Polity
Article by: Creamer Media Reporter
Published: 12 Nov 2009
Source: The Department of Public Enterprises
Title: SA: Hogan: Address by the Minister of Public Enterprises, on recent developments at Eskom, National Assembly
1. Mr Speaker, I would like to thank the House for the opportunity to
account to it as Shareholder for ESKOM.
2. Regrettably, the past 14 days have been a turbulent time for Eskom
and the economy, due to a breakdown in the relationship between the
Board and its former CEO.
3. Unfortunately, the dispute did not remain an internal matter for the
company to resolve in terms of its own governance framework, as it
should have, but disturbingly, it entered the public domain through
groups with their own political and vociferous campaign in support of
one party against another. They provided undue pressure through a
never-ending stream of public commentary that sometimes had no
basis in fact or law, and only served to inflame and exaggerate an
already complex and difficult boardroom matter. This is indeed
lamentable.
4. As my colleague Minister Naledi Pandor commented yesterday the
Boardroom of Eskom was politicised. This has 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.
5. The timing of the debate was potentially damaging, as it happened at
a time when the Minister of Finance was abroad raising funds from
investors for Eskom. Fortunately, the reputational damage done to
ESKOM was minimal as investors are well acquainted with Eskom‟s
performance-- but those who want to make a political crusade out of
boardroom politics need to reflect on the potential damaging
consequences for a company such as Eskom and the economy of
SA.
6. It is very disturbing to note that his matter also became a racial
football, targeting certain individuals who I believe have integrity and
only the best interests of the country at heart. Such racial slur,
particularly directed at Mr Bobby Godsell, the former Chair of the
Board, goes against what we fought for and codified in Kliptown, and
is also against the core values of our society and our Constitution -
especially, the value and importance of non-racialism. I want to thank
Mr Godsell for his exemplary leadership in the last 15 months.
7. In the midst of all of this I am very grateful for the sanity and sobriety
that prevailed in important sectors of our country. Mr Speaker, let me
say thank you to the ANC, COSATU and NUM and those people in
our country who chose not to publicly enter this fray but to maintain
their discretion in the interests of ESKOM and the country in these
trying two weeks.
8. I look forward to further constructive engagement with trade unions
on matters relating to ESKOM.
9. 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.
10. Instead my Deputy Minister and myself busied ourselves,
tirelessly trying to reach an amicable settlement. Days and days of
long hours and complex negotiations ensued. Our aim was to try and
reach an amicable settlement that would resolve the matter in the
best interests of Eskom and the country. Mr Speaker, I wish to
acknowledge my colleague the Deputy Minister, Enoch Godongwana
for his unflagging support, energy and effort in this matter. I also wish
to thank the staff at the DPE and in particular the DG for their
invaluable support.
11. We tried to pursue options of facilitation, mediation and
arbitration, even a negotiated settlement. During this period, a
demand arose that the Minister must provide "leadership". As we
were to discover, the subtext of this demand was in actual fact a
demand that I, as Minister, 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.
12. 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.
13. This intervention was not taken lightly and was not done to
undermine the Board but rather lend it support to resolve the dispute.
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.
14. Let me say upfront, that this Government is completely
committed to abiding by the principles of proper corporate
governance in all of our relationships with the SOE.
15. As shareholder, the Articles of Association of Eskom allow me
to appoint a CEO after consultation with the Board. The CEO then
enters into a contract of employment with the Board, which is
governed by the company and labour law. Included in that contract is
the basis for termination of that relationship.
16. 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.
17. The right of either party to that contract can be asserted in a
court of law, a right that this progressive government entrenched.
18. Mr Speaker, I am constitutionally obligated to operate within
this legal framework - one which has due regard for our country‟s
labour laws and the Companies Act. As Shareholder I am already
attending to ensuring that we align our SOE with the King 3 report
and the new Companies Act which is due to be implemented in mid
2010.
19. Let me stress, Mr Speaker, that the integrity of a Board is
paramount. Boards are appointed by Government, and by law, are
obligated to govern the company with the support of senior
management. The Shareholder oversees the functioning of the
Board, to ensure that the Board and the company give effect to the
strategic intent and objectives of Government.
20. Mr Speaker, I am now pleased to say the Board has moved in
the last few days, in the interests of the company and the country, to
finally resolve this matter in the following manner:
a) Mr Maroga is no longer the CEO of Eskom. The search
for a new CEO will now commence.
b) Mr Mpho 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.
c) In addition, the Board is attending to the realignment of
Board committees and composition thereof as well as the
necessary delegations of executive functions.
21. I would like to firmly assure this House that we are on track to
ensure that Eskom and all SOE have the capacity and support to
carry out Government‟s strategic intent. And that I, as Shareholder,
together with SOE management and SOE Boards, will always act
within the rule of law and sound corporate governance principles.
22. So yes, ESKOM is on track. The lights are on, and it‟s most
urgent priority - the revised MYPD application due to be submitted to
the Regulator on 30 November 2009 has - and is feverishly -being
attended to.
23. Mr Speaker, if there are any concerns about governance of
parastatals in the country, let me assure everyone in the House that
this Ministry and the Boards of SOE have the full authority to govern
their companies without unlawful or inappropriate interference - we
say to them- „hell yes, you must govern‟ ....so let us get back to the
business of building our economy.
I thank the House.