Bobby Godsell on Eskom's useless board
Former minister Barbara Hogan blames the ‘completely dysfunctional relationship’ between the Eskom board and its CEO at a critical period of the project for what has turned into South Africa’s power station disaster
FORMER minister of public enterprises Barbara Hogan says a fundamental breakdown in corporate governance played a major role in the Medupi fiasco.
Hogan was the political head of Eskom five years ago when a lot of the contracting for the mega power station was taking place. “There was a fundamental breakdown in the corporate governance relationship as all of these processes were unfolding,” she said in an interview last week.
She was referring to what she says was a “completely dysfunctional relationship” between the Eskom board, chaired by Bobby Godsell in 2008 and 2009, and CEO Jacob Maroga, which led to the departure of both men at a critical phase of the Medupi project.
“When you have a complete breakdown between the board and CEO, as is what happened, at a time when you are contracting for major, major contracts … I think this played a big role in the Eskom disaster.”
Her comments come at a time when the country is trying to find answers for the missed deadlines and massive cost overruns that have bedevilled the Medupi project. These will have damaging economic consequences, not least for taxpayers, who will have to fork out about R100-billion more than originally budgeted for.
CEO Brian Dames has taken a hammering, and quite rightly so, according to experts.
But they agree that the role of the Eskom board, especially since Medupi was put on the table, needs to be more vigorously interrogated.
It was the responsibility of the Eskom board to ensure that the CEO and executive team “managed the process meticulously”, says Willem Louw, former managing director of Sasol Technology and currently director of the Centre for Business Management of Projects at the University of Stellenbosch Business School.
None of the Eskom boards since the Medupi project started can be absolved of blame for not doing their job properly, he says.
Godsell agrees, up to a point. “The board is where the buck stops for all the big issues, but it cannot do the management’s job,” he says.
No, indeed, agrees Louw. But the board’s own job is to interrogate the executive team closely and frequently, “to ask the right questions at the right time”.
Godsell says his board’s interrogation of Eskom’s executive team was what brought things to a head with Maroga. “There was a general concern that management had not been sufficiently responsive to board concerns about a range of issues, including capital expenditure projects.”
Godsell, 60, was one of Anglo American boss Harry Oppenheimer’s blue-eyed boys and the company’s chief negotiator in tense stand-offs with Cyril Ramaphosa’s mineworkers’ union in the late 1980s.
He was CEO of Anglogold-Ashanti for 12 years and was appointed to Trevor Manuel’s National Planning Commission by President Jacob Zuma.
He did not rise to those dizzy heights without learning to tread very carefully around certain issues. So it comes as no surprise that he takes a sympathetic line on Eskom.
“For major capital projects to be late and over budget is not entirely unusual,” he says. “In fact, it is more the rule than the exception.”
To the extent of Medupi? “Well, look at the soccer stadiums that by and large came in 100% over budget.”
After some prodding, he concedes that “for a project of Medupi’s strategic importance to come in significantly late and significantly over budget is not a good outcome”.
He agrees that it is “entirely fair for the taxpayers of South Africa to ask of the board what went wrong”.
As chairman of the board during what Hogan believes was a critical period in the life of the project, can he tell us?
He does not mention the “completely dysfunctional corporate governance” that was top of Hogan’s list. He was chairman for only 15 months, he reminds me. “And Medupi was well under way by then.”
He makes the point that he was called in when the lights went out as a result of a shortage of coal, “which clearly was a failure of the board and management at that time”.
The chairman of the board responsible for that disaster was ANC stalwart Valli Moosa (2005-08). His claim to fame is that while also a member of the ANC’s national executive committee and finance committee, he unblushingly awarded one of the two main contracts for Medupi to Hitachi Power Africa, in which his party, through its front company Chancellor House, had a 25% stake.
This clearly did not offend his concept of corporate governance, and it took the public protector, Lawrence Mushwana, to point out that his behaviour was “improper” and constituted a “conflict of interest”.
Earlier this year, he became chairman of Anglo Platinum, which raises questions about the questionable grasp that Anglo American’s platinum arm seems to have on corporate governance.
Unlike Godsell, Moosa was not available to reflect on the role of boards in disasters such as Medupi. Perhaps because he is dealing with another big disaster right now.
Godsell says in his 15 months as chairman his board met eight times. “And I can’t think of a single board meeting where we did not get a report on Medupi.”
What on earth were they doing with them, one wonders.
“We sought to understand the reason for delays which were apparent at that time, and also cost overruns.”
They also asked for an analytical breakdown and “did the best we could”.
He concedes that “whatever we did, it wasn’t good enough because the project came in late and over budget”.
Various experts, observers and commentators believe that Eskom directors do not have the capacity to ask the right questions of the executive because they are political appointments.
One senior economist says the current board is “not fit to run a fish-and-chips shop, never mind oversee a capex project of this order of magnitude”.
“They’re political appointments. They have no corporate experience, no capex experience,” he says.
Current chairman Zola Tsotsi did not respond to requests for an interview.
Godsell says he can speak only for his board, which was “well qualified and highly energetic and sought to exercise its oversight duties as effectively as any board I have served on in the private sector”.
The real problem for him, apart from the fact that his CEO locked himself in his office for days on end and would not speak to him or his board, was that as chairman he reported to three different ministers of public enterprises and had to deal with several different ministries as well.
This created “complications” and made it difficult to get “a clear message from the shareholder” (that is, the government) on critical issues such as Medupi going off the rails.
With more government infrastructure projects in the pipeline, do not be surprised if there are more derailings, suggests Hogan. “The problem with state-owned enterprises is when a political party and the president decide it is their prerogative to appoint CEOs. You can get this disjuncture in corporate governance which is very, very damaging for what happens thereafter.”
Have we not learnt anything from Medupi? She hopes so, but does not sound confident. Parastatals are “beset with these kinds of problems”, she says.
“And at times when you’re doing major procurement and embarking on major construction projects, this can come home to bite.”