Eskom tempts fate with somersault on Molefe
Officials at Moody's may call the government out on its commitment to good governance at state-owned companies when they visit South Africa this week after it was announced on Friday that Brian Molefe would return to his position as CEO of Eskom after he resigned under a cloud last year.
Staff at the international ratings agency are scheduled to meet government, business and labour leaders over three days from Wednesday, a senior Treasury official confirmed on Friday.
Business Leadership South Africa condemned Molefe's appointment, saying that five reports "found prima facie evidence of serious malfeasance at Eskom during Mr Molefe's tenure there".
Business Leadership South Africa chairman Jabu Mabuza said: "His reappointment is wilfully disrespectful of the citizens of this country. Both business and government have been working to convince investors and ratings agencies that we are a country adhering to good governance, especially in respect of state-owned enterprises. This decision undermines all our efforts."
Molefe's reinstatement, which takes effect tomorrow, could give Moody's yet another reason to downgrade the sovereign credit rating to junk status, analysts said on Friday.
Lumkile Monde, an economist at Wits University, said: "With the developments at Eskom it is very possible that they will move quickly because Mr Molefe's name has come out in that [State of Capture] report from the public protector. He's got no clue around governance, around transparency and around accountability."
Molefe was CEO of Eskom for 18 months before resigning unexpectedly in December after the report linked him to the Gupta family and irregularities in coal contracts awarded to their company Tegeta Exploration and Resources. Molefe said at the time that he would resign in the interests of good corporate governance and to clear his name.
Eskom and Molefe came under fire several weeks ago for a R30-million pension payout for less than two years on the job. Public Enterprises Minister Lynne Brown refused to sanction the payout.
Brown said on Friday Molefe's reinstatement was the best solution after the parties could not reach agreement on the pension repayment.
The Eskom board rescinded its approval of his early retirement application and reached an agreement with Molefe that he had to repay by the end of this year about R7-million of the pension already paid to him.
"I still think it's a better position than paying Mr Molefe R30-million in pension," Brown said.
The legal age for early retirement in South Africa is 55. But Molefe is 49 years old.
Professor Owen Skae, director at the Rhodes Business School, said that by reappointing Molefe the board had not followed good corporate governance. "[The reappointment] to my mind already suggests there is a breach of fiduciary responsibility on the part of the board, particularly in the light of the fact it has never been resolved fully why he had resigned."
An underlying principle of the King IV code, which outlined the leading practices for corporate governance, was the need for ethical and effective leadership, Skae said.
"I don't see how there is going to be a positive outcome from this. I'm quite sure if this was a listed company one would have seen the share price drop," he said.
Bernard Hotz, head of business crimes and investigations practice at Werksmans law firm, said Molefe's appointment highlighted the government's rhetoric on good corporate governance and its poor commitment in implementing it.
While Molefe had not been found guilty of any offence, the public protector's findings implicating him were serious.
Despite the allegations, Molefe was appointed as a member of parliament earlier this year.
"It is very disturbing how people are being deployed, if one looks at how people are being deployed into finance and to Eskom. The timing of things is also interesting," Hotz said.
Molefe's appointment came under fire from the political parties, civil society and business groups.
The CEO Initiative said Molefe's appointment added to the political and institutional uncertainty the country was facing "and will exacerbate the negativity caused by the downgrades".
The initiative was established at the request of President Jacob Zuma last year as a partnership within which government, labour and business work together to achieve higher levels of inclusive growth and shared prosperity and also to avert sovereign-ratings downgrades.