Several energy companies are recruiting former Eskom executives allegedly to gain an unfair competitive edge, benefit from insider trading, and position themselves for billions of tenders at the power utility.
According to insiders and industry sources, the growing trend raises questions about an alleged revolving door phenomenon involving former Eskom bosses, the power utility’s failure to enforce the government’s restraint of trade policy, and threatens the credibility of the state-owned company’s procurement processes.
Former Eskom Group CEO Brian Dames, former Group Executive for Generation Phillip Dukashe, former Group Executive for Transmission Mervyn Naidoo, and the power utility’s former head of transmission and generation Thava Govender are among the executives who traded their positions for senior roles in the private sector over the past decade.
Dames joined Patrice Motsepe’s private energy firm, African Rainbow Energy & Power (AREP), in 2014, two years after leaving Eskom. AREP was later awarded R800 million worth of IPP tenders. Govender is now the CEO of Babcock Nthuthuko, a subsidiary of Babcock International. Former Eskom chairperson and acting CEO, Jabu Mabuza, was a shareholder of Babcock International at the time of his death in June 2021. Babcock is one of Eskom’s major maintenance contractors.
In his supplementary affidavit deposed to the Zondo Commission of Inquiry in May 2021, former Eskom acting CEO Matshela Koko touched on the same issue, saying Mabuza was conflicted after he took over as Eskom board chairperson in 2018.
“Mr. Mabuza was not free of conflict of interest, and I can not rule out that he was one of the three board members who were not vetted. He was an executive chairman of a company that owned a company that had a contract to maintain a third of Eskom boilers. He also had interests in Eskom coal business through his son,” said Koko’s affidavit.
Naidoo and Dukashe joined Actom as CEO and Group Operations Executive, respectively. According to the company’s website, ACTOM is the “largest manufacturer, solution provider, repairer and distributor of electro-mechanical equipment in Africa”. The Africa division of Babcock International prides itself on being a “leading supplier of engineering support services to the energy, process, mining, and construction industries and the exclusive regional distributor for many leading international brands”.
Dukashe quit Eskom in May 2022 after 13 months at the helm of the power utility’s generation division, saying he wanted to achieve a better balance between health, family, and work. He later joined ACTOM.
Naidoo took over as Actom CEO in March 2017. The company maintains Eskom’s boilers.
“When these directors resign from Eskom, most of them go to the companies that are bidding for tenders at Eskom so that they can have an advantage over their competitors. Phillip Dukashe is not the first one. There are others who used to work at Eskom who joined companies like Actom, Babcock and others. People like Thava Govender, Mervyn Naidoo etc. When they arrive there, it becomes easy for them to get these projects because one, they have [the] capacity and the new executives know everybody in the system,” said the source.
“If Phillip Dukashe was the project manager and later became head of generation, he knows everybody who has anything to do with generation, their flaws, and employment records. It becomes easy for him if he comes back and says, ‘Man, please help me with a contract’. What it means is that they have left Eskom formally, but their influence remains. It gives these multinational companies a competitive advantage.”
Another source said the revolving door and insider information phenomena dated back 90 years when Eskom was established because it had been a monopoly for decades. However, it has become rife in recent years.
“Jabu Mabuza was the CEO, chairperson, and supplier of Eskom. And the MD of that company [Babcock] is a former transmission executive at Eskom, Thava Govender. He was head of generation for seven years, and was moved to transmission after he faced some challenges. It [Babcock] was partly owned by Jabu Mabuza. He was a 30 percent shareholder there during his tenure at Eskom. Remember, he was the one who said he didn’t want anybody with a conflict of interest at Eskom,” said the industry source.
“Actom is doing boiler maintenance at Eskom. Mervyn’s position at Actom is similar to Thava’s at Bancok. They are all doing maintenance.”
Adile Nchabeleng, an independent energy expert, said former Eskom executives joining energy companies that do business with the power utility is a “huge conflict” of interest. In most cases, he said, the companies would later be awarded lucrative tenders by Eskom.
“It’s huge, all of them. When Brian Dames left, he immediately went to the private sector and joined ARM, Patrice Motsepe’s company. Soon, before we know it, Patrice Motsepe is sitting with major IPPs. How coincidental is it that Brian Dames leaves and becomes the CEO of African Rainbow Energy, renewable energy, and suddenly Eskom awards most of the IPPs to Patrice Motsepe’s company, which is led by Brian Dames. Even in the last 27 IPPs that we were contesting in court, Brian Dames was still awarded,” Nchabeleng said.
He said the trend was part of a revolving door syndrome, common in the US.
“They go into government, set up deals, set up legislation, and they go out into the private sector and scoop up those opportunities. South Africa is unique in the sense that we have got the PFMA (Public Finance Management Act), which must exclude them according to law. But somehow, these guys scale over it. They ride over the whole shadow, and nobody ever picks it up,” Nchabeleng added.
“They have insider information; they know what is upcoming, and when they go, they go already with preferential insider information to literally line themselves up as front guys.”
Nchabeleng said that under the PFMA, companies employing Dames, Dukashe, Govender, and Naidoo should be barred from doing business with Eskom for up to five years. However, the system turns a blind eye to pro-renewable energy firms.
“PFMA actually excludes them for five years from participating in a competitive industry, coming directly out of a state-owned entity. Even if you have a relative, they need to know upfront if the relative is bidding within Eskom. So, it excludes these guys. I don’t know how they get around it, but remember they get given special priority when they jump ship to these companies that are pro-renewable,” he added.
