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Chairmen of Transnet, Eskom and Denel to go

CIPS 9 June 2011
Chairmen of Transnet, Eskom and Denel to go
Minister persuades Cabinet in bid to gain greater oversight

THE chairmen of three of SA’s most powerful state-owned companies — Transnet, Eskom and Denel — are to be removed soon in a dramatic show of force by Public Enterprises Minister Malusi Gigaba , as the government tries to tighten its grip on the "commanding heights" of the economy.

The changes were discussed and approved at a Cabinet meeting in Cape Town yesterday.

Business Day reliably understands that Transnet chairman Mafika Mkwanazi — who was appointed only late last year and who also briefly acted as the company’s CE — will be invited to move to the board of Eskom as an ordinary member.

Eskom chairman Mpho Makwana, it is understood, will not be offered another position.

He has served on the Eskom board since 2002 and became chairman last year after a row in which both then-chairman Bobby Godsell and CEO Jacob Maroga left the company.

It is further understood that Mr Gigaba intends to replace virtually the entire Eskom board, with the exception of Dr Bernie Fanaroff and one other member.

The proposed new Eskom chairman is little known in SA. He is Zola Tsotsi, chairman of the Lesotho Electricity Authority.

At Denel, Mr Gigaba intends to install Zoli Kunene as chairman, replacing Sibusiso Sibisi, who is also president of the Council for Scientific and Industrial Research. In all, about nine of the 14 Denel directors are expected to be replaced.

Neither Mr Gigaba, nor his spokesman, Makhosini Nkosi, were commenting on the changes yesterday.

While Mr Gigaba, still relatively new in his position, is not seeking actively to control the state- owned enterprises , he wants much tighter shareholder oversight as the government tries to develop an economic model that fulfils its political promises to create millions of new jobs.

The boardroom changes follow hard on the heels of an effort by Mr Gigaba to put meat on the bones of a new approach to the way in which the state-owned enterprises in his charge behave.

He wants to use them to build long-range partnerships with private capital in the construction of new ports, roads, rail and other infrastructure.

But, in a speech at Wits University this week, he also spelled out how he, as the shareholder, was uncomfortable keeping his distance from them.

Outlining his approach to getting state-owned enterprises and their customers closer, to the point where customers would be able to co-finance infrastructure projects, he also said that "the point I wish to emphasise is that this process will require joint projects between the shareholder (the government) and the SOEs (state- owned enterprises) as the SOE’s instinct is to fall back on to its balance sheet".

Denel’s struggle for profitability is well known, but there has clearly also been growing unease in the Department of Public Enterprises with what it perceives as the independence of the Eskom management and board.

Tension recently came to a head following an order for six new steam generators for the Koeberg nuclear power plant, a deal worth about R3bn.

Public enterprises feels it was brought up to speed on the Koeberg contracts only as they were about to be announced. Normally, state-owned enterprises are required to consult ministers for any order worth more than R300m.

It is understood, nevertheless, that Mr Gigaba did not have it all his own way at the Cabinet meeting yesterday. His proposal to replace Mr Mkwanazi at Transnet with Iqbal "Rafiq" Sharma was shot down and a new candidate will have to be found. Mr Sharma, a former senior official in the Department of Trade and Industry, was appointed to the Transnet board last December, shortly after Mr Gigaba took up his new job.

But Cabinet colleagues are thought to have been uncomfortable with appointing someone relatively inexperienced and unknown in the capital markets.

There were also fears that he might be too closely identified with the wealthy Gupta family, friends of President Jacob Zuma.

Senior African National Congress leaders have become sensitive to hostility inside the party towards the Guptas. That is mainly born out of jealousy over the family’s apparently easy access to the president, but it has become a problem for party managers.

The problem at Transnet has been predictable — Mr Mkwanazi is a former CEO there and there will have been clashes of will between him and Brian Molefe, who became the CEO earlier this year.

Briefing journalists soon after his appointment last year, he already had detailed ideas about operations and projects. The new CEO, meanwhile, would have developed his own.

It is also understood that there will be one other departure from the Transnet board — that of Mr Don Mkhwanazi.

The head of the Friends of Jacob Zuma Trust, Mr Mkhwanazi was also brought on to the board late last year but is thought to have been unable to bring sufficient expertise to its deliberations.

Mr Gigaba said in his speech at Wits University this week that while state- owned enterprises had the potential to lead SA’s development, their balance sheets were too weak to make a difference. He proposed building long- term "developmental partnerships" between these entities and their private-sector customers.

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