This article first appeared in Moneyweb.
Civil society group Corruption Watch wants five former Eskom board members declared delinquent directors.
It has applied to the Pretoria High Court to prevent the five former directors from ever holding a directorship in a private company again, and for seven years in a state-owned company. The case is unusual in that it relies on little-used sections of the law to hold directors accountable, and if successful will rattle the rafters of boardrooms around the country. Also unusual is that civil society is bringing the case instead of government, which is supposed to act in the interests of the public, but has shown itself gun-shy when acting against directors of state-owned companies.
The five former Eskom directors are Mark Pamensky, Anoj Singh, Brian Molefe, Venete Klein and Zethembe Khoza, all of whom have been accused of involvement in corrupt activities at the utility. Eskom and the minister of public enterprises are also cited as respondents to assist the court in coming to a decision.
Singh was chief financial officer until early 2018, serving alongside former chief executive Molefe. Klein was appointed to the board in 2014 and resigned in 2017. Khoza served as chairman as well as head of the Board Tender Committee.
Pamensky, a close associate of the Guptas and former director of Gupta-owned Oakbay Resources, joined the board in 2014 and resigned in 2016 when leaked emails highlighted his role in sharing sensitive Eskom information to assist the Guptas in acquiring Optimum Coal, which supplied coal to the power utility.
The Guptas acquired Optimum using Eskom guarantees and prepayments. Pamensky is accused of acting against Eskom’s best interests in violation of his duties as a board member. Last year the Organisation Undoing Tax Abuse (Outa) laid criminal charges against Pamensky for corruption, and for violating his obligations in terms of both the Companies Act and the Public Finance Management Act (PFMA).
Khoza, Singh and Molefe are accused of contracting with Gupta-owned Tegeta for the supply of coal on terms that were uncommercial and caused harm to Eskom. They also failed to respond to Treasury and other arms of government in their effort to exercise oversight at the utility.
The Companies Act requires the courts to declare delinquent any director who abuses the position, takes personal advantage of information or opportunities, or causes harm through gross negligence while serving in that position.Read: Court rules against Brian Molefe
Sending a message vital
David Lewis, executive director of Corruption Watch, says it is vital to send a message to those in high office that there are consequences to abusing their positions: “This case is about sending a message that a directorship in a state-owned company means more than looking for personal commercial opportunities while occupying a board position.”
Lewis says the five former directors have given notice of their intention to defend the court action, though have yet to file their replying affidavits.
In his affidavit before the court, Lewis says Corruption Watch is bringing the action in the public interest, particularly in light of the numerous credit downgrades Eskom has suffered in the last 24 months. The dire state of Eskom’s financial position and lack of adequate governance were cited by rating agencies S&P Global and Moody’s as a key reason for downgrading SA’s credit rating in 2017.
“These downgrades have had a detrimental effect on the growth of our economy and have increased the cost of living, which directly and adversely affects all South Africans and more dramatically, the most vulnerable and poorest of South Africans,” says Corruption Watch’s affidavit.
“The directors abused their positions in order to benefit other entities and individuals rather than the interests of Eskom and, by necessary extension, the people of South Africa.”
Determined state-capture strategy
Eskom was central to the state capture project now being aired before the Zondo Commission of Inquiry. This appears to be part of a determined strategy by the former directors “to commit fraud, corruption, racketeering and engage in other financial misconduct.”
The named directors should not be allowed to escape personal liability and accountability for their role in bringing Eskom to its knees in furtherance of the state capture project. The enrichment of the Gupta family and others to the detriment of Eskom and the SA public cannot be allowed to pass without consequences. Lynne Brown, the former minister of public enterprises, failed to act in the public interest and hold the directors responsible, so it has been up to civil society to do government’s job for it.
Virtually all of the supporting evidence behind Corruption Watch’s case is in the public domain. One of these is a report by PwC showing how the Eskom board delegated power to line managers and allowed individual employees to enter binding contracts on behalf of Eskom for large amounts of money. The directors must therefore be held accountable for the significant failures in the procurement of coal.