According to the Department of Public Enterprises’ (DPE) reply to a parliamentary question from EFF MP Marshall Dlamini, AREP is an equity shareholder of several energy companies awarded billions worth of the Renewable IPP Procurement Programme (REIPPPP) by Eskom between 2011 and 2016. Motsepe’s AREP has a 30 percent stake in Ngodwana Energy Project, a 11.3 percent stake in Kangnas, and a similar stake in Perdekraal East.
Moreover, it has a 15 percent stake each in six other companies, including De Wildt, Bokamoso, Zeerust, Greefspan PV Power Plant No 2 Solar Park, Droogfontein 2 Solar and Waterloo Solar Park. AREP owns the stakes through a special-purpose vehicle called Business Venture Investments No. 1984.
The department said it was advised by a legal panel of five transaction advisors during the design, preparation and evaluation phases for procuring all four IPPs programme bid windows. The law firms are Bowman Gilfillan, Edward Nathan Sullivan, Ledwaba Mazwai (including Mkhabela Huntley Adeke Attorneys), Webber Wentzel and Linklaters.
Eskom reportedly admitted in February 2021 that it had awarded Actom, which later employed Dukashe as an executive, two tenders worth more than R300 million in a manner that disregarded standard procurement procedures. According to a May 27, 2021, article on Moneyweb, Eskom’s lawyers admitted that three contracts for supplying electrical transformers were awarded to Actom, even though it was more expensive on two of the bids.
The report further stated that Eskom’s lawyers, Cheadle Thompson & Haysom, in a letter to Instrument Transformer Technologies (ITT) dated 10 February 2021, explained that the record of the tender compiled by Eskom’s procurement team made the most elementary of ‘errors’ in that the prices recorded for ITT included VAT, but excluded them for Actom. That was a R341 million (exclusive of VAT) error favouring Actom on two contracts. It was enough to swing the contracts from the cheapest to the more expensive bidder.
Dukashe did not respond to questions sent via WhatsApp or subsequent phone calls or voice messages left on his phone.
Eskom declined to comment regarding the allegations surrounding its former executives being recruited by private companies to take advantage of their insider knowledge of the power utility’s procurement systems. Despite an extended deadline, Eskom’s spokesperson Daphne Mokwena and her media desk team did not respond to any attempts to contact them, including emails, phone calls, and text messages.
Efforts to gather comments from the accused companies and the former Eskom executives yielded no results. Babcock and Actom failed to respond following media inquiries sent to them via email. When asked about the Dames issue and the IPPs, Lisa Nery, spokesperson for AREP, chose not to provide any comments.
Instead, she referred African Times to a media statement released by AREP five years ago in response to the allegations. In it, Nery confirmed AREP’s involvement in BEE deals connected to the government’s IPP contracts but refuted “the allegations and suspicions of improper plans and strategies which implicate AREP and relate to Eskom and the alleged roles by the Minister of Energy, Mr. Jeff Radebe and President Cyril Ramaphosa who are both his brothers-in-law”.
“After evaluating and pursuing various renewable energy projects, AREP and its partner Jinko Solar submitted an offer in April 2016, to SunEdison, an American company, to acquire the 6 solar photovoltaic projects which SunEdison was awarded by the Department of Energy in April /June 2015. AREP was not successful as SunEdison decided to sell to Old Mutual. Old Mutual thereafter invited BEE bidders to acquire 30 – 35% of the equity in each of the 6 SunEdison solar photovoltaic projects, which Old Mutual had acquired. In October 2017, AREP was informed by Old Mutual that it was one of three BEE partners who were selected to each purchase 15% equity in the SunEdison solar photovoltaic projects. The other two BEE partners who each acquired 15% are Phakwe Solar and Reatile Solar Power. 6 Local community trusts also acquired equity. The value of AREP’s agreement with Old Mutual was approximately R462 million and AREP committed R139 million from its own resources. Approximately 398 MW power will be produced by these 6 projects,” said AREP in its 2019 statement.
The AREP statement added: “The total equity value of AREP’s current renewable energy projects is approximately R800 million or 3.9% of the total equity value of the Department of Energy’s Round 4, Renewable Energy Independent Power Producer (REIPP) programme which is R20.6 billion. The total BEE equity value of all the projects under the Department of Energy’s REIPP’s Round 4 is R 8.6 billion and AREP’s share is R 800 million which is less than 10%. AREP did not participate in the Department of Energy’s REIPP projects relating to the provision of electricity to Eskom under Rounds 1, 2, 3 and 3.5 whose total equity value is R47.2 billion1.”
“It is patently clear that every single one of the 9 REIPP projects that AREP is currently participating in and has a minority shareholding, were acquired from privately owned companies and not from the Department of Energy. Any transfer of equity or shares under the REIPP programme has to be approved by the Department of Energy and is based on certain qualification and evaluation criteria for preferred bidders.”
In the same statement, Motsepe conceded that having Radebe and Ramaphosa as his brothers-in-law “justifiably raises perceptions of favouritism or improper conduct” but maintained AREP’s business was above board.
“Having relatives in very high positions in government justifiably raises perceptions of favouritism or improper conduct particularly in the context of the REIPP programmes where there is a relationship with the Minister of Energy. When the Minister of Energy was appointed, I told Brian Dames that, “we now have a major and serious perception problem. AREP has to fundamentally strengthen its governance and ethical requirements and procedures.”
Actom CEO Naidoo and Babcock Ntuthuko CEO Govender could not be reached for comment.
