Liquidity problems

Opposition Democratic Alliance's MP Natasha Mazzone drew parallels between the denials and "omerta" -- the mafia's code of silence.

But Ms Lynn Brown, a close ally of President Zuma and minister in charge of state enterprises, denies that she covered up governance and financial irregularities at Eskom.

"We are not at that point yet that we can prove that people have done things wrong," Ms Brown told MPs.

Eskom's woes started in 2007 with the highly unpopular power shortages that plunged many neighbourhoods into darkness on a nightly basis.

Outages have been sharply reduced, but credit rating agencies have repeatedly downgraded the power utility over its financial and liquidity problems. Its annual financial results, released on January 30, showed profits plummeted 34 per cent and the firm is heavily indebted to the tune of over 300 billion rand ($250 million). (AFP)

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