/ 19 October 2018

Eskom board member resigns over conflict of interest in ICT contract

George Sebulela.
George Sebulela. (Robert Tshabalala/Financial Mail)

Struggling power utility Eskom has announced the resignation of one of its directors, over perceptions of a conflict of interest in a multi-billion rand information and communications technology (ICT) contract.

George Sebulela resigned on Friday after Eskom’s board received a legal opinion on the matter. The board only became aware of it for the first time last week.

In announcing Sebulela’s resignation, board chairman Jabu Mabuza did not disclose the contents of the opinion, saying only it was to determine whether there was a conflict.

Sebulela tendered his resignation on Friday and Pravin Gordhan — the Minister of Public Enterprises — has been informed.

“Mr Sebulela resigned after considering legal advice on his continued role as an Eskom director after the Board was made aware of certain conflicts of interest .. Mr Sebulela made the correct decision to resign from the Board and to help ensure that acceptable standards of good corporate governance are maintained.

“The Board is aware that allegations are being peddled in the media that other directors had also resigned from the Eskom board today. Such information is patently false.”

Eskom said it could not reveal the value of the tender as that will be determined by the winning bidder, but the Mail & Guardian has established that Eskom has paid over R5-billion over the last 10 years for the service.

The M&G has further established Sebtech — Sebulela’s company — is a supplier and development partner to IT giant EOH, one of two companies shortlisted for the award. The other company is T-Systems.

EOH confirmed that the company had submitted its bid about four months before Sebulela’s appointment to the board. EOH also declared, via Eskom’s normal declaration processes, Sebulela’s directorship on the sub-contracting entity in March of this year. This was after Eskom notified bidders the tender was going ahead.

The potential conflict only became an issue last week after EOH was named preferred bidder by Eskom’s executive tender committee and the board tender committee.

Lwanda Zingitwa, Mabuza’s chief of staff, said the board then found out that Sebulela had not declared the conflict. Zingitwa however, could not confirm whether EOH had too.

It is understood EOH submitted a bid for the work last year, several months before Sebulela was appointed to the board, and that once he was appointed it had notified Eskom that he was a sub-contractor.

Sebulela said his resignation was in the interest of Eskom and that the board had collectively agreed that issues of conflict would not be tolerated.

He refused to be drawn on speculation that he had initially refused to resign because the bid was submitted before his became a board member.

Sebulela — a former executive at Absa — is the president and chief executive of Sebvest Group, the owner of Sebtech Technologies, and secretary-general of the Black Business Council.

He was one of eight new board members announced by the power utility on January 20 following a meeting between President Cyril Ramaphosa and former ministers Lynne Brown (public enterprises) and Malusi Gigaba (finance).

At the time government said the “intervention”, which was ratified by cabinet later, would address urgent challenges at the company.

Eskom had been facing a financial and reputational crisis related to massive losses driven by rampant corruption which cost the parastatal billions of rands. Because of public perception of Eskom’s ‘capture’, lending institutions were no longer willing to extend credit to the energy supplier.

The new board included chairman Jabu Mabuza, former MTN chief executive Sifiso Dabengwa, Dr Rod Crompton, and Mark Lamberti. Lamberti has since resigned after being embroiled in a discrimination incident that emanated from his time at Associated Motor Holdings.

In the statement government said: “Eskom is critical to the South African economy. As a key enabler of economic growth and social transformation‚ any further deterioration of Eskom’s financial and operational conditions could have a severe impact on the country.

“The company has been facing several challenges‚ including a weak financial position‚ declining revenues and governance failures‚ which are threatening the sustainability of the company going forward,” the statement continued.