The CEO of South Africa's power utility is back. Why the move can't be justified

Eskom CEO Brian Molefe addressing the media.
Alon Skuy/The Times

The return of Brian Molefe as CEO of South Africa’s largest state owned enterprise, the power utility Eskom, has caused outrage due to the circumstances under which he resigned in December last year.

Molefe left the power utility after a Public Protector’s inquiry alleged that he may have been involved in nefarious activities. The State of Capture report by the then Public Protector, Thuli Madonsela, showed extensive and irregular communication between Molefe and the Guptas, a family with close ties to President Jacob Zuma.

At the time Molefe’s backers – including board chairperson Ben Ngubane – glorified him. They attributed a turnaround in Eskom’s fortunes as a function of the CEO’s 18-month tenure. His supporters branded him as a messiah whose departure would have negative consequences for the power utility.

Similar sentiments were expressed more recently by Ngubane and Public Enterprises Minister Lynne Brown. She told a press conference that she supported his return as CEO as he was responsible for the fact that load shedding (organised power cuts) had stopped and the power utility was on sound financial footing.

But was Molefe’s performance as great as his supporters say it was? I suggest not.

It’s true that under Molefe’s reign power cuts across the country were brought to an end. In addition, Eskom reported better financial results last year.

But neither of these two developments had much to do with Molefe’s capabilities as a CEO. The power cuts ended primarily due to a decline in electricity demand – partly the consequence of a weakening economy – and new generation capacity that had been in the pipeline for years. And the improvement in a number of Eskom’s financial ratios was due in large part to massive financial support provided by the government in 2015.

Did Molefe end the power cuts?

Prior to Molefe’s arrival as CEO in March 2015 the power utility’s finances had been worsening and it was struggling to meet electricity demand. These challenges were largely due to a delay in investment by the government as well as slow increases in tariffs.

The delay in investment was due to government’s indecisiveness over a protracted period of time. And the slow increase in tariffs was the result of a desire to shield consumers from sharp increases and a mistrust of Eskom’s claimed needs.

South Africans lived through a period of extensive power cuts in 2007. Electricity generation capacity was unable to keep up with demand. The situation was largely saved by slowing economic growth combined with greater energy efficiency. These factors meant that electricity demand was already well below forecasts prior to Molefe’s appointment and continued this trajectory during his tenure as CEO.

Falling demand created a virtuous cycle in operations: lower demand put an end to the need to impose power cuts. It also opened up the opportunity to do maintenance on infrastructure, leading to greater availability of capacity and an even lower probability of power cuts.

To be sure, Molefe still had to ensure that Eskom continued to get the basics right. There’s little evidence that he did more than that. Instead, it seems that his predecessor, Tshediso Matona, was excessively negative in his outlook. This set up Molefe to appear as though he had pulled-off a dramatic success.

Molefe’s bailouts

What of the improvements in Eskom’s financial situation?

The view that Molefe was behind Eskom’s short-term financial turnaround was used to award him a R2.5 million performance bonus for the year ended 31 March 2016. (Molefe appears to have secured a R30 million retirement package when he tendered his resignation. Under the terms of his return to the job this will now no longer be paid.)

But a closer look suggests that Eskom’s financial improvement can’t be attributed to Molefe. In many respects it was the result of extraordinary support afforded to the power utility by the government in 2015.

This support, facilitated by two special appropriation bills passed by Parliament, had two main components. The first was an equity injection through which the National Treasury under which Eskom received R23 billion in exchange for shares. Since government is the sole Eskom shareholder, this translated into a straight cash gift.

The second component was even more significant. This involved government writing-off a R60 billion loan which had been approved in 2008 and disbursed in multiple tranches between 2008 and 2010.

If we treat Eskom as a genuinely independent entity, the full cost to national government and therefore the taxpayer of writing off the loan had two parts:

• the remaining principal amount (around R30 billion), and
• an additional R86 billion, the estimated cost of the state foregoing interest payments on the loan. According to the loan conditions, Eskom would have been required to pay this interest in the event that its financial situation improved.

Whether this financial support was desirable depends on your view of Eskom’s recent history. Many analysts agree that additional government support was overdue. But in relation to Molefe it raises a simpler question: if many of the improvements in Eskom’s financial ratios were due to massive transfers of cash and assets from taxpayers, did it make sense to pay its CEO a bonus that effectively also came from taxpayers?

Either way, closer analysis of Molefe’s supposed successes reveal that they are not what they have been made out to be. Combined with the failures of corporate governance with which he has been associated, the case for reappointing him as Eskom CEO appears to be paper thin.

Seán Mfundza Muller, Senior Lecturer in Economics, University of Johannesburg

This article was originally published on The Conversation.

