In the interest of the SA economy, Koko must go – Eskom CEO

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 interest of the South African economy.

The affidavit forms part of Eskom’s filings in the Labour Court in opposition to 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 served Koko with another notice of suspension on fresh charges. His disciplinary hearing on these charges will start on Friday, February 16.

Hadebe describes in the court papers the events that led to his ultimatum to Koko.

He says Eskom underwent a qualified audit last year for the period that 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), who 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 former CFO Anoj Singh and Koko. Singh has since resigned, but Koko refuses to go and went to court instead.

Hadebe describes how Eskom was downgraded by credit agencies. Development Finance Institutions including the World Bank and the European Investment Bank on November 29 last year wrote to public enterprise minister Lynne Brown and finance minister Malusi Gigaba to raise their concern 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 with Eskom’s funders on January 22, the day after his appointment and realised the money taps wouldn’t 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. In the event of Eskom defaulting on its debt, the full amount would be recalled due to cross-default clauses,” 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.”

Hadebe says Koko would have received notice as stipulated in his employment contract or be paid for the notice period to depart immediately. Therefore, he argues, the dismissal would not have been unlawful and Koko’s court application was premature.

In court Eskom argued that Koko’s service would have been terminated on the basis of operational requirements, as it had to be done to unlock funding, and therefore it would not have been unlawful.

Eskom further argued that the only legal requirement for the termination of Koko’s services was that he had to get an opportunity to state his case and that the reason for his termination was fair.

Koko’s conversation with Hadebe and an earlier one with former board chairman Zethemba Khosa and newly-appointed board member Prof Malegapuru Makgoba about his proposed departure from Eskom gave him two opportunities for dialogue and reflection and therefore comply with the requirements for a hearing, Eskom argued.

Eskom also argued the case was moot, since Koko has been charged and suspended and will be subjected to a disciplinary process.

Koko’s arguments in court were simply that Eskom had to comply with its contract of employment with Koko, which incorporates Eskom’s disciplinary procedure. 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 Labour Relations Act and the Constitution, Advocate Frans Barrie SC for Koko argued.

Koko has a right to answer to the allegations and mere suspicion or allegations by funders of government are not enough grounds for summary dismissal, he told the court.

He said despite Eskom following the procedure subsequent to the interim order being given, Hadebe still persists with his argument that firing Koko on January 25 would have been lawful.

Therefore the case is not moot and the court should issue a declaratory order stating it would be unlawful.

He said it was unlawful for government or funders to interfere with Koko’s rights in terms of his employment contract and Koko, Eskom, government and the funders are all on the same footing before the Labour Court.

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