Eskom: State-owned Company Boards Cannot Play Politics

State-owned companies (SOCs) are important to South Africa’s economy as critical strategic
players in the delivery of public services such as water, energy, transportation, and infrastructure amongst others. As a result, good corporate governance practices in SOCs are vital to ensure sustainable economic growth and healthy contributions to the government fiscus, when profitable.

Though boards of SOCs, including Eskom, carry responsibility through their fiduciary duties for performance. In practice, they do not have autonomy because the objective for government to own state enterprises is so that they support national economic and strategic interests. At times, these interests, are divergent to those of a company as a juristic person such as the lack of investments into new power stations under President Thabo Mbeki’s administration because the focus was privatising Eskom which is the genesis of the country’s energy crisis.

Eskom’s mandate is to supply stable electricity in an efficient and sustainable manner, to contribute to lowering the cost of doing business in South Africa and enable economic growth. The government is the sole shareholder, and the shareholder representative is the Minister of Public Enterprises, Mr Pravin Gordhan, since February 2018. In terms of Treasury Regulations issued in accordance with the Public Finance Management Act (PFMA), Eskom must in consultation with its executive authority (the Minister of Public Enterprises), annually conclude a shareholder compact documenting the mandated key performance measures and indicators to be attained that must be agreed between the Board and the executive authority. I hope the twenty-three recommendations mentioned by the Standing Committee on Public Accounts (SCOPA) chairperson Mkhuleko Hlengwa during the meeting with the Eskom where he had an unpleasant exchange with one of the independent board members, Busi Mavuso, are part of the compact and not added extras.

The underperforming Eskom has led to significant challenges in the overall economic growth, competitiveness of South Africa on the Continent and, frankly, an embarrassment for a country that thirty-eight years ago was touted a beacon of Black rule. Improving the performance of Eskom, not only requires an ethical and competent board and management with clearly defined, realistic and time-bound targets. The board needs to be fully empowered and given autonomy to do their work without an invisible puppet string. In theory, the Eskom board is responsible for providing strategic direction and leadership, for ensuring good corporate governance and delegating the implementation of the strategy to management.

The draft guideline framework for the Corporate Planning and Shareholder’s Compact was developed in 2002 and a template can be found on the National Treasury website. These shareholder compacts should be signed annually. In the compact, the shareholder, which is government, makes the following undertakings:

• Issuing of instruction with sufficient warning and response times.
• Not to renege on promises, guarantees and undertakings given.
• Not to cause delays in critical decisions required.
• To allow the public entity’s accounting authority to get on with strategic direction and control.
• To seek regular contact and consultation opportunities with the accounting authority.

One has heard frustration from Eskom boards over the years about the adverse impact of undue interference, delayed or non-responsiveness of government as a shareholder implicating them in the state of the utility. This inspired me to seek out the shareholder’s compact framework that reflects the expectations of both the board and Public Enterprises. As much as the boards are held accountable to the public through the Minister and Parliament, so should the board and management hold the shareholder accountable by, firstly not signing a compact that does not hold the shareholder’s feet to fire as the undertakings above stipulate. This would give the board leverage in giving factual evidence when SCOPA next visits as to why recommendations are amber and not green, and deadlines must be moved.

The Eskom board, even during the chairmanship of Reuel Khoza during President Mbeki’s leadership, are always caught between handling difficult situations behind closed doors or seen as ‘playing politics’ if they talk to the media. They are caught between the rock and a hard place. As a result, they do not take the public into their confidence timeously when government does not hold up its end, especially with dependencies, where a delayed action from government constrains the accomplishment of set targets. When we get to Stage 4, it is too late. People are gatvol of loadshedding. Thus, Busi’s frustration was human and understandable. Saying, “Government is the cause of the delays’, would have sufficed, without adding, ‘ANC- led’. The people know.