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Eskom’s chief is a cause for concern in South Africa

The South African utility and largest state-owned enterprise this week saw the return of its former head who stepped down amid a graft allegations last year. The move has stoked fears of a repeat scandal.
Protesters outside state-owned company Eskom demonstrate against the reinstatement of Brian Molefe as its chief executive. Gulshan Khan / AFP
Protesters outside state-owned company Eskom demonstrate against the reinstatement of Brian Molefe as its chief executive. Gulshan Khan / AFP

Cape Town // Last November, Brian Molefe quit as the chief executive of South Africa’s state-owned company Eskom after the country’s graft ombudsman accused him of favouritism in awarding big coal supply contracts.

Now, he has just been reappointed to that position.

Mr Molefe is seen as close to the president Jacob Zuma, who has the ultimate authority to hire and fire senior state employees. Mr Molefe had departed after the country’s graft ombudsman – the public protector’s office – issued a report pointing to his involvement in funnelling contracts towards the Gupta family businesses.

His sudden return to Eskom was therefore unexpected and to many, unwarranted. Even the ruling African National Congress (ANC) party was caught by surprise, calling the decision “unfortunate and reckless”.

“Mr Molefe left Eskom under a cloud following the release of the public protector’s report into state capture late last year,” says the ANC spokesperson Zizi Kodwa. State capture is a type of systemic political corruption in which private interests significantly influence a state’s decisionmaking processes to their own advantage.

“The report, while still under review, made observations against Mr Molefe which, at the time, he had deemed serious and significant enough to warrant his resignation,” Mr Kodwa says.

Mr Molefe’s reappointment is seen as part of the wider soap opera that South African politics and economics has become lately. At its centre is Mr Zuma, who is fighting to retain control over an increasingly rebellious ANC.

Mr Zuma must leave office in 2019 in accordance with the country’s constitution. The clock is consequently ticking on a pet project of his, a plan to build a fleet of nuclear plants at a cost of about 1 trillion rand (Dh280.49 billion). A recent court action, however, found the procurement process flawed and ordered that it begin afresh.

Since Eskom will be driving the requisition, Mr Molefe’s sudden return could be seen as an attempt by Mr Zuma to repeat efforts to get the process right. This will not be easy. The original reason Mr Molefe left was for allegedly pushing coal contracts to mines owned by the Gupta family. The Guptas are Indian migrants who are close to Mr Zuma and employ his son Duduzane. Their firms participate in state contracts, and they own a major uranium mine that some feel will benefit from a nuclear build.

Local media has reported over the past few years on how the family’s apparent influence over Mr Zuma, and therefore government, has grown. These allegations were given official weight when Thuli Madonsela, the state ombudsman, released a report into state capture by well-connected businessmen.

Consequently, the family has become deeply unpopular, to the extent that crowds have turned up to protest against them at their Johannesburg home. Last year the family decamped to Dubai and bought a Dh110 million house in Emirates Hills. The family did not respond to a request for comment.

Mr Molefe, meanwhile, is off to a busy start. His first day back at Eskom this week began at 4am when he reportedly went to Eskom’s offices early to avoid protesters. Within a day he was fending off fresh allegations of malpractice, this time from a former government minister. Ngoako Ramatlhodi, who was the mines minister two years ago, says he was pressured by Mr Molefi to rig coal contracts Eskom held with the Swiss-based commodities trader Glencore. Mr Ramatlhodi claims senior Eskom executives including Mr Molefe wanted him to suspend Glencore’s mining licence.

“They insisted that I must suspend all the Glencore mining licences pending the payment of the2bn rand,” Mr Ramatlhodi told the amaBhunane news service. He notes these discussions took place at a time when Eskom was administering countrywide blackouts or “load shedding” due to a shortage of generation capacity. “You must remember that the country was undergoing load-shedding at that time. I said to them: ‘How many mines do these people [the Guptas] have supplying Eskom? How many more outages are we going to have?’”

Mr Ramatlhodi refused to suspend Glencore’s licence and was subsequently fired by Mr Zuma. As a result of the contractual dispute the affected coal mine was running at a loss and Glencore eventually sold it to the Guptas for a fraction of its value.

A spokesman for the family’s business interest denies any “undue favours” from Eskom or other government sources, and says they welcome a commission of enquiry into the matter “so we can finally clear our name”.

The spokesman adds that the family would not gain any advantage should a nuclear fleet be procured. “Nuclear is not part of our business model at all. Our uranium assets are geared for the export market. We have publicly stated many times that our life of mine [for our uranium deposits] will be passed before South Africa is ready for nuclear.”

Mr Molefe, meanwhile, has denied Mr Ramatlhodi’s allegations, through a board spokesman. This fresh crisis, though, has “potentially catastrophic” implications for the economy, says Proffessor Anton Eberhard of the Graduate School of Business in Cape Town. “Eskom is not just any other state-owned enterprise; it is by far the largest with revenues around 200bn rand and assets of more than 600bn rand. It is also an enterprise facing severe stress.”

Eskom, he says, is suffering from a crisis of leadership. “At this moment we need experienced people on its board and its management. South Africa’s best and brightest, unfortunately, are not being drafted into these responsibilities.”

business@thenational.ae

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Updated: May 17, 2017 04:00 AM

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