/ 6 November 2009

Eskom upheaval: The case against Maroga

The Eskom board’s loss of confidence in the ability of chief executive Jacob Maroga to lead the parastatal, coupled with an irretrievable breakdown in the relationship between it and Maroga, led to Maroga’s resignation.

Board chairperson Bobby Godsell announced the resignation to Eskom staff on Thursday afternoon.

But there were indications on Thursday of an 11th-hour attempt to possibly reinstate him.

Maroga’s resignation follows a week of uncertainty over the leadership of one of South Africa’s most important parastatals.

The Mail & Guardian has copies of board documents issued at a meeting held last week, where the board’s relationship with Maroga finally came to a head.

  • Maroga’s rejected Chief Executive strategy document. (8.35MB)
  • Godsell’s ”breakaway” note to the board. (2.96MB)
  • ‘I am very concerned at the capacity of management to respond both effectively and quickly to the very many major challenges now facing Eskom,” reads a note from Godsell to the board.

    The note includes 41 concerns regarding issues identified for action on the part of Eskom management that were left incomplete or late in their execution.

    Godsell expresses concern at the stress and responsibility placed on Maroga and his executive team and even suggests that Maroga be given the support of a chief operating officer.

    A senior alliance source briefed on developments told the M&G that Maroga had first offered to resign a week ago, after the board heard both Maroga and Godsell on their visions for Eskom’s future. When the board made it clear it preferred Godsell’s approach, Maroga offered to quit as shortly afterwards did Godsell. Both men were asked to leave the meeting and the board elected to accept Maroga’s offer and to keep Godsell said the source.

    A total media blackout from Eskom has left the public with no official response on Maroga’s actual status within the company. A press conference scheduled for Thursday at 1pm, after the staff announcement on Maroga’s resignation, was cancelled at the last minute.

    Maroga is believed to have tendered his resignation to the board, but Godsell was called away to a meeting with Hogan before the scheduled press conference.

    The M&G understands that a number of influential political figures did not want to see Maroga go, but that Hogan had told Luthuli House that she supported the board’s decision.

    In a statement to the media on Thursday Hogan confirmed that the relationship between the board and Maroga had broken down. ‘As shareholder, government has indicated to all relevant parties that this matter should be resolved expeditiously, with due regard to every single person’s dignity and rights,” she said.

    ‘We are confident that all parties do have the best interests of the country at heart and that they will resolve this matter with the urgency that it deserves.”

    Sources who declined to be named told the M&G that there has been a great deal of unhappiness at senior management level regarding Maroga’s leadership.

    In September senior Eskom staff wrote a letter to Hogan complaining about Maroga’s leadership. At the time it was reported by the Citizen that staff accused Maroga of allegedly refusing to allow senior management personnel an opportunity to tackle pressing issues with the company’s executive committee. They also alleged that Maroga refused to implement a cost-cutting measure proposal tabled by the senior staff.

    During this period internal documents were simultaneously leaked through the Democratic Alliance. They include a damming report by consultant Susan Olsen given to Maroga six months before the January 2008 load-shedding, pointing to massive problems in the company’s coal procurement unit.

    Eskom’s coal mismanagement was one of the chief reasons the country was plunged into darkness last year.

    A source told the M&G that there was insufficient trust between Maroga and his exco staff and that he was inclined to listen to consultants rather than listen to his internal team members.

    It was also felt that there was no action being taken to address the dire state the organisation found itself in.

    The relationship between the board and Maroga has been deteriorating for some time, sources allege. ‘Between himself and the board, there was a feeling that [Maroga] believed he was in charge,” said one.

    Godsell, Eskom and the public enterprises department were unavailable for comment.

  • Additional reporting by Matuma Letsoalo

    Explosive report predicted meltdown
    At the heart of Eskom chief executive Jacob Maroga’s demise is an explosive report on coal procurement written by American energy consultant Susan Olsen, reports Lloyd Gedye.

    In the report, which the M&G has in its possession, Olsen warned Maroga six months before the electricity crisis of January 2008 that Eskom’s coal division would ‘collapse under its own weight” unless serious steps were taken.

    It has been reported that the main reason for the board’s dissatisfaction with Maroga is his handling of Olsen’s report, with claims that he did little to act on it. This failure is alleged to have resulted in the electricity crisis, which cost the country about
    R2-billion a day.

    Olsen stated that Eskom’s coal procurement problems could be fixed in less than 18 months. ‘I believe the choice is clear and the reasons for it are compelling,” she wrote. Maroga fired her from her consultancy position at Eskom after she produced the report.

    In Maroga’s chief executive strategy document, dated October 22 2009, which the M&G has seen, Maroga commented on the Olsen report, saying there was a culture of ‘white supervision” at Eskom: ‘White supervision is a phenomenon that derives from our past of racial segregation and racial hierarchy. This phenomenon is based on the view that, without white supervision, blacks by themselves are not able to lead and achieve anything of significance.”

    Maroga blamed the culture of ‘white supervision” for the leaking of sensitive Eskom documents to the media. One of these leaked documents was the Olsen report.

    ‘The manner in which the Olsen report was given status and attention is one example of white supervision mentality,” said Maroga. ‘The Olsen report was written by a white person and leaked by a white person to a political party and the media. It did not matter that this report was in response to already identified weaknesses that were already being addressed.”

    The concerns listed in the Olsen report pointed to a company unit deeply in trouble. Olsen raised three key queries. First, why did two of Eskom’s coal-fired stations not have long-term supply contracts and why had this status quo been allowed to continue for several years? Second, Olsen asked Maroga why the existing contracts for the other eight coal-fired stations had not been negotiated to meet burn requirements. Third, she queried how Eskom had failed to foresee and solve the coal supply crisis.

    Olsen also pointed out that Eskom was ‘unequipped for the challenges” of the international coal market to secure coal and cope with domestic industrial demand. Her report expressed concern about the ability of staff at Eskom’s generation primary energy (GPE) unit, citing their ‘lack of experience in and failure to grasp the basics of commercial negotiations”.

    Olsen said Eskom’s long-term contracts were designed in a way that suited mining houses by failing to build in performance requirement regarding coal quality. Eskom had failed to enforce the few performance requirements that were included in these contracts: ‘GPE’s failure to demand at least minimum performance … has resulted in mining houses supplying at best on the margin, at worst in breach, in either case, with [seeming] impunity.”

     

    M&G Slow