Eskom's internal saga entering public domain unfortunate - Hogan

Thursday, November 12, 2009

Cape Town - Minister of Public Enterprises, Barbara Hogan, says it was unfortunate that the breakdown in the relationship between the Eskom board and its former Chief Executive Officer (CEO) Jacob Maroga did not remain an internal matter for the company to resolve.

"Disturbingly, it entered the public domain through groups with their own political and vociferous campaign in support of one party against another," said the minister during her address in the National Assembly on Thursday.

She said that a never-ending stream of public commentary that sometimes had no basis in fact or law had provided undue pressure on an already complex and difficult boardroom matter.

"This is indeed lamentable," said Hogan.

She described the past 14 days, in which the state utility's CEO and the board's chairman Bobby Godsell resigned, as a turbulent time for Eskom and the economy.

Hogan agreed with Science and Technology Minister, Naledi Pandor's sentiments on Wednesday that the boardroom of Eskom was politicised and this had wrongly painted an exaggerated image of a company in crisis.

"Yes, there was a breakdown in the critical relationship between the board and CEO - and this is indeed a serious matter. But the fact of the matter was that Eskom and its operations continued.

"Lights went on, mines were mined, factories manufactured, the wheels of commerce and industry continued to turn, our homes were lit, and our food was cooked," said the minister.

The timing of the event was potentially damaging as Minister of Finance Pravin Gordhan was abroad raising funds from investors for Eskom. However, it was fortunate that the reputational damage done to Eskom was nominal as investors were acquainted with the company's performance.

Hogan further said it was disturbing that the matter had become a "racial football" which targeted individuals whom she believed had integrity and only the best interests of the country at heart.

Such racial slur, she said, went against the core values of society and the country's Constitution.

Explaining government's silence on the matter following days of uncertainty and speculation in the media, the minister said: "In this highly charged and volatile environment I felt it wise to maintain a prudent silence and to refrain from making public commentary, which would only serve to heighten tensions."

Hogan and her deputy, Enoch Godongwana, had instead worked tirelessly to reach an amicable settlement that would resolve the matter in the best interests of Eskom and the country. They pursued options of facilitation, mediation and arbitration, even a negotiated settlement.

It was during this period, the minister said, that a demand arose for her to provide leadership on the matter. However, she believed the subtext of this demand was that she should in actual fact override the board and confirm a person in his position.

"As minister, I refused to override the principles of corporate governance by imposing a person in the position of CEO without the authority of the law. The type of leadership I preferred to exercise was rather to work indefatigably behind the scenes to resolve the matter.

"At a certain stage, the President's office offered its assistance to break the deadlock and the Board was approached to delay its processes in a final attempt to resolve the matter. This intervention was not taken lightly and was not done to undermine the board but rather lend it support to resolve the dispute," said the minister.

She said government's overriding concern was the strategic importance of Eskom to the economy and to the country, and addressing the highly charged political environment that was creating the false notion that Eskom's operations were being compromised.

Hogan reiterated that government was completely committed to abiding by the principles of proper corporate governance in all of its relationships with the state-owned enterprise.

She pointed out that as shareholder, the Articles of Association of Eskom allowed her to appoint a CEO after consultation with the board. The CEO would then enter into a contract of employment with the board, governed by the company and labour law. Included in that contract is the basis for termination of that relationship.

"It would be inappropriate and illegal for a minister to interfere in the contractual relationship, and might I add, I am not a signatory of the contract," she added.

She said in the past few days the board had moved to finally resolving the matter. Therefore Maroga was no longer the CEO of Eskom and Mpho Makwana had been appointed to act as chairman of the board.

"Makwana will act as Executive Chair of EXCO until a permanent CEO is appointed and he will be supported by two senior managers in the execution of the CEO functions. He will also act as an interim Chair," said Hogan.

She assured the House that government was on track to ensure that Eskom had the capacity to carry out its mandate.