The ghost of former CEO Brian Molefe is haunting Eskom. This week the new board will be called on to decide the future of former acting CEO Matshela Koko, but its decision will determine the fate of the whole utility, and of the board itself. It will also have profound implications for SA.
In May, Eskom asked Koko to take a leave of absence while it instructed law firm Cliffe Dekker Hofmeyr to investigate if there had been a conflict of interest, and any irregular conduct on Koko’s part, when it came to his handling of contracts with a company in which his stepdaughter had an interest.
The investigation by Cliffe Dekker, together with a forensic investigation into Koko by auditing firm Nkonki Inc, was completed in June and a report was handed to Eskom’s legal department and board. Public enterprises minister Lynne Brown confirmed in June that she’d received the report from the Eskom board.
“I am still reading the report, and it is quite voluminous,” she said when asked if a decision on Koko’s future was imminent, and whether the report would be made public. “I want to give the board a chance to decide how it will deal with the matter.”
In August 2014 Impulse International was awarded contracts “for the provision of specialised services” to Eskom. As group executive for generation, Koko was head of the contracting unit of the utility, which put him in a position of conflict of interest because Koketso Choma, his stepdaughter, had a 25% shareholding in Impulse. This subsequently increased to an indirect 35% shareholding by Choma.
None of this was declared to Eskom, in defiance of its conflict of interest policy, until the Sunday Times exposed the relationship. At the time the discovery was made, Koko had become acting CEO, replacing Molefe, who left Eskom late last year after he was fingered for his inappropriate handling of a relationship with another Eskom supplier, the Gupta family.
While Brown would not be drawn on the contents of the report, it is widely understood that both Cliffe Dekker and Nkonki found numerous irregularities in Koko’s conduct.
Among the allegations against him are that Impulse was appointed to render services in July 2014, without being registered as a vendor to Eskom, and without a contract. Only a month later was it registered as a vendor in the utility’s system. But two days before this, Impulse had already submitted an invoice for payment, which could not be legally paid without the supplier being registered as a supplier in the SAP management system.
The Financial Mail can reveal that the investigators found Impulse was not on any Eskom panel of service providers. But despite all its problems, Impulse was paid R348.6m for nine irregular contracts awarded between July 2014 and early 2017.
This would seem to be a mountain of evidence against Koko that the board cannot ignore. Neither is it the first time Koko finds himself on the wrong side of the law. It was he who facilitated an undue payment of almost R700m in late 2015 to the Gupta family’s Oakbay Resources, money which former public protector Thuli Madonsela found was illegally used to help Oakbay fund its acquisition of Optimum Coal. In her report on the investigation into state capture, Madonsela recommended further investigation of Eskom’s conduct.
But Koko not only got away with the irregular payment, as the Molefe-led executive and Ben Ngubane-led board vainly tried to explain it away. He also got away with lying about it on television.
At the time, the board and management enjoyed political protection as Brown, the minister responsible for Eskom, simply looked the other way — until doing so became untenable after Molefe’s about-turn on his departure.
This time the odds seem to be against Koko as Cliffe Dekker and Nkonki have explicitly recommended disciplinary action against him.
The process may take longer than expected, however, because the board has already made some serious blunders that may delay effective implementation of disciplinary processes. Instead of proactively suspending Koko in May, the then Ngubane-led board reluctantly said it would investigate the allegations against Koko while he carried on working. Only when the minister instructed him to take leave did the acting CEO go.
To further complicate its position, the board publicly denied it had suspended him. If it is to take any disciplinary action against him, Eskom will first have to bring him back to work. Only then can it formally suspend him before taking any action as recommended by Cliffe Dekker and Nkonki. Sources say Koko has been eager to return, pressuring new chairman Zethembe Khoza to bring him back.
In defiance of the recommendation to discipline him, which may result in his expulsion from the utility, this week the board will formally consider reinstating him. Should Eskom yield to Koko’s pressure, it may well be a replay of the Molefe saga in which both the board and minister yo-yoed on his departure, his return and then his forced departure. The drama is still playing itself out in court.
Koko may yet get his way and return to work. Again, as in Molefe’s case, his triumph will be short-lived. Brown and Khoza’s board may yet claw back some of its credibility and save Eskom from yet another unnecessary and debilitating leadership crisis.
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