Koko ‘threat’ to SA economy

ESKOM INTERIM CEO HIGHLIGHTS DANGERS Power utility forced to choose between saving executive or its future viability.

Eskom interim CEO Phakamani Hadebe tells Labour Court why he has to get rid of suspended head of generation.

Eskom interim CEO Phakamani Hadebe says in an affidavit before the Labour Court that he has to get rid of suspended head of generation Matshela Koko in the interests of the economy.

The affidavit forms part of Eskom’s filings in the Labour Court in opposition to Eskom’s suspended head of generation Matshela Koko’s application for a final interdict preventing Eskom from unlawfully firing him.

Koko obtained an interim order on January 25, which prevented Hadebe from executing the ultimatum he put to Koko the day before, to resign or be fired.

Eskom has, nevertheless, since served Koko with another notice of suspension on fresh charges. His disciplinary hearing on these charges will start on February 16.

Hadebe says Eskom got a qualified audit last year for the period while Koko was interim CEO and describes the consequences thereof. It led to a default on a loan with the Development Bank of Southern Africa (DBSA) and the bank threatened to call up a R15 billion loan to Eskom.

This could have triggered cross-defaults and could have accelerated payment of all Eskom’s debt, which stood at R361 billion at that stage, Hadebe says.

As a result, National Treasury asked Eskom to terminate the service of implicated senior executives, including Koko and former CFO Anoj Singh. Singh has since resigned, but Koko refuses to go and went to court instead.

Hadebe describes how Eskom was downgraded by credit agencies and development finance institutions, including the World Bank and the European Investment Bank.

He wrote to Public Enterprises Minister Lynne Brown and Finance Minister Malusi Gigaba to raise concerns with governance and compliance at Eskom.

This came after a similar letter to Eskom, dated June last year, had little effect. The institutions demanded a new Eskom board and the filling of executive posts.

Governance failures and leadership issues were also raised by Moody’s when it further downgraded Eskom last month.

Hadebe said he met Eskom’s funders on January 22, the day after his appointment, and realised the money taps would not open unless Eskom dealt with senior executives, including Singh and Koko.

“The continued employment of these senior executives at Eskom was a real and imminent threat to the viability of Eskom and in turn the South African economy,” Hadebe states.

“If Eskom was to default on its debt, which risk we sought to avoid, it would trigger the R350 billion in guarantees provided by the government to the power utility,” he says.

Hadebe says he put the ultimatum to Koko on January 24. “The reality of the situation was that Eskom was being forced to choose between saving Mr Koko and its future viability and, in turn, that of the South African economy.”

Koko’s arguments were simply that Eskom had to comply with its contract of employment with him. Firing him without following the disciplinary procedure as set out in the document would infringe Koko’s rights in terms of his employment contract, the Labout Relations Act and the constitution, Frans Barrie SC, for Koko, argued.