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Gordhan Questions 'Reckless' Decisions Made By Politicians And SOEs

The former finance minister grilled a former Eskom CEO at state capture inquiry in Parliament.

07/11/2017 15:52 SAST | Updated 07/11/2017 15:52 SAST
MUJAHID SAFODIEN / AFP / Getty Images
Former finance minister Pravin Gordhan (L) and former president Kgalema Mothlante (R) attend the opening night of the documentary film Promises and Lies screening at the Constitutional Hill on May 4, 2017 in Johannesburg.

Former finance minister Pravin Gordhan has questioned the "recklessness" of decisions taken by politicians and state-owned company board members.

"What lessons are we learning about the recklessness of some of the decisions made both by politicians and by boards, and the kind of financial impact it has on big entities like Eskom, and perhaps in today's context the country itself?" he asked former Eskom CEO Tshediso Matona, who appeared on Tuesday before Parliament's public enterprises portfolio committee.

The committee is conducting a months-long inquiry into corruption and maladministration at state-owned companies.

Matona was Eskom CEO for only five months -- from October 2014 to March 2015 -- before he was suspended by the utility's board after a meeting that included Public Enterprises Minister Lynne Brown.

Gordhan, who serves as an ordinary ANC MP on the committee, cited an affidavit tabled by Matona ahead of his appearance.

"In your affidavit... you say your suspension could lead to a downgrade, and that in fact Standard & Poor did downgrade Eskom to junk status on March 19, 2015. You also express the view that at the time, S&P did say that this downgrade to junk status was linked to your suspension."

Matona said he did not know of any other incident before this where what he termed a "misgovernance event" had triggered a downgrade in the manner it happened at Eskom.

READ: Former Eskom CEO Tells State Capture Inquiry: 'It's Too Late'

"This was a time when we were also talking to investors. We wanted to give them assurance that we've got a handle on the company... It was natural then that when a dramatic event of that nature happens that investors would take fright... that's why they did the downgrade," he said.

At the time, the Eskom board also asked three other senior Eskom executives to step aside.

Asked why the board had suspended him, Matona said he had a sense that the meeting to discuss his suspension was being handled in a manner that would create a defence for the board, allowing me to make representations.

"I chose to walk away, and leave that sorry and sordid episode behind me."

"But it was a farce, in my view. I could see at the time that the outcome was predetermined... In the final analysis, I concluded that the board did not see me fitting into whatever its plans are."

He declined to speculate further.

On his suspension, he said there was no basis whatsoever for this, and it had come as a complete shock.

"Particularly suspension by a board that had just taken office... When the pretext of an investigation of the state of the affairs of the company was given, I could not buy that. Because I believe that the problems of the company had been well established at the time. So we knew where the problems were operationally and financially.

He had challenged his suspension through the Labour Court, which had found it to be unfair, and then the CCMA.

He had finally been "made an offer" to leave Eskom, which he had accepted.

"I chose to walk away, and leave that sorry and sordid episode behind me."

Earlier, Matona revealed that there had been "serious in-fighting" among members of the previous board, which had been in place when he took office in October 2014.

"There was significant tension, you could call it turmoil, there was serious in-fighting between the board [members] on a range of issues, but largely to do with procurement."

This had almost rendered the board dysfunctional.

He also described an electricity supplier that was facing dire problems when he stepped in as CEO, after previously serving as public enterprises director general.

Eskom at the time was battling to balance its books and its revenues were under pressure, mainly the result of rising levels of municipal debt. However, the "burning platform" he found himself on was the utility's operational problems.

Matona said he was told that in 2010, at the time of the Soccer World Cup, a decision had been taken to defer power station maintenance. This had happened again at the next elections.

"There was significant tension, you could call it turmoil, there was serious in-fighting..."

"A culture had set in of deferring maintenance... By the time I got there, the units were packing up one after another."

On the diesel that Eskom had been forced to buy to power its peak supply generators at the time of the load shedding that followed, he suggested that the procedures invoked to cope with the emergency had allowed the utility "to deviate from what normal procurement would be".

This had created a "major risk" to who was awarded a diesel supply contract, and the price charged for the fuel.

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