Living with an open sewer for 15 years

Residents in East London say election promises were made to fix the problem

By Nombulelo Damba-Hendrik

Duncan Village residents have been complaining about broken sewerage pipes in the area for more than 15 years. Photo: Nombulelo Damba-Hendrik

A number of residents at Duncan Village Area 12B Informal Settlement in East London told GroundUp they have been living next to broken sewerage pipes for more than 15 years. They say they reported the problem to various ward councillors who told them that the municipality would fix the problem. They say promises were also made during the local elections last year.

When it rains, dirty water from the drains flows into shacks and the smell is unbearable. Close to 1,000 shack homes are affected. Community leader Akhona Klass said, “The municipality is dragging their feet in fixing the broken sewerage.”

When GroundUp visited the area last week, Nomkhamelo Singwentu, 62, was sweeping away a pool of dirty water near her shack. Singwentu has lived in the informal settlement for 25 years.
“I’m getting sick of cleaning this dirty water,” she said. “It’s been 15 years living next to this broken sewerage.”

A woman, who called herself Mambele and who has also been living in Duncan Village for over 20 years, said that when they started the informal settlement there were only a few shacks next to bushes.

Like other residents we spoke to, she has been hoping for all these years that the municipality would move her to another area and give her a proper house.

Ward 2 councillor Ntombizandile Mhlola said she is aware of the broken sewerage in Area 12B and she has reported it to Buffalo City Metropolitan Municipality (BCMM).

Spokesperson for BCMM Sibusiso Cindi also said they were aware of the broken pipes. he said they were caused by “decaying infrastructure and vandalism”. He said new sewerage pipes were being installed in the surrounding areas.

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Published originally on GroundUp .

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An open letter to Premier Helen Zille

Domestic workers’ struggle for housing, not a hidden agenda, is behind the campaign for Tafelberg

By Sheila Madikane

Reclaim the City leader Sheila Madikane meets Premier Helen Zille outside her official residence at Leeuwenhof on 5 May 2017. Photo supplied

Dear Premier Zille
My name is Sheila Madikane. I am a domestic worker, a housing activist, and one of the leaders of Reclaim the City. We have met a number of times over the last few weeks at protests and pickets after you decided to sell the Tafelberg site. In each of these conversations I have tried to point out our desperate need for affordable housing in the inner-city, and in Sea Point where I live. I have told you what the Tafelberg site represents to me, and other domestic workers and carers in Sea Point: for us it is a symbol of hope, a way to desegregate our city; to recognise the struggles of working-class people; to live and work in the inner city. But we have not been heard.

Your decision to sell the Tafelberg site tells me that you do not understand or acknowledge the experiences of people like me in this city. This became clear to me when you said, in a recent column for the Daily Maverick, that you are suspicious we have other agendas. I hope this letter will make you rethink the reasons why so many are fighting for Tafelberg to be used for affordable housing.
I was born and raised in Worcester but I have been living in Sea Point since 1987. I remember my journey on the train to Cape Town and spending my first night in this City at the station. In the morning I took a bus to Sea Point and got off at Grand Bazaars, where the Shoprite on Main Road is now located, to meet my aunt. My aunt was living on St. John’s road, and each morning I would have to leave her room early, so that her employers and the caretaker would not find out that I was living with her. I would bathe using the public taps, because I was too scared to use their facilities. I struggled to find a job, but I knew that I couldn’t go back home because I had to provide for my one-year-old daughter who I had left behind. Once I had found a job as a domestic worker, my employer found me a room on St. John’s Road to rent.

After a few years I moved into a room at Mimosa apartments, where I found a part-time job as a domestic worker for two different families. I lived at Mimosa for 16 years, before some of the “maids-quarters” were closed down for those of us who were not employed full-time by the owners of the units.

After a long struggle looking for alternative accommodation, I moved into my current home which I share with my three daughters and grandchild. My two younger daughters were born at Somerset Hospital and have both attended school in the inner-city since crèche. My oldest daughter currently works at the Waterfront, and both she and I access our workplaces easily without having to incur a lot of travel costs. Sea Point is the only community I have known in this city, and I have no desire to get to know another. We feel safe here; we enjoy how vibrant this area is; the easy access to shops, my children’s school and my church. But each day our future here in Sea Point is more and more uncertain.

Every week I see working people like me struggling to hold onto the small cramped rooms that we live in. We are the ones who live in the basement rooms, in the storerooms and in the “maid’s quarters”. The landlords refuse to provide the most basic upkeep. There is damp and rats. In many buildings there are strict rules. If you live down below, you can’t use the main gate or the elevators.
Nobody wants us here anymore because we can’t afford to pay higher rent. My friend Thandeka Sisusa and her daughter were evicted in January from her room in the basement at Bordeaux. She tried to ask for more time in court but the judge told her she must leave and ordered her to pay costs. I helped her carry her fridge, her bed and all her things onto a bakkie. She’s trying to save enough money to buy a Wendy house so she can live in a backyard in Langa. Everybody knows if you leave, you don’t come back. I too am fighting against my own eviction.

