South Africa: How Jacob Zuma helped destroy Eskom

By Romain Chanson
Posted on Monday, 9 May 2022 11:02

Electric pylons owned by Eskom in Soweto, South Africa, in March 2021. © Siphiwe Sibeko/Reuters.

The Zondo commission’s fourth report accuses South Africa’s former president Jacob Zuma of having helped the Gupta brothers take control of Eskom, Africa's largest electricity producer, and weakening a company that is now heavily in debt.

Corruption sometimes manifests itself as a light going out. In 2021, electricity was cut off for 1,136 hours (47 days) in South Africa.

That year, compared to 2020, load shedding was up 37%, a figure that has been steadily increasing since 2018. The fault lies with Eskom, the state-owned electricity company. After years of embezzlement and mismanagement, the company is now forced to operate regular load shedding due to breakdowns and maintenance operations. These blackouts weaken the economy and enrage South Africans, whose security (electric fences, cameras, alarms, etc.) also depends on power.

Eskom, in fact, is at the heart of the Zondo anti-corruption commission’s fourth report. Launched in 2018 and chaired by Justice Raymond Zondo, it is investigating “state capture”, the infiltration and misappropriation of government departments and public enterprises by a group of individuals during the presidency of Jacob Zuma (2009-2018).

The former head of state is described as “central” to the Gupta brothers’ plan to take over Eskom. The three brothers are suspected of being the main architects of the state capture. Two of them, Rajesh and Atul, are the subject of an Interpol Red Notice for fraud and money laundering charges. They are reportedly on the run in Dubai, UAE.

“The Guptas must have identified President Zuma early on as someone whose character would allow him to be used against South Africans, his own country and his own government, in order to advance their business interests,” says the Zondo report.

The Guptas whispered in the president’s ear the names of people who should be placed at the head of public enterprises to ensure their control. This was the case for Transnet, the state-owned infrastructure giant, South African Airways, the national airline, the tax authority and Eskom.

President’s interference

In March 2015, four of the company’s executives, including its CEO, were fired without warning. The Guptas wanted to ensure that the leaders would remain compliant. President Zuma had prepared the ground a few days earlier by directly interfering in the management’s affairs.

“President Zuma’s interference […] marks the launch of the Guptas’ plan to take over Eskom, and the president played a central role in this plan,” said the commission.

After placing people close to them at the head of Eskom, the Guptas now have full control over the coal sector. More than 80% of South Africa’s electricity is produced from coal. The siblings own mines through their company Tegeta, in which Duduzane, one of Zuma’s sons, has a stake. Infiltrating Eskom has allowed the Guptas to sell their coal in very large quantities. They also got Eskom to lower its quality standards.

The government went so far as to help the Guptas acquire mines, by pressuring the Swiss group Glencore to sell one of its concessions to the Guptas. The siblings did not have the required funds to purchase the mine, so Eskom gave them an advance of about R2bn (about $126m), which was presented as a pre-payment to secure the coal distribution. This means that public funds were diverted to finance private investment.

Overcharging

As in previous reports, the Zondo commission denounces the abuse of consultancy firms. McKinsey is widely cited as having collaborated with Regiments Capital, a firm linked to the Guptas, to obtain contracts from Eskom that were deemed unnecessary and overpriced. In a statement, the company said it had recovered R1.1bn from McKinsey. A team has been set up to study the Zondo report, figure out what actions need to be taken, and recover the R3.8bn in damages suffered by the state capture.

Years of looting have weakened this state-owned company, which is now R392bn ($24bn) in debt. This is “unsustainable”, according to the IMF.

In a report published in February, the institution warned of the “considerable adverse consequences” of worsening Eskom’s operational weaknesses and debt.

In the meantime, the taxpayers absorbed the shock. Bills were going up, while the power grid was becoming less reliable. “South Africans thought the ANC [African National Congress] government controlled Eskom, but it did not,” Zondo says in his report.

“The government had ceded control to the Guptas and their appointees. The ANC and its government should be ashamed that this happened under their watch,” said the judge.

Load shedding at least until August

Zuma is not the only factor to blame for Eskom’s deteriorating situation. The infrastructure is ageing and several coal-fired power stations should be closed. However, state capture has compounded these structural weaknesses.

“Eskom used to be a pretty healthy company,” says Mark Swilling, an energy expert and professor at Stellenbosch University in Cape Town. “But when you combine rampant debt and the loss of skills due to the departure of honest people who can’t stand corruption, you create a cataclysm and the system collapses.”

2022 has already seen its fair share of load shedding and it is expected to overshadow the daily lives of South Africans until at least August, Eskom has already said. The southern winter will be tough. As Daily Maverick journalist Ed Stoddard describes it, the state-owned company is now as fragile as a “candle in the wind”.

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