Corruption Watch, in the wake of long-standing poor governance at Eskom, has launched an application in the High Court in Pretoria, to have former Eskom board members declared delinquent.
The application, which is brought in the public interest in terms of section 157(1)(c) of the Companies Act 71 of 2008, focuses on the violation of fiduciary duties and gross negligence on the part of former board members and was served on the following parties:
Eskom Holdings SOC Limited, Mark Vivian Pamensky, Anoj Singh, Brian Molefe, Venete Jarlene Klein, Zethembe Wilfred Khoza and former minister of public enterprises, Lynne Brown.
David Lewis, executive director of Corruption Watch, commented: “State owned enterprises, and Eskom in particular, have been at the centre of the state capture conspiracy. Instead of protecting the interests of the company, Eskom’s erstwhile directors have abetted the looting of the entity. We are determined that there should be consequences for their conduct. This application is one way of exacting those consequences and in ensuring that they are not afforded another opportunity to conduct themselves in a similar fashion elsewhere.”
The purpose of such an application is to have those former directors who engaged in serious misconduct declared delinquent and excluded from holding directorships, in terms of section 162(5)(c) of the Companies Act, which aims to ensure that companies are managed by directors who are fit to occupy such a position. This is particularly important for state owned entities (SOEs) such as Eskom with its entire share capital held by the state and which, as our courts have held, are thus owned by the nation. The public has an interest in the prudent management of public funds and directors of SOEs are entrusted to act in the best interest of the company, and by extension the people of South Africa.
Despite the removal last year of the majority of the then board of directors of Eskom and the removal of Lynne Brown as minister of public enterprises, the lack of oversight and poor management in the preceding years has left Eskom in an impoverished position and has contributed to South Africa’s economic instability. It has also emerged that Eskom was central to the state capture project and that directors abused their positions to enrich themselves and a host of third parties.
The lack of proper oversight and poor management resulted in the downgrading of Eskom debt and contributed to the downgrading of South Africa’s sovereign credit rating. The effects of this are evident in the deterioration of the basic, essential service that Eskom is responsible for providing.
Such misconduct by Eskom’s directors is a breach of trust and a dereliction of duty. Corruption Watch hopes, through this application, that the former directors will not be afforded another opportunity to abuse such a position.
We need less price increases, more transparency, more clean-up
and a restructured Eskom
OUTA – 4 February 2019
Today the Organisation Undoing Tax Abuse (OUTA) makes another submission to the National Energy Regulator (NERSA) public hearings to oppose the Eskom price increases.
Eskom applied for an increase of 15% a year for the next three years from April (the MYPD4 application), but on Friday updated this to ask for 17.1%, 15.4% and 15.5% over the three years.
OUTA opposes Eskom’s change to its price application at the end of the consultation process compromises the integrity of public participation. It also suggests that Eskom is failing in its medium- to long-term planning.
Eskom is also applying for an extra R21.624bn as clawback for under-recovery during 2017/18 (the RCA application), which will be added to the tariff hike.
In addition to these increases, NERSA has already approved a price hike of 4.41% for 2019/20, for the recovery of past RCA amounts.
OUTA proposes that Eskom should not be allowed any RCA clawback and that the MYPD4 hikes should be limited to a maximum of CPI.
OUTA’s objections to the tariff increases include:
- NERSA should consider the affordability of tariffs;
- OUTA believes the NERSA rules on allowable Eskom expenses are flawed as they don’t minimise expenses which arose from corruption or maladministration, thus allowing these expenses to be perpetuated;
- There is insufficient clarity on the progress of criminal cases arising from corruption at Eskom or legal attempts to recoup losses;
- There is a lack of transparency on Eskom’s coal contracts, which enables corruption and overspending which is passed on to consumers;
- Eskom should publish its long-term coal procurement strategy, to enable oversight and move away from “permanent emergency” coal procurement;
- Eskom’s primary energy costs (mainly coal) escalated more than 500% from R18bn in 2007 to more than R85bn in 2018, which included the corrupt R11.7bn coal contract to the Guptas’ Tegeta;
- There is a lack of transparency in how Eskom calculates the value of its fixed assets which affects the tariff increases;
- OUTA objects strongly to Eskom’s attempt to increase the value of its asset base by 76% year-on-year to R1.3 trillion, as OUTA believes it is worth no more than R400bn;
- NERSA has not adequately monitored or curbed Eskom’s capital expenditure programme (Medupi, Kusile and Ingula), which has experienced exorbitant cost overruns;
- Eskom expects the public to cover all its costs through substantive annual tariff hikes which are supposed to cover the operational and capital costs, but it continues to increase its debt through questionable borrowings;
- Eskom’s energy availability factor is only 69.8% against its target of 78%;
- Eskom is overstaffed, with staff increased from 32 674 in 2007 to 48 628 in 2018 while productivity has declined by 35% (measured by the average number of GWh produced per staff member);
- OUTA believes that Eskom has major structural challenges embedded in its business model which cannot be addressed by merely hiking prices; and
- Eskom is technically bankrupt so the recent recommendation from the advisory panel to restructure it into separate generation, transmission and distribution businesses is a crucial step towards sustainability.
OUTA’s presentation to NERSA is here.