Testimony: Zuma’s bogus inquiry pushed Gupta-resistant executives out of Eskom

Evidence of how Regiments Capital, which amaBhungane describes as the Gupta family’s secret pipeline to state-owned companies, tried to muscle in on Eskom has been provided to the Zondo Commission on State Capture by an executives ousted in a bogus inquiry set up by former president Jacob Zuma.

Eskom returned as the focus of the inquiry this week, with consultant Nick Linnell testifying on Monday after being named in evidence presented by former Eskom board chairperson Zola Tsotsi.

Linnell was grilled on his relationship with Dudu Myeni and his role in co-ordinating an inquiry into maladministration at Eskom in 2015, following a meeting with former president Jacob Zuma at his Durban residence on 8 March that year.

Linnell’s time on the stand was cut short by a severe Joburg thunderstorm on Monday and continued before Deputy Chief Justice Raymond Zondo on Tuesday morning, picking up on the Eskom inquiry set in motion at Zuma’s behest.

It was an inquiry that would see four top senior executives suspended a mere three days after Linnell’s meeting with Zuma, paving the way for the Gupta buyout of Optimum Coal by Gupta-owned Tegeta Exploration and Resources and the resultant flow of hundreds of millions of rands  from Eskom to Tegeta. It also resulted in the appointment of Gupta lackey Anoj Singh as Eskom CFO and Brian Molefe as CEO.

In Tuesday’s session, Linnell, positioning himself as an objective consultant operating within legal constraints, told how he left the Zuma meeting with a mandate to prepare a memorandum for the Eskom board, chaired at the time by Zola Tsotsi, “proposing an inquiry into affairs at Eskom”.

To ensure the inquiry was able to do its work speedily and without obstruction, certain senior executives would need to be suspended and Linnell drafted suspension letters to be served by the board.

“I would prepare a draft aide-mémoire to support the board in conducting pre-suspension hearings with the individuals concerned,” said Linnell, who defended himself as Zondo questioned why he should have been hired when Eskom had internal legal and human resources capacity to do the job itself.

He was also forced to defend the need for the suspensions, saying subordinates with information needed to feel free to approach the inquiry and not be intimidated by their seniors.

He insisted the suspensions were temporary, for a maximum of three months, and the executives were to be assured there was no wrongdoing on their part. The executives were also to be in communication with the board and brought in to assist the inquiry. 

However, matters did not transpire as Linnell allegedly believed they would.

Documents were speedily emailed to Tsotsi that same day, to be presented to the board on Monday 9 March. The board was initially resistant to the need for the inquiry, but this had turned around by Wednesday 11 March, which proved to be a fateful day for the power utility.

Linnell said there were “three or four meetings on that day”. First was the board meeting, then a board meeting with then Public Enterprises Minister Lynne Brown, then a third meeting during which he met the board, and a governance committee meeting thereafter.

One of the executives suspended that day, finance director Tsholofelo Molefe – not associated with Brian Molefe – provided insight into what happened when she testified on Tuesday afternoon. 

As a director, Molefe attended Eskom board meetings, and at the first meeting of 9 March 2015, when the inquiry as requested by Zuma was proposed, she said there was no support for it and Tsotsi, as chair, did not raise the issue of suspensions.

The board meeting two days later, on 11 March, lasted about 45 minutes before minister Lynne Brown arrived. Molefe said the inquiry was not discussed prior to Brown entering the room.

Brown complained to the board about reports being leaked to the media, before asking her and Eskom chief executive Tshediso Matona to recuse themselves.

Zondo noted that this may have had to do with the impending suspensions but evidence at this point indicated Molefe’s name was not on the list of three executives to be suspended to make way for the inquiry.

According to Tsotsi, said Zondo, “someone on the board said the minister said your name should be added to the list of executives (to be suspended)”.

When Molefe was called back after 5pm and told she was to be suspended, she said “if that’s what the board wants, I can’t stand in the way. I signed the letter and left”.

