Table of Contents

Question 1
1.1 A description of the company and an overview of the scandal.
1.2 Identify and discuss the stakeholders to corporate governance as it pertains to the
scandal. Critically evaluate the role of the parties that have played or ought to have
played. According to your research, identify the party that you hold the most
responsible for the scandal.
1.3 Discuss the four (4) most applicable mechanisms through which personality risks
in corporate governance may be managed in relation to the identified scandal.
Elaborate on any mechanism/s that might have or in the process of being
implemented.
1.4 Discuss the applicability of the King IV Code and evaluate the alignment of the
selected involved entities’ practices against the recommended ones in terms of the 2nd
principle of the King IV Code.
1.5 Evaluate the level to which the selected entity involved in the scandal had
embraced GRC.

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Question 1

1.1

Company Description

Eskom Holdings SOC Ltd, commonly known as Eskom, is a state-owned electricity

utility company in South Africa. It is responsible for generating, transmitting, and
distributing electricity to South Africa's residential, commercial, and industrial
sectors. Eskom plays a crucial role in the country's economy as it supplies
approximately 95% of South Africa's electricity.

Eskom Holdings SOC Ltd, established in 1923, is South Africa's largest electricity
utility company. It operates as a state-owned enterprise under the oversight of the
Department of Public Enterprises. Eskom plays a critical role in the country's energy
sector, supplying electricity to approximately 58 million people and powering the
South African economy.

The company operates a diverse energy portfolio, consisting of coal-fired power

plants, nuclear power plants, hydroelectric facilities, and renewable energy projects.
Eskom owns and operates multiple power stations across South Africa, with a total
installed capacity of over 44,000 megawatts.

As a vertically integrated utility, Eskom manages the entire electricity value chain,
encompassing power generation, transmission, and distribution. The company
operates an extensive transmission grid, spanning thousands of kilometers, to
transport electricity from power plants to distribution networks.

Eskom's primary mandate is to ensure the reliable and affordable supply of electricity
to meet the country's growing energy demands. However, the company has faced
significant challenges in recent years, including aging infrastructure, insufficient
investment, operational inefficiencies, and financial difficulties.

These challenges have resulted in electricity supply constraints, leading to load

shedding or planned power outages to prevent a total collapse of the grid. Eskom's

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financial woes have also had a considerable impact on the country's economy, with
the South African government providing substantial financial support to keep the
company operational.

In a nutshell, Eskom plays a vital role in South Africa's energy landscape, but its
operational and financial challenges, along with the associated scandals, have posed
significant obstacles to its ability to fulfill its mandate effectively.

Overview of the Scandal

One of the notable scandals involving Eskom is related to corruption,

mismanagement, and state capture. The scandal revolves around allegations of
irregularities and malpractices in Eskom's business operations, primarily during the
tenure of the company's former executives and board members.

The scandal gained significant attention and was extensively investigated by various
organizations, including government agencies and media outlets. It exposed a web of
corrupt practices involving prominent individuals, politicians, and business entities.
The key aspects of the scandal are as follows:

State Capture

The scandal uncovered a system of "state capture" in which politically connected

individuals influenced decision-making processes within Eskom. It revealed how
certain individuals allegedly used their influence to manipulate appointments,
contracts, and policies within the company for personal gain.

Gupta Family Involvement

The Gupta family, a wealthy business family with close ties to former South African
President Jacob Zuma, was central to the scandal. It was alleged that the Gupta family
exerted undue influence over Eskom and gained control over key decisions, such as
the appointment of senior executives and the awarding of lucrative contracts.

Irregular Contracts and Payments

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The scandal revealed numerous irregularities in Eskom's procurement processes,
including the awarding of contracts to companies with questionable track records or
limited expertise. These contracts were often inflated and resulted in excessive costs
for Eskom. Furthermore, there were allegations of kickbacks and bribes given to
Eskom officials in exchange for favorable treatment.

Financial Mismanagement

Eskom faced severe financial challenges during this period, with allegations of
mismanagement and wasteful expenditure. It was accused of overlooking cost-saving
measures, ineffective financial controls, and unsustainable business practices. These
issues contributed to Eskom's financial instability, which had a detrimental impact on
South Africa's economy and electricity supply.