Premier: these are the things we are concerned about. When you say that you are suspicious of our agenda it hurts. You do not see how deeply we are affected by the housing crisis in this city. That the government could allow Tafelberg, Helen Bowden Nurses Home and the Woodstock Hospital site to remain empty for all these years, battered by the elements, and home to only the birds, shows little regard for us.

We want to be able to live in Sea Point. We don’t want to be evicted. We want to pay a fair rent for a decent home. That is it.

When you suggest that Reclaim the City is anti-Semitic, then it seems that you do not know the amount of support we have received from the Jewish community in Sea Point and elsewhere, for the Tafelberg campaign. You do not know the people that make up Reclaim the City. You seem to be trying to sow division between us.

We would hoped that our campaign and our attempts to appeal to your duty and conscience would have been sufficient to convince you. But, you have not heard us - instead you have made a false accusation against us. We are left with little choice but to fight in the courts, to secure the only right and just outcome for the Tafelberg property.

This open letter was written with help from Reclaim the City supporter Hopolang Selebalo.

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Published originally on GroundUp .

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Guilty by Association

I was watching eNCA's Checkpoint last night. A program on Coligny.

A couple of things struck me and made me realize that it is late in the day for this country. It is a quarter to midnight, and time is running out...

An elderly black gentleman was interviewed. He has a couple of cattle, it was said he was a farmer. I am not sure if he has his own farm or just let his cattle graze wherever he sees a piece of grass.

Anyway, what he said is worrying. He said the white people of Coligny were attacked, NOT because they are guilty of something themselves. They were attacked “because they are guilty by association."

He was referring to the two white men who are accused of killing a 16-year-old boy, although the two white men said that he jumped off a moving bakkie. Therefore, in his mind, he apparently believes and is convinced that you can attack all people in the town, just because of the perceived crimes of two white men, although they certainly have the right to be presumed innocent until proven guilty.

He did not say if the Indian townspeople, and Bangladeshi and other foreign nationals whose property have also been destroyed are also guilty by association.

The local farmer who employed the two white men has to be guarded by SAPS now, around the clock.
The elderly black gentleman said that as soon as the SAPS leave, the farmer will be attacked, and said the old black gentleman; the farmer's land “must be given for us to farm.”

Now here something is clear to me. Some party is planting ideas in those African people's heads. I only have two suspect parties in this regard, and one is Julius Malema and his red berets. We know the EFF is active in Coligny, and we are aware Malema has said on numerous occasions that land should be invaded. In fact, he has court cases running against him in that regard.

The local Zancster party has run the municipality into the ground and was facing service delivery protests, and so it would be very convenient for them to deflect attention away from themselves and start blaming whites.

Then I want to know if one farm is occupied, where it all will end. Certainly, it will spread like wildfire.

Who will be in charge on these farms? Will it be a free for all? Will it be collective farms? Will these farms be divided into a little block for everyone, like communal land in tribal areas?

Will it be like a situation straight out of the book Animal Farm by George Orwell, where the “oppressor” has been removed, and now the “oppressed “are all equal?

However, where a few leaders will step forward on the farm and say: Comrades, we are all equal, but we need leaders, so some of us will just be a little bit more equal than you.

We need to wake up fast, and realize that all of us have to do whatever we can to remove the klepto/ fascist Zupta cabal, as soon as possible- that cabal is poisoning and infecting the body politic, the collective national discourse.

We need to get the looters out so that more money can become available so that we can get more people like that elderly black gentleman settled legally on his own piece of land.

Do whatever you can. Join civil society groups like Save SA, OUTA, Afriforum, Helen Suzman Foundation. Try to become active citizens in your communities, join groups, and become politically active.

As I said: It is a quarter to twelve...

 Opinion by Daniel Sutherland and published on South Africa Today

South Africa's water sector: a case study in state capture

Children pump water at communal tap in Durban, South Africa. The country is facing a mounting water infrastructure challenge.
REUTERS/Rogan Ward

A lot of what is being presented as radical economic transformation initiatives in South Africa is simply state capture by a corrupt elite. The water sector provides a lens through which this issue can be viewed in a very practical way. The consequences will be dire if the situation is not addressed.

The minister of water affairs and sanitation Nomvula Mokonyane, stands at the centre of the unfolding tragedy. Billions of rands are at stake in a story that threatens the lives and livelihoods of all water users.

