Public Enterprises Minister Pravin Gordhan addressing journalist regarding State-owned company Denel in Pretoria. PHOTO: ANA

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Shame corporates who colluded with state capture into paying back money – Gordhan

PARLIAMENT, August 15 – Parliament should lead a campaign to shame big firms who were collusive in the state capture scandal to pay back money siphoned off South Africa’s parastatals, Public Enterprises Minister Pravin Gordhan said on Wednesday.

“Civil cases take a long time. What about moral suasion?” Gordhan asked during a briefing to Parliament’s portfolio committee on public enterprises on progress in rehabilitating companies left in financial dire straights by corruption.

He said private executives from firms that were complicit in irregular deals or covering these up through unscrupulous auditing confided to him that they were “excruciating” about what had transpired.

“Well, excruciating is one thing, paying back the money lost to South Africa is another,” the minister said.

He suggested the legislature was well-placed to make a call to the entities involved to “get them to pay back the money”.

Gordhan noted that international consultancy McKinsey had refunded R902 million paid to it by Eskom without a proper contract, but lamented that at this point there was no progress in recuperating large sums paid by the power utility to its local development partners, the Gupta-related Regiments Capital and Trillian.

He said as government implemented corrective measures at state-owned entities, more irregular spending was coming to light that was not reflected in auditing processes for a number of years, and this raised questions about the conduct of auditors at the time the state capture phenomenon was in full swing.

“Why have they not been reporting some of the things we see today?”

He noted that Eskom’s irregular expenditure had jumped from around R3 billion to R19.6 billion in the last financial year and said it was not the only state-owned company where irregularities have come to light since the government rotated boards.

“There is a pattern here that you will see with many entities as new boards are put in place and audit performances are being questioned,” he said, adding that it must be explained why they had proven unable to detect corruption.

Gordhan last year, before he returned to government as part of the Ramaphosa administration, termed international auditing firm KPMG’s local operations a “willing partner in state capture”.

In terms of Eskom’s financial health, Gordhan said the company needed to increase revenue by boosting sales rather than merely relying on raised tariffs.

He cited research by the UCT (University of Cape Town) Graduate School of Business that showed that the utility’s actual sales had declined slightly in ten years if one compared a figure of 218,200 gigawatt hours for 2007 with that of 214,121 for 2017. In contrast, staff numbers had risen over the same period from 9,451 to 33,178 and debt securities and borrowings from R40 billion to R355 billion.

The minister said in terms of action taken on irregularities, 11 criminal cases had been opened, of which five involved nine senior executives.

Since April, 628 outstanding disciplinary cases had been finalised, resulting in 75 employees leaving the company and remedial action had been taken against 25 staff members who were doing business with the company.

The Eskom board is due to submit a new five-year business strategy at the end of September.

Gordhan also noted that Eskom had begun lifestyle audits of senior staff.  In contrast, he said troubled state arms manufacturer Denel lacked even the cash to implement such audits as it was sitting with outstanding debt of R1.1 billion to creditors.

“It basically does not have the money to do this kind of work. The corruption of the past, particularly led by members of two previous boards have systematically slowed down Denel.”

He said the company was one of those in the state’s portfolio that scrambled to borrow more cash to be able to pay salaries, terming it “a vicious circle it needs to get out of”.

He reported that state low-cost carrier South African Express would gradually resume flights next week with nine planes after its air operator certificate was suspended by the South African Civil Aviation Authority in May. The CAA grounded the airline after discovering very poor maintenance on its fleet.

Gordhan noted that the airline lacked money to pay staff and buy parts for its planes, and needed new chief executive and chief financial officers but said sound work has been done in recent months towards turning it around. He thanked Siza Mzimela for taking time out from the private sector free of charge to help in this regard.

“She helped us tremendously in putting a strong team on the ground.” (ANA)

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