Update: Eskom's Brian Molefe falls on his sword. In a break with tradition, Eskom chief executive Brian Molefe on Friday tendered his resignation from the utility, scoring a rare victory for good corporate governance.
When it comes to the King code, Eskom’s version of reality takes a peculiar twist. "In the spirit of good corporate governance, we endeavour to apply the principles and practices of the King Code"
Eskom evidently doesn’t think it has any problems with corporate governance. It generously awarded itself a AAA score for governance in its 2016 integrated report.
And while Thuli Madonsela was given a measly R1.5m for her state capture report, Eskom probably spends far more on consultants each year, overseeing compliance with all sorts of regulations from the Companies Act to the King Code.
Judging from the output, we would be better served if Madonsela had been given Eskom’s entire oversight budget. Eskom’s annual report for the year to March runs to a modest 148 pages and contains some useful information: Eskom sold 12% more electricity to our neighbours than in 2015, for example, while sales to industry were down 7%.
But apart from learning that chairman Ben Ngubane attended only two of the six committee meetings dealing with "board recovery and build programme", there’s little to learn about the state of Eskom’s governance. There was certainly no hint of an organisation that played such a central role in Madonsela’s state capture report.
The "key activities" of Eskom’s social, ethics and sustainability committee look fairly innocuous: all the boxes were ticked, no signs of any strain there.
Eskom's roll-out plan
It was the same with the board tender committee, whose responsibility it is to ensure Eskom’s procurement system is fair — but there were no signs of difficulties there either as it approved numerous contracts, including "negotiations with Optimum Coal".
There is an update on the independent inquiry into the board’s suspension of four executives in 2015. It made no findings of wrongdoing against any of the executives.
When it comes to the King Code on governance, Eskom’s version of reality takes a peculiar twist. "We endeavour to apply the principles and practices of the King Code," it says. But it adds that as a state-owned company, a few of the principles don’t apply. Then, it says that using the Institute of Directors’ assessment tool, it gave itself a AAA (highest application) score for governance.
As one analyst remarked: "Eskom’s report has everything it should have in terms of corporate governance, but there’s a complete mismatch between reality and the report."
It isn’t helped by the fact that it has only one shareholder: government. But if there is poor oversight, there’s no reason why its resources can’t be captured for private ends.
It’s remarkable how the King code can allow offenders to paint a trouble-free picture. What we need is something akin to a Madonsela report that will set off alarm bells when insiders would prefer to keep things quiet. This should apply not just to Eskom but to all state-owned enterprises.
What it means: Eskom’s governance is not helped by the fact that it has only one shareholder.