So, are the controversial activities of some political leaders ensuring that water comes out of the taps in rural villages? Have their decisions contributed to the security of the water supplies that are needed to keep industries working and the economy of the country growing? Is the country making the right investments in its water future? Is there value for money? Is the right infrastructure being built, in the right place, and is it built properly?

At the most basic level, the number of people whose taps no longer provide a reliable water supply grew by almost 2 million between 2011 to 2015. This is a problem particularly in rural areas but it is spreading to urban areas as well. In Mangaung, one of South Africa’s eight metropoles, 70% of people questioned, reported water cuts that lasted more than two days in 2015. In most cases, it has been shown that the problem is bad management not a shortage of water.

At the other end of the scale, the picture is no better. Expansion of the biggest and most important water supply scheme in the country, the Vaal River System, is more than five years late.

Destructive political intervention

The effective functioning of the Vaal system underpins a large part of the country’s economy and around 35% of the population. Its failure would have disastrous consequences for lives and livelihoods and every year’s delay costs at least R500 million.

The main reason for the latest delay is that Mokonyane has spent two years changing the rules and governance of the project. Her stated reasons for doing this include that the changes were part of government’s economic transformation agenda to ensure that a broader array of companies could compete for contracts.

To push through this position, she fired Dr Zodwa Dlamini, South Africa’s chief delegate in charge of a daily project oversight in Lesotho. She replaced Dlamini with a lawyer with no engineering or water knowledge.

Then she cancelled a tender that had already been closed after reportedly meeting with officials of the company that was excluded because it did not have the required expertise.

More scandals

In between the township tap and the big dams of Lesotho, there are many more sad stories. Newspaper reports tell of huge contracts given to political friends – R4 billion in Limpopo Province alone. There are many question marks over their performance and Limpopo remains one of the worst performing provinces with 60% of its households suffering long interruptions in supply in 2015.

In October Mokonyane’s department took out full page advertisements boasting that the Auditor General had given them a “clean audit”. But then in November the Auditor General highlighted the department as one of the worst offenders for billions of rands of irregular expenditure.

Mokonyane then claimed that the irregularities were due to drought despite the fact that they occurred after three years of normal to above average rainfall in the province concerned.

Meanwhile, officials in the national government and water professionals have been horrified to learn that, in the Free State, the minister and mayor of Mangaung are pushing ahead with proposals to build a R2 billion pipeline to bring more water to the city from the Gariep Dam on the Orange River. Technical studies –- carried out by the Mokonyane’s department – show that this is three times more expensive than other alternatives that could meet the city’s needs for the next 20 years. If this project goes ahead, it will reduce funds for water provision in the province by more than a R1 billion.

Radical transformation

Mokonyane has justified her actions on the grounds that she is promoting radical economic transformation. But what does that mean and is it true?

In 2015 the handover report of the first National Planning Commission said that radical change was necessary to end poverty and inequality and ensure a prosperous South Africa.

The commission spoke of the need to move away from narrow black economic empowerment benefiting only a few people to more broad-based approaches. The shift emphasised supporting people engaged in productive activities rather than just middlemen. It pointed out that new economic tools would be needed to achieve this. Conventional economic policies would need to be interrogated and support, such as long-term low-income loans, would need to be provided.

It is important to consider decisions that are being taken today and ask whether they are moving the country in this direction.

My contention is that, based on what’s happening in the water sector, they are not. When companies without capabilities are appointed to do jobs, they have two choices. They can appoint others to do the work for them, the traditional middleman approach. Or they will try to do the job themselves, resulting in delays and cost overruns.

Take a large project like the Polihali Dam and tunnels for Lesotho Highlands Phase 2. This is no small job.

The Polihali dam will be 169 metres high, almost as tall as one of Johannesburg’s tallest buildings, the Ponte City. The tunnel, big enough to drive a double decker bus down, will be over 30 kms long. So choosing inexperienced contractors could result in disastrous delays and cost overruns.

If decisions taken in the name of radical transformation put the water supplies to major centres at risk of interruption, economic activity will stagnate or move elsewhere. With it will go the jobs and opportunities to engage more people in the economy. Already, many South African corporations are worrying about the water security of their operations in places like Gauteng.

Playing into the pockets of the elite

When money is wasted there will simply be less available to provide services to those who do not yet have them. This will in turn reduce demand for the basic goods and services in house building and construction that should be part of any radical economic transformation.

Mokonyane faces mounting criticism for her handling of water matters. Her department has reportedly been the subject of investigations by the public protector and the police’s Special Investigating Unit. In response she has appointed her own task team led by a lawyer to investigate. Whether its work will be independent is highly questionable.

The view through the lens of water is thus clear. The shenanigans in the water sector have little to do with radical economic transformation. They are more about the ongoing enrichment of a new elite.

Mike Muller, Visiting Adjunct Professor, University of the Witwatersrand

This article was originally published on The Conversation.