The scandal surrounding Eskom has had far-reaching consequences, including

electricity supply disruptions, increased public debt, and a negative impact on investor
confidence in South Africa. Various investigations and inquiries have been conducted
to uncover the extent of corruption and hold those responsible accountable.

1.2

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 Government Industry
Public Enterprises, Water and Environmental Affairs, National
Treasury, DTI, Trade and industry, GCIS, Public works, DST, Association of Municipal Electricity
Cooperative Government and Traditional Affairs (COGTA), SA Local
Government and Association Undertakings, Industry experts

Parliament Employees
Public Enterprises, Minerals and Energy, Water and Environmental
Affairs, Trade and Industry, NCOP, Select Committee on Finance, Employees, Executive Forum, Exco, Board
Select Committee on Public Enterprises and Labour, Provincial and
Local Government, Standng CommitteesOversight and ICT.

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Key Customers Regulatory
Top Key Customers, Industrial, mining, commmercial, municipalities,
agricultural, residential National Energy Regulator (NERSA), Nationall
Nuclear Regulator (NNR)
 Media Suppliers
Capacity expansion contractors, fuel suppliers, Original equipment
South African, African and International
Manufacturers

Business Organised Labour

NUM, NUMSA, Solideriteit, COSATU
Financial Institutions, Investors-Local and International,
BUSA, SACCI, Chamber of Commerce and Industry SA,
both national and regional

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Civil Society International Relations
Multilateral Institutions (World Bank, Africa Bank, IMF), Cooperation
NGOs and CBOs, SANGOC, WWF, Consumers Forum
agreements, MoU International Corporations,/members (WEF,
CIGRE), Foreign representations

Shareholders/Investors: Shareholders have a significant interest in corporate

governance and should have been vigilant in monitoring the company's operations and
holding management accountable. However, in the Eskom scandal, shareholders may
be criticized for not actively challenging the company's practices and failing to
exercise their rights as owners.

Board of Directors: The board of directors is responsible for overseeing the

company's affairs and ensuring good governance. In the Eskom scandal, the board
members have been criticized for their lack of oversight, failure to detect and address
the corrupt practices, and potential conflicts of interest. Some board members may
have been complicit in allowing the scandal to unfold.

Executive Management: The executive management team holds a critical role in

ensuring ethical conduct and proper management of the company. In the Eskom
scandal, certain executives have been implicated in corruption and mismanagement,
indicating a failure in their fiduciary duty to the company and its stakeholders.

Employees: While employees may not have direct responsibility for the scandal, they
play a crucial role in upholding ethical practices and raising concerns about
misconduct. However, in the case of Eskom, there have been allegations of employees
being involved in corrupt activities, highlighting a failure of internal controls and
ethical culture within the organization.

Government: As Eskom is a state-owned enterprise, the government has a significant

role in overseeing its operations. The government should have ensured proper
governance, transparency, and accountability within Eskom. However, there have
been allegations of government officials being involved in the scandal or failing to
exercise sufficient oversight.

Regulators: Regulators such as NERSA have a responsibility to monitor and enforce

compliance with regulations in the energy sector. In the Eskom scandal, there have
been concerns about regulatory failures in detecting and preventing the corrupt
practices within the company, indicating a lack of effectiveness in their oversight.

Customers: Customers have a legitimate expectation of reliable and affordable

electricity supply. In the Eskom scandal, customers suffered from the consequences of
mismanagement, including electricity supply disruptions. However, customers may be

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seen as relatively passive stakeholders who rely on the company, regulators, and
government to ensure good governance.

Suppliers: Suppliers have a responsibility to engage in ethical business practices and

compete fairly for contracts. In the Eskom scandal, some suppliers were alleged to
have obtained contracts through corrupt means, suggesting a failure in the due
diligence processes and ethical standards within the company.

Financial Institutions: Financial institutions that provided loans or financial support

to Eskom should have conducted proper due diligence and monitored the company's
financial stability. However, they may have failed to adequately assess the risks
associated with the company, contributing to the financial crisis at Eskom.

Media: The media plays a crucial role in exposing corporate scandals and holding
companies accountable. In the Eskom scandal, media outlets have been instrumental
in investigating and reporting on the corrupt practices and mismanagement at the
company, shedding light on the extent of the scandal.

