[OPINION] Connect the dots from the past to deal with the rot at Eskom
As the country hurtled towards Stage 4 load shedding this week, President Ramaphosa declared himself ‘angry and shocked’. Pravin Gordhan, Minister of Public Enterprises said in Parliament yesterday that Medupi and Kusile, the two power stations built to stave off a full-blown electricity crisis, were ‘badly designed’. Gordhan told MPs that, “We will have an independent audit done on what it is exactly that's going on (sic), so we put Eskom back on track and give South Africans - sooner rather than later - the assurance that we have an entity that is able to give us the energy security that we require.”
Sooner rather than later.
Our country is awash with audits, reviews and commissions of inquiry. Conspiracy theories about sabotage within Eskom have also done the rounds in the last few days. It’s easy to give credence to these, but the reality is probably worse than the conspiracy - Eskom is R440 billion in debt (thanks Brian Molefe, Lynne Brown, Jacob Zuma, Matshela Koko, the Guptas and an array of corrupt actors) and its infrastructure is crumbling. In December last year a forensic probe was instituted to examine the work of certain contractors working on Medupi and Kusile as Gordhan deemed some of the work ‘sub-standard’. Costs for both power stations had doubled, leading Gordhan to ask why this was the case.
Last week President Ramaphosa spoke of dividing Eskom, like the whole of Gaul, into 3 parts: generation, distribution and transmission. Immediately the unions objected – “privatisation by another name”, they cried.
What is abundantly clear is that these challenges and crises have no easy, overnight solutions. Working through the full effects of state capture will take time and, on Ramaphosa’s part, a spine of steel to deal with them urgently and decisively.
It is easy to be ahistorical about Eskom and also about Medupi and Kusile but it helps, as always, to connect the historical dots.
As far back as 1998 there were reports that our power supply was fragile. Yet, in 2002, then Minister of Minerals and Energy Phumzile Mlambo-Ngcuka said there was no looming power crisis.
And then came 2008 and the new era of rolling blackouts.
Since then the problem has been managed or “spun” in such a way as to avoid general panic. We are probably now at a point of panic.
The building of Medupi and Kusile power stations has been mired in controversy from the start, from labour issues to questions about patronage politics. After all, the ANC’s investment arm, Chancellor House, owned a stake in Hitachi, which supplied the boilers for the Medupi and Kusile power stations.
We know that Chancellor House benefited, through its stake in Hitachi Africa, from the contracts to supply boilers to the Medupi and Kusile power stations. Although Barbara Hogan, then Minister of Public Enterprises, called for a quick exit in a speech to the National Assembly as far back as 2010, there was never any real unanimity within the party on how to deal with the thorny issue of Chancellor House.
Many outside of the governing party have long argued that the ANC, as the governing party, should not be allowed to tender for state contracts even if, as it argues, it is at arm's length via Chancellor House. That seems to be a very thin veil to pierce and the conflicts of interest, as well as the unhealthy blurring of party and state, were surely obvious and to be avoided?
In 2012, speaking at an Idasa debate in Cape Town, then ANC secretary general Gwede Mantashe said that Chancellor House was 'everywhere and anywhere' and that there was nothing 'illegal' in it tendering for state contracts. Mantashe seemed then to diminish concerns regarding conflicts of interest or the perception thereof.
Frankly, there can be no level playing field if Chancellor House was submitting tenders given that the judge and jury are in reality the same people. At that same debate, the UDM's Bantu Holomisa, long a champion of transparency, called Chancellor House an 'unethical' arrangement and said further that, "You cannot use a state resource as a cash cow and milk it every day".
It was strident stuff that Mantashe batted away with bluster. His words then were, "Chancellor House is an example of a transparent source of funding". He further defended the existence of Chancellor House by saying it was created to close the gap created when donor funding - which had supported the ANC during the struggle - retreated after democracy had been obtained. "That we should not take initiative is saying we should starve ourselves to death and collapse."
Speaking at another forum in Cape Town in 2014, then ANC treasurer general Zweli Mkhize argued that Chancellor House should not hold direct government contracts and should avoid all conflicts of interest in future. While Chancellor House had by then divested its stake in Hitachi Power Africa, which held a R38.5 billion contract with state-owned enterprise Eskom, the investment company still held stakes in several companies that have government contracts or operate in government-regulated industries such as mining.
Chancellor House was in the spotlight again in 2015 because of an investigation by the US Securities and Exchange Commission (SEC) after it claimed Hitachi had breached the US Foreign Corrupt Practices Act. Hitachi then agreed to pay $19 million to settle the SEC charges that it violated US anti-bribery law through allegedly improper payments tied to the supply of boilers to Medupi and Kusile. Hitachi agreed to the settlement without admitting or denying the SEC's allegations - which claimed Hitachi had violated the Foreign Corrupt Practices Act by inaccurately recording improper payments made to Chancellor House. The SEC also alleged that in 2008, Hitachi paid an additional $1 million in 'success fees' to Chancellor House, which was improperly booked as consulting fees.
Hitachi settled the matter and there was therefore no admission of guilt. The $19 million settlement, however, raised more questions than answers regarding alleged payments made to the ANC as a result of the deal. Why would Hitachi pay a settlement figure? What was that in lieu of? The ANC did not comment on the issue at the time and Eskom said it was unaware of the SEC and Hitachi settlement. In 2017 the ANC devised a plan to liquidate Chancellor House of all its assets in an effort to stay financially afloat.
So many of our current woes are mired in levels of corruption related to the funding of the ANC as a political party. It has been a toxic mix and one that is now costing the country dearly and threatens to seriously undermine our economic well-being.
It is so that to understand the present, we need to connect the dots to the past and then only will we be able to deal with the rot.
Judith February is based at the Institute for Security Studies and is also a Visiting Fellow at the Wits School of Governance. She is the author of 'Turning and turning: exploring the complexities of South Africa’s democracy'. Follow her on Twitter: @judith_february