Eskom Seems Compromised in Nuclear Deal

This piece originally appeared in the Business Day on 1 November, 2016.

An overwhelming amount of recent research demonstrates that SA’s state-owned entities (SOEs) such as Eskom, fall far short of their constitutional obligations in terms of oversight.

For example, in 2011, a joint report by PwC, the Institute of Directors in Southern Africa and the Development Bank of Southern Africa noted the lack of effective oversight of SOEs; in 2012, a report from the Centre for Corporate Governance in Africa at Stellenbosch University called on SOEs to improve their disclosure of information to enable effective oversight; while in 2013, the government’s own review of SOEs called for an “urgent review of oversight practices” that it found to
be “inadequate”.

It is within this context that there are two particularly worrying features of Energy Minister Tina Joemat-Pettersson’s recommendation that Eskom, and not the Department of Energy, should manage the procurement of any new nuclear power stations.

The decision vests a great deal of power and responsibility in the Eskom board, and it brings the procurement directly within the purview of President Jacob Zuma.

Enabling legislation grants the Eskom board an enormous amount of power, not least of which is its responsibility to manage procurement “fairly, equitably, transparently, competitively and cost-effectively”.

As the majority shareholder in Eskom, the government has unlimited power to appoint board members, making it vulnerable to political interference and even “capture”.

To what extent the current board is acting in the best interests of all South Africans is unclear, but there are obvious causes for serious concern.

An overwhelming amount of recent research demonstrates that SA’s state-owned entities (SOEs) such as Eskom, fall far short of their constitutional obligations in terms of oversight.

For example, in 2011, a joint report by PwC, the Institute of Directors in Southern Africa and the Development Bank of Southern Africa noted the lack of effective oversight of SOEs; in 2012, a report from the Centre for Corporate Governance in Africa at Stellenbosch University called on SOEs to improve their disclosure of information to enable effective oversight; while in 2013, the government’s own review of SOEs called for an “urgent review of oversight practices” that it found to
be “inadequate”.

It is within this context that there are two particularly worrying features of Energy Minister Tina Joemat-Pettersson’s recommendation that Eskom, and not the Department of Energy, should manage the procurement of any new nuclear power stations.

The decision vests a great deal of power and responsibility in the Eskom board, and it brings the procurement directly within the purview of President Jacob Zuma.

Enabling legislation grants the Eskom board an enormous amount of power, not least of which is its responsibility to manage procurement “fairly, equitably, transparently, competitively and cost-effectively”.

As the majority shareholder in Eskom, the government has unlimited power to appoint board members, making it vulnerable to political interference and even “capture”.

To what extent the current board is acting in the best interests of all South Africans is unclear, but there are obvious causes for serious concern.

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