Civil Society Organizations: Civil society organizations have an important role in

advocating for good governance practices and scrutinizing corporate behavior. In the
Eskom scandal, these organizations have played a significant role in raising
awareness, demanding accountability, and pushing for reforms within the company.

International Investors: International investors who have invested in Eskom or have

an interest in the South African economy may be affected by the scandal. The scandal
could impact investor confidence and perceptions of the country's business
environment.

General Public: The general public, as citizens and consumers, have a stake in the
governance and performance of Eskom. The scandal at Eskom has had broader
implications for the South African economy and society as a whole, affecting the
availability and affordability of electricity.

Auditors: External auditors have a responsibility to independently verify the accuracy

and reliability of financial statements. In the case of Eskom, the role of auditors has
come under scrutiny. There have been concerns raised about the effectiveness of the

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auditing processes and whether any irregularities were missed or not adequately
investigated. The involvement of auditors in the scandal raises questions about their
independence and diligence in uncovering financial mismanagement and corruption.

Law Enforcement Agencies: Law enforcement agencies have a crucial role in

investigating and prosecuting criminal activities. In the Eskom scandal, these agencies
have been involved in the investigations and legal proceedings against individuals
implicated in corrupt practices. The effectiveness and efficiency of law enforcement
in bringing those responsible to justice will play a significant role in holding
accountable the parties involved in the scandal.

Considering the overall assessment of the parties involved in the Eskom scandal, the
most responsible party appears to be a combination of the board of directors and
executive management. The board of directors, as the ultimate governing body, failed
to exercise effective oversight and ensure good governance within Eskom. Their lack
of diligence and potential conflicts of interest contributed to the systemic failures that
allowed corruption and mismanagement to persist.

The executive management, including top executives and senior officials, also bears
significant responsibility. They were responsible for day-to-day operations, strategic
decision-making, and the implementation of proper controls and ethical practices. The
involvement of some executives in corrupt activities indicates a failure of leadership
and a breach of their fiduciary duty to the company and its stakeholders.

It is important to note that the Eskom scandal is a complex issue involving multiple
parties, and the level of responsibility may vary among individuals within those
parties. Further investigations and legal proceedings are necessary to determine
individual culpability and hold those responsible accountable for their actions.

Conclusion

In conclusion, the Eskom scandal exposed systemic failures in corporate governance,

corruption, and mismanagement. The parties involved, including the board of
directors, executive management, government, regulators, auditors, and others, all
have a degree of responsibility for the scandal. However, based on the research

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conducted, the board of directors and executive management appear to bear the most
significant responsibility for the failures that allowed the scandal to occur and persist.
The effective implementation of reforms and the enforcement of accountability will
be crucial to prevent such scandals from recurring in the future.

1.3

Personality risks in corporate governance refer to the potential negative impact that
the personal characteristics, behaviors, or ethical values of individuals within an
organization can have on its governance processes. These risks arise from the inherent
vulnerabilities associated with human nature and can manifest in various forms, such
as conflicts of interest, unethical behavior, lack of integrity, and failure to fulfill
fiduciary duties (Lipton & Lorsch, 1992; Voegtlin et al., 2019).

Scholars have offered insightful definitions to capture the essence of personality risks
in corporate governance. Lipton and Lorsch (1992) define personality risks as the
"perils posed by individuals in their roles as managers, executives, or directors" due to
personal biases, self-interest, or ethical lapses that can compromise the effectiveness
of governance mechanisms. This definition emphasizes the potential hazards that arise
from the behavior and actions of individuals in positions of authority within
organizations.

Furthermore, Voegtlin et al. (2019) define personality risks in corporate governance

as the "systemic vulnerabilities that emerge when personal attributes and individual
behaviors undermine the effectiveness of governance structures." This definition
emphasizes the interaction between personal attributes and governance structures,
highlighting how individual traits and actions can undermine the intended outcomes
of established governance mechanisms.

These definitions underscore the importance of recognizing and managing personality

risks in corporate governance to prevent organizational misconduct, protect
stakeholders' interests, and uphold ethical standards. By understanding the inherent
vulnerabilities associated with individual behavior, organizations can implement
strategies to mitigate these risks and create a governance framework that promotes
integrity, transparency, and accountability.

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Personality risks in corporate governance refer to the potential negative impact that
the personal characteristics, behaviors, or ethical values of individuals within an
organization can have on its governance processes. In the context of the Eskom
scandal, several mechanisms can be employed to manage personality risks in
corporate governance:

Strong Ethical Culture

Fostering a strong ethical culture within the organization is essential for mitigating
personality risks. This involves promoting and reinforcing ethical behavior, integrity,
and accountability at all levels of the organization. Implementing ethics training
programs, whistleblower policies, and codes of conduct can help instill a culture that
discourages unethical practices. Eskom has recognized the importance of
strengthening its ethical culture and has implemented ethics training programs and
whistleblowing mechanisms to encourage a more ethical work environment.

Robust Board Composition and Independence

Ensuring a diverse and independent board of directors is crucial for effective

corporate governance. Board members with diverse backgrounds, expertise, and
independence can bring fresh perspectives and challenge management decisions. In
the case of Eskom, there have been calls for improving the independence of the board
and ensuring that it comprises individuals with the necessary skills and experience to
oversee the company's operations effectively.

Stringent Risk Management and Internal Controls

Implementing robust risk management frameworks and internal control systems can
help identify and mitigate personality risks. This involves establishing clear policies
and procedures, conducting regular risk assessments, and monitoring key risk
indicators. Adequate checks and balances, such as segregation of duties and regular
internal and external audits, can help prevent and detect unethical behavior. Eskom
has recognized the need for enhanced risk management and has taken steps to
strengthen its internal controls and risk assessment processes.

Transparency and Accountability

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Promoting transparency and accountability is vital for effective corporate governance.
This includes ensuring that accurate and timely information is disclosed to
shareholders and other stakeholders. Regular reporting, including financial statements
and corporate governance reports, enhances transparency and enables stakeholders to
hold the organization accountable. Eskom has been working towards improving
transparency and accountability by providing regular updates on its financial and
operational performance and implementing governance reforms.

Eskom has implemented several mechanisms to manage personality risks in corporate

governance. The company has focused on improving its ethical culture by introducing
ethics training programs and whistleblower mechanisms. It has also taken steps to
enhance board independence by appointing independent directors and experts in
relevant fields. In terms of risk management, Eskom has strengthened its internal
controls, risk assessment processes, and implemented regular audits to identify and
address potential risks. Additionally, Eskom has been making efforts to enhance
transparency and accountability through regular reporting and disclosure of
information.

However, it is important to note that addressing personality risks in corporate

governance is an ongoing process, and there is room for further improvement. Eskom
should continue to strengthen its mechanisms by consistently reinforcing its ethical
culture, ensuring board independence, enhancing risk management practices, and
maintaining transparency and accountability.

The Eskom scandal has highlighted the critical importance of effectively managing
personality risks in corporate governance. The scandal has shed light on the failures
within the organization and the impact that personal characteristics, behaviors, and
ethical values can have on governance processes. To mitigate such risks, various
mechanisms can be employed, including fostering a strong ethical culture, ensuring
robust board composition and independence, implementing stringent risk management
and internal controls, and promoting transparency and accountability.

Eskom has taken steps to address these personality risks by implementing ethics
training programs, whistleblower mechanisms, and strengthening its internal controls
and risk assessment processes. The company has also made efforts to enhance board

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independence and improve transparency and accountability through regular reporting
and disclosure of information. These initiatives demonstrate a commitment to
addressing the shortcomings that contributed to the scandal.

However, it is crucial to acknowledge that managing personality risks in corporate

governance is an ongoing process. Continuous efforts are needed to reinforce the
ethical culture, ensure the independence and diversity of the board, strengthen risk
management practices, and maintain transparency and accountability. Eskom must
remain vigilant in implementing and evaluating these mechanisms to prevent future
scandals and rebuild stakeholder trust.

Furthermore, the government, regulators, and other stakeholders have a role to play in
holding organizations accountable for managing personality risks effectively.
Collaboration and coordination among these parties are crucial to create a governance
environment that minimizes the potential for misconduct and unethical behavior.

The Eskom scandal serves as a reminder that corporate governance is not solely about
structures and processes but also about the individuals who occupy key positions
within the organization. By proactively managing personality risks, companies can
foster a culture of integrity, enhance decision-making processes, and safeguard the
interests of stakeholders.

Conclusion

In conclusion, managing personality risks in corporate governance requires a

multifaceted approach that encompasses organizational culture, board effectiveness,
risk management practices, and transparency. By implementing and continually
improving these mechanisms, companies can strengthen their governance practices
and reduce the likelihood of scandals that can have far-reaching consequences for
stakeholders and society as a whole.

1.4

In the recent years, corporate governance has gained importance both domestically
and abroad (ACCG, 2016:70–79; Malberbe & Segal, 2001:7). For every organization
to be successful in terms of its implementation framework and control mechanisms,

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the notion of governance is essential (ACCG, 2016:70–79). Corporate governance
frameworks must be in place for a successful competitive environment in order for
any organization to function successfully (Dibra, 2016:284). In the South African
context, individuals anticipate that the government will function efficiently and in
accordance with accepted governance standards because these standards help fight
corruption (Santiso, 2001:17).

Corporate governance can be used to lead an organization in the right path because
the word governance literally means to steer (Dibra, 2016:283). The corporate
governance failures that have occurred in many areas of government and the business
sector have, however, derailed the public' expectations (Santiso, 2001:5–6).
Corporate governance errors have been documented in the recent past in both the
public and private sectors (Mahajani, 2016:29). The notion of corporate governance,
according to KPMG (2011:31), is dependent and relies on the board of directors and
should encompass the implementation process and system control. Bad company
performance in the private sector and bad service delivery in the public sector have
resulted from a lack of adequate corporate governance (Santiso, 2001:13).

The South African King IV report on corporate governance was released on

November 1st, 2016. The Institute of Directors in Southern Africa (IODSA) is in
charge of publishing the King reports. Professor Mervin King emphasized in this
report that "the overarching goal of King IV is to make corporate governance more
accessible and relevant to a broader range of organizations, and to be the catalyst for a
shift from a compliance-based mindset to one that sees corporate governance as a
lever for value creation."

The report's structure provides a firm foundation of principles from which towns can
strive to navigate the ever-changing local government environment. The sector
supplement on local government aims to sustain good governance norms in the local
government sector. The report clearly encourages transparency and emphasizes the
importance of good corporate responsibility (Masegare, 2016:20). As a result of this
discussion, it is possible to conclude that the municipality is expected to be
transparent in its implementation of corporate governance norms.

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Corporate governance promotion is an essential component of administering an
organization (governing body) and producing governance objectives such as ethical
value, good performance, effective control, and legitimacy (Masegare, 2016:33;
IODSA, 2016:2 -3). It can be agreed that corporate governance promotion aims to
reinforce corporate governance as a holistic and interconnected collection of
arrangements that must be understood and applied in an integrated manner.

The King IV Code, developed by the Institute of Directors in Southern Africa

(IoDSA), provides a comprehensive set of principles and recommended practices to
guide organizations towards achieving good governance outcomes and becoming
responsible corporate citizens. The code consists of 16 principles and 208
recommended practices, which cover various aspects of governance, including ethical
culture, board composition, risk management, and stakeholder engagement (IoDSA,
2016).

The second principle of the King IV Code focuses on the composition and
responsibilities of the governing body. It emphasizes the need for an effective,
independent, and ethical board that provides strategic direction and oversees the
organization's activities in a responsible manner (IoDSA, 2016). Evaluating the
applicability of the King IV Code and the alignment of involved entities' practices
with the recommended ones in terms of this principle is essential to assess their
governance effectiveness.

In the case of the Eskom scandal, the applicability of the King IV Code can be
examined in terms of the board's composition and responsibilities. The code
emphasizes the importance of having a diverse and independent board that brings
relevant skills, knowledge, and expertise to effectively govern the organization. It
recommends that the board should consist of a balance of executive and non-
executive directors, with a majority of non-executive directors being independent
(IoDSA, 2016).

To evaluate the alignment of involved entities' practices with the recommended

practices of the King IV Code, an analysis of Eskom's board composition and
responsibilities is necessary. It would involve examining the independence of board

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members, their qualifications and experience, and the effectiveness of the board in
providing strategic oversight and fulfilling its fiduciary duties.

Based on available information, there have been concerns about the independence and
effectiveness of Eskom's board in fulfilling its governance responsibilities. There have
been allegations of potential conflicts of interest among board members and a lack of
expertise in critical areas such as energy and finance. These factors raise questions
about the alignment of the board's practices with the recommended practices of the
King IV Code's second principle (Tshetsha, 2021).

While it is important to acknowledge that the specific details of board practices and
alignment with the King IV Code's recommendations may require further
investigation, initial observations suggest a potential misalignment between Eskom's
board practices and the recommended practices of the code.

It is crucial for organizations, including those involved in corporate scandals, to

embrace and implement the principles and recommended practices outlined in the
King IV Code. Compliance with the code can enhance governance effectiveness,
promote ethical conduct, and build stakeholder trust.

To facilitate alignment with the King IV Code, involved entities should undertake a
comprehensive review of their governance structures, policies, and practices. This
review should identify gaps and areas for improvement in relation to the code's
principles and recommended practices. By doing so, organizations can strengthen
their governance frameworks, enhance board composition and responsibilities, and
ultimately achieve the desired governance outcomes.

However, it is important to note that the King IV Code is a voluntary framework, and
organizations have the flexibility to adapt its recommendations to their specific
circumstances. While compliance with the code is not mandatory, organizations are
encouraged to embrace its principles and strive for alignment to demonstrate their
commitment to good governance and responsible corporate citizenship.

Conclusion

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In conclusion, the King IV Code provides a comprehensive framework of principles
and recommended practices for achieving good governance outcomes. The second
principle of the code, focusing on the composition and responsibilities of the
governing body, is relevant to assessing the practices of involved entities in the
Eskom scandal. An evaluation of their alignment with the recommended practices of
the code's second principle reveals potential gaps in board composition,
independence, and effectiveness. To enhance governance practices, organizations
should undertake a thorough review and strive to align their practices with the
recommendations of the King IV Code.

1.5

Embracing Governance, Risk & Compliance (GRC) is crucial for organizations to

effectively manage risks, ensure regulatory compliance, and maintain good
governance practices. The integration of governance, risk management, and
compliance helps organizations establish a cohesive framework that aligns these
functions and promotes a holistic approach to managing uncertainties and meeting
legal and ethical obligations. In evaluating the level to which Eskom had embraced
GRC, it is important to assess the organization's policies, processes, and procedures in
these areas.

Eskom faced significant issues as a result of leadership and governance instability. In

the previous ten years, it has had ten CEOs and three boards, resulting in an unstable
and unsustainable approach. Governance had not been priority, as evidenced by
Eskom's lax controls, where deviations had become the standard. It had to be admitted
that the appointment of a new board had brought about much-needed reform. Because
the Board's approach was not business as usual, its first priority had been to clean up
the mess. Because of the poor financial condition, it was necessary to clean.

Eskom's journey must be divided into four sections in order to be understood:

The first phase was the cleanup, which had two main goals. The first goal was to
establish transparent and effective corporate governance, and the second was to
respond to qualified audit reports and discover unusual expenditure. Not all irregular
expenditure had been cleared up, and more would be discovered.

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The second phase was stability. The Board had determined that the institution was not
viable and required a financial viability strategy based on the business plans for 2017
and 2018. Eskom had a debt of R380 billion, but the business strategy predicted that
in four years, the debt would have risen to R600 billion. Eskom was already
struggling to service its R380 billion debt, so increasing it to R600 billion would be
catastrophic, as the institution could not function with such a large burden. Eskom
asked the Minister of Energy for permission to develop a one-year corporate strategy
that would allow it to borrow R72 billion to better understand the dynamics it was
confronting. By the end of the year, a new business plan would be developed, driven
by a new shareholder compact that prioritized Eskom's concerns.

The decisions made resulted in a 21% rise in earnings before interest, tax,
depreciation, and amortisation (EBITDA), an R32.7 billion RCA determination, and
enhanced liquidity by generating 72% of the funding requirement for FY2018/19.
Funding had been secured for the following year, which meant that the starting
balance for funding next year would begin at 34%, as opposed to this year, when it
was difficult to raise R20 billion to service debt. The additional capital requirement
was the result of the Board's open and honest communication with investors. To attain
financial viability, capital expenditure (capex), maintenance, and operating
expenditure (opex) had been reduced. Capex would be lowered to around R45 billion
over the following five years, saving R50 billion. The yearly growth rate with opex
was between 9% and 11%, and it had been lowered to 4.5%, saving R10 billion per
year. Maintenance had been cut, but they were encouraged not to cut any further and
to keep the figure at R19 billion per year. The cost-cutting effort meant Eskom would
save roughly R100 billion in five years, but due to the magnitude of the debt, this
would not be enough. More work would be required, and salary negotiations had
added to the difficulty.

The third phase was efficiency optimization, which centred on how Eskom might
improve and earn income. The initial objective was to target high-energy customers
who were recommended to quit Eskom sooner. Municipal arrears had to be addressed.
An Inter-Ministerial Committee (IMC) task team was formed when it was determined
that this was not simply an Eskom issue but also required involvement. Minister
Gordhan and Dr Zweli Mkhize, Minister of Cooperative Governance and Traditional

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Affairs (COGTA), were collaborating to find a solution. The next phase was to deal
with the rising cost of coal. Relationships with coal companies needed to be repaired
because they had deteriorated in past years. The first time problems with coal became
apparent was when there was little investment in cost plus mines, resulting in a rise in
coal exports. The price of coal per ton had risen as a result of exporting. Engagement
was taking place, and one coal business agreed to sell 10 million tons of coal at a
lower price as a result of the engagement. The fourth phase was to increase staff
productivity. The productivity levels of Eskom employees were compared to those of
other similar institutions throughout the world, and it was discovered that they were
not at the level that they should be. It had last been competitive in 2003, although
attempts were being made to address this obstacle.

The fourth phase aimed to prepare Eskom for the future. The global energy sector was
rapidly changing, and Eskom needed to decide its future role. It would look at
optimizing its balance sheet because it had too much debt, but it would also need to
build a new business model to survive the new adjustments.

Clean Up Achievements

Ten top executives had left, and the completion of ongoing disciplinary cases
involving senior executives was being sped up. Eleven criminal cases had been filed,
with five of them involving nine top officials. Since April 2018, a total of 1 049
disciplinary proceedings have been initiated, of which 628 have been completed,
resulting in 75 employee exits. 239 "whistleblower" instances had been investigated,
with 122 resolved. Disciplinary proceedings were underway in 67 confirmed cases.
Remedial action had been taken against 25 Eskom employees, and seven had
resigned. Senior management was undergoing lifestyle audits. There was a valid
declaration of interest. All erroneous supplier contracts were being scrutinized, and
five suppliers had already stopped doing business with Eskom. R2.3 billion was spent
with these companies in the previous three years. Eskom had recovered R1 billion
from McKinsey, including interest, and will move to court to reclaim R600 million
from Trillian. It was collaborating with eight regulatory agencies that were pursuing
substantial investigations.

Efficiency Optimization

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The following were the primary initiatives to drive growth and efficiency:

Boost sales: Eskom aimed to boost sales because it would increase revenue; stimulate
sales by producing new products and services and optimizing prices; and conduct
sales growth initiatives for an additional 3.5 TWh, resulting in an additional R2.9
billion in revenue over two years. Nine contracts had been signed.

Reduce arrears: Collect a minimum of R1 billion from municipalities, gain

government assistance in resolving local arrears, and continue pre-paid meter
installation.

Manage the risk of rising coal prices by investing in cost-plus mines and optimizing
logistical costs, such as switching from road to rail.

Increase productivity by: To discover optimal productivity improvements, conduct a

comprehensive analysis and hold meaningful stakeholder talks.

Conclusion

Based on the general principles and common elements of GRC integration, an

assessment of Eskom's governance structure, risk management practices, compliance
monitoring mechanisms, and communication and training programs would be
essential in determining their level of GRC integration. Embracing GRC is crucial for
organizations like Eskom to effectively manage risks, ensure regulatory compliance,
