NEWS

State Capture Probe: 'Damage Caused By Corruption Is Profound'

The much-anticipated probe takes place against the backdrop of former public protector Thuli Madonsela’s 'State of Capture' report.

17/10/2017 08:46 SAST | Updated 17/10/2017 17:04 SAST
Siphiwe Sibeko / Reuters
Steam rises at sunrise from the Lethabo power station near Sasolburg, a coal-fired power station owned by state power utility Eskom.

Corruption and maladministration at state-owned companies, particularly Eskom, are having a profound impact on the South African economy, crimping its growth, retarding investment and pushing up prices.

This was the main message to emerge on day one of an investigation into state capture at Eskom, Transnet and Denel, which got underway at Parliament on Tuesday.

The investigation is being conducted by the public enterprises portfolio committee, chaired by ANC MP Zukiswa Rantho.

"The damage... is profound. We have to understand that when we undermine our core institutions, and our core state-owned enterprises, then we are undermining our ability as a developmental state," University of Cape Town professor Anton Eberhard told MPs.

Such undermining affected the investor climate, growth prospects, employments and poverty alleviation.

Earlier, in a presentation to the committee, Eberhard pulled no punches when he suggested "rent-seeking and corruption" at Eskom were partly responsible for the massive increase in electricity tariffs over the past decade.

"Burgeoning costs, arguably driven by rent-seeking and corruption, have resulted in electricity tariffs increasing by more than 400 percent [over this period]. The effects of this on the South African economy and prospects for economic development and transformation are huge, and reinforce the urgent need for governance and structural reforms at the utility," he said.

Eberhard also warned of a "narrow and corrupt elite", and said it was important the committee's investigation exposed the way the Eskom board had been "subsumed" by them.

The portfolio committee's terms of reference include coal contracts entered into by the state-owned company; the pension pay-out made to its former CEO Brian Molefe; the remuneration and appointment of Eskom board members and executive management, as well as other maladministration, governance and procurement issues.

The much-anticipated probe takes place against the backdrop of former Public Protector Thuli Madonsela's "State of Capture" report, made public in November last year. The report analysed alleged systemic corruption being perpetrated through state-owned companies, and -- fuelled by further allegations over the past 11 months -- sparked a national outcry from opposition political parties, civil society, business leaders, the public, and from within the ranks of the governing party itself.

Eskom is by far South Africa's largest state-owned company, with annual revenues three times that of Transnet, and six times that of SAA. The utility provides more than 90 percent of the country's electricity, has assets valued at R710-billion, and a capital spending programme of about R350-billion over the next five years.

Among those who may testify before the committee are President Jacob Zuma's son Duduzane Zuma, as well as the Gupta brothers Ajay and Atul, although the identity of those called as witnesses is reportedly being kept under wraps over security concerns. The inquiry has the power to subpoena witnesses.

The alleged "capture" of Eskom and other state-owned company business by the Guptas has incensed many South Africans.

Rantho said the inquiry would extend to the leaked Gupta emails, which allegedly implicate a number of state officials, including Eskom executives.

Among the MPs who are members of the investigating committee is former finance minister Pravin Gordhan.

Rantho said the inquiry into state capture was open-ended, and could carry on for several months.