She then tried to communicate with the board about things being stated in the media, but received no response.

She later communicated other concerns and asked for the inquiry terms of reference, only to get a letter from Eskom’s law firm, Bowmans, dismissing her requests.

She then wrote to new interim board chair Ben Ngubane about her concerns and a meeting was arranged for 4 May, where she was asked if she would be open to “parting ways”, despite not having sought to leave the company.

Realising the board wanted her to leave, she negotiated an exit package equivalent to about 18 months’ salary.

But prior to providing her detailed account of what transpired on 11 March 2015, Molefe told how, when she was newly appointed as CFO in 2014, the previous board was seized with an investigation into a contract with Gupta newspaper The New Age, which needed to be reported as an irregularity in the financial audit.

There was “pressure from outside” to smooth this over, said Molefe.

Additionally, two months into her post she was introduced to Gupta henchman Salim Essa by Nhlanhla Msomi, who was chief of staff for former Minister of Public Enterprises Malusi Gigaba. Essa, who she agreed to meet while in a hurry on the way to the airport, said he worked with various companies and wanted to do business with Eskom. She referred him to the relevant processes in Eskom and cut the meeting short, but Essa, through Msomi, kept pushing for another meeting.

“I refused to engage further,” said Molefe.

However, she ran into Essa again following a strategy session with the Eskom board in April 2014, at which she presented turnaround strategies. Board chair Tsotsi said he wasn’t happy with the presentation and the interim chief executive at the time, Collin Matjila, called a meeting at Times Square in Montecasino to deliberate on the next steps to formulate a financial plan. It was at this meeting that Essa was called over.

“Matjila said this is someone who can help us. They have helped Transnet, SAA and City power.”

Essa suggested Eskom work with Regiments Capital and a meeting was set up with Regiments CEO Eric Wood. With Matjila in attendance, Wood pitched the credentials of Regiments, which had worked with McKinsey on large mandates.

Molefe said she insisted proper procurement processes needed to be followed, but Matjila insisted this was an emergency as a turnaround strategy needed to be given to the Public Enterprises Minister within three months.

“We quarreled,” said Molefe, adding she argued that there were procurement procedures for emergency situations. She refused to sign the Regiments agreement and took the matter to the board.

The upshot was Regiments was hired for a “high-level desktop exercise”, for which the company was paid about R1-million because “the board wanted comfort” that nothing was missed or not covered in the plan presented to new Public Enterprises Minister Lynne Brown, who was appointed in May 2014.

Former Eskom group capital executive Daniel Marokane, another of the executives suspended, also testified on Tuesday. 

Marokane was on leave, having seen the first Medupi power station unit come online a few days earlier, when he got a call at 9pm on 11 March to say the board, which had been meeting all day, wanted to see him.

He went in to work at 8am the next day and was called in and told about the inquiry and that it had to happen “in a space free from influence”.

“They made it clear the investigation would take no longer than three months and no allegations were tabled against me.”

He said the investigation was billed as a fact-finding exercise and the board told him he had made representations in respect of his suspension and these had been considered.

No such representation had been made. “I could immediately see it was procedurally getting quite messed up.”

There were also inaccuracies on his letter of suspension, including the date. He said he crossed out the inaccuracies and signed.

As had happened with Molefe, Marokane’s attempts to communicate with the board received no response; he never received the terms of reference for the inquiry and was not called in to assist as promised.

Trust with the board broke down and a settlement agreement was reached at the end of May that year, with Marokane paid the equivalent of six months’ salary and some of bonuses due.

Linnell, although instrumental in setting up the inquiry, was frozen out a week after the executives were suspended, receiving a last communication from the Eskom board on 17 March, he said.

The other two suspended executives were CEO Tshediso Matona and technology and commercial executive Matshela Koko.

The Zondo commission continues to hear Eskom-related evidence on Wednesday from former Eskom financial director Nonkululeko Dlamini, as well as from former board members Norman Baloyi and Venete Klein. DM