Zuma hijacked Eskom and Transnet, says Hogan

In the fourth article that outlines the evidence presented to the commission of inquiry into state capture, this week we look at the alleged interference of former president Jacob Zuma in the executive decisions taken in the former public enterprise minister’s running of Transnet and Eskom. Zuma allegedly started meddling in the affairs of the state-owned entities after he became president in 2009 particularly with key appointments

WHEN former minister of public enterprises Barbara Hogan testified before the commission of inquiry into state capture in November, she alleged a pattern of interference in the running of state-owned entities, by former president Jacob Zuma that undermined her own role.

Hogan was in office from May 2009 to October 2010, when Zuma reshuffled his cabinet, replacing her with Malusi Gigaba. During her testimony, she highlighted the importance of the president to allow his appointed ministers to do their work and that good governance was upheld at all times.

Transnet

According to Hogan, it was Siyabonga Gama or nobody for Zuma, when Transnet looked for a new group chief executive after Maria Ramos’ departure in 2009.

Hogan’s tenure started in May, just after the recruitment process started and a month into office when she was called to a meeting with Zuma to discuss Transnet. She presented the board’s preferred candidate, Sipho Maseko – who was group chief executive of BP Southern Africa at the time – but Zuma rejected the recommendation on the spot.

The rejection frustrated the board as they had intended to look internally, said Hogan, but not one Transnet candidate satisfied their criteria. Gama was one of these. At the time, he was chief executive of Transnet Freight Rail – a Transnet subsidiary – and had been the subject of an internal investigation into allegations of misconduct. He had also lost out because he did not have the required capabilities, according to the board.

The board’s initial process, before settling on Maseko, had produced then-sars commissioner Pravin Gordhan. That process was abandoned when Gordhan withdrew his candidacy on the news that he would be appointed finance minister. He was installed in the cabinet at the same time as Hogan.

The months that followed Hogan and Zuma’s meeting would be characterised by what she described as undue

pressure from the former president to appoint Gama. Despite the board having followed all the necessary processes to attain a suitable candidate, Zuma was interested only in discussing Gama. He was not interested in Maseko or his qualifications.

Only at a meeting about a month later, in July, was Hogan able to go through Maseko’s credentials with Zuma. She also got the opportunity to outline the allegations against Gama. This time Zuma responded that he would think about it and get back to her. The appointment process for group chief executive was left hanging, along with the appointment of a new board as the existing one’s term was coming to an end. Zuma’s position at the time, according to Hogan, was that a new board would not be appointed until the Gama investigation was concluded.

Hogan told the inquiry that Zuma’s conduct was unconstitutional, as it was the minister who had to play a role in the appointment process, after recommendations were put forward by a sitting board. The minister had the right to appoint directors at the entity’s annual general meeting, and remove them.

The directors had a fiduciary responsibility to the company, but not necessarily to the minister. Hogan added that chief executive appointments depended on the founding legislation of a particular SOE. A minister could make the appointment, but had to allow the board to headhunt, within parameters.

Gama was eventually found not guilty, and returned to his original post. He would later be promoted to group chief executive of Transnet when Brian Molefe – who had been appointed to the position – moved to Eskom in early 2015.

Eskom

About the same time that Transnet was struggling to appoint a permanent group chief executive, Eskom was dealing with a rogue Jacob Maroga, who Hogan said was operating with the understanding that he had the solid backing of the president. Maroga’s departure from the power utility in late 2009, she said, was preceded by months of tension and irregular power play on his part. He had been chief executive since 2007.

Again Hogan spoke of Zuma’s interference. The former president had encouraged Maroga, she said, to the extent that he informed Hogan by letter in November 2009, in the midst of high tensions with the board, that he remained chief executive of the power utility, even against the board’s wishes, and would account to the president and the president only. The board had expressed to Hogan that there were major differences between its and Maroga’s strategic outlook for Eskom and that was not good for the growth of the utility.

Prior to the letter, the relationship between Maroga and the board had deteriorated to the point that at a meeting in late October, he is alleged to have angrily told directors that it would be better for him to resign, before storming out. The board promptly agreed unanimously that it viewed this act as an official offer to resign and proceeded to accept it.

Because her relationship with Maroga had also suffered under the pressure, Hogan asked her deputy, Enoch Godongwana, to meet Maroga to discuss a way forward. The chief executive refused, saying he would speak only to Hogan. When she did meet him, Hogan offered alternative processes, including mediation and even arbitration, which Maroga declined, impressing upon her that she was supposed to exercise her authority in the matter and rule. Even after he insisted on her discharging her executive powers, Hogan said she told Maroga that she could only go as far as she had and did not wish to interfere.

Zuma was out of the country at this time, so Hogan took the matter up with then-deputy president Kgalema Motlanthe, who responded that she must do what she had to do. Despite the board having already publicly announced Maroga’s removal, Hogan was forced – on Zuma’s instruction – to retract any communication stating that Maroga was no longer chief executive.

On his return to the country, Zuma said both Maroga and the board would have to produce reports stating their version of events, over which Hogan would then preside and then decide the way forward. The board agreed to the proposal, on condition that Maroga take special leave to execute this task – Maroga refused. Bobby Godsell, upon receiving the news, resigned as board chairman.

The next instruction Hogan received from Zuma was to let the board know that he had given Maroga permission to proceed as chief executive. The latter returned to his office on November 9 and later that day penned a seemingly gloating letter to Hogan, stating that he had an instruction from, and was accountable to “the shareholder at the highest level”, which Hogan understood to mean Zuma. This action, however, was what ultimately sank Maroga.

By this point, Godongwana engaged senior officials at Luthuli House to discuss the matter. When he confronted Zuma about the contents of the letter and the inference that Maroga enjoyed the president’s protection, Zuma instructed Maroga to step down, and only return to his post on Hogan’s instruction.

Maroga sued Eskom in 2010, demanding that he either be reinstated, or paid R86 million in compensation for his removal. He lost the battle and was ordered to pay costs, with the South Gauteng High Court ruling that his version of events at the board meeting in which he was alleged to have resigned, was questionable.