Molefe’s removal could be a step in the right direction, say analysts

With Brian Molefe under the dark cloud of state capture, his dismissal as Eskom CEO could be a step in the right direction towards raising investor confidence in discredited state-owned enterprises (SOEs).

According to analysts, this case of “blatant state capture” has been addressed by the ruling ANC through Public Enterprises Minister Lynne Brown’s order yesterday that Molefe’s return to Eskom be rescinded.

“The financial markets could see this in two ways. One way could be that Eskom is a total mess – but that’s been known for some time,” said economist Azar Jammine.

“But from a different perspective, markets can take courage that this is one case of blatant state capture that has been addressed by the ruling party. So there is a neutral position.”

The Eskom board reappointed Molefe earlier this month due to an apparent “mix-up” over whether he had resigned after being fingered in former public protector Thuli Madonsela’s State of Capture report, had gone on early retirement or was on unpaid leave.

Moreover, during Molefe’s time away from Eskom, he was made an ANC member of parliament.

Government’s interministerial committee met to discuss the issue and considered Molefe’s reappointment to be controversial, leading Brown to meet the board and ordering them to rescind it. Jammine said more attention would now be paid to the competence of the board.

From a credit rating point of view, he said, the ratings agencies would be watching the SOEs, especially the power utility, as it is the largest.

This would show whether there was an increased or decreased risk of the government granting Eskom the bailout it has requested. A bailout would, in turn, increase public debt.

“So, you have got negative inferences to draw from this; also positives,” he said.

Political economy analyst Zamikhaya Maseti said Eskom already had a problem with state capture and Molefe had not passed the morality test in this regard.

Therefore, when it comes to governance problems, the board must resolve them.

“The board doesn’t uphold governance practices and principles.”

Maseti said, globally, South Africa was seen as a country that did not know how to manage and deploy SOE resources in terms of the National Development Plan.

“But the minister’s order will restore confidence, and markets have a responsibility to support this positive move,” he said.

“They should respond positively; it should raise investor confidence and bring dignity around our SOEs, because [the] reputation[of our] SOEs is terrible.”

He added that state capture confirmed “one thing and one thing alone”: that the country is highly contested by the political and economic elite.

“So you will find this alliance abusing the state for their own interests. The Guptas managed to win this competition to control the state,” Maseti said.

“This is apparent through the Guptas not being a recognisable political force, but being able to influence President Jacob Zuma, and his family and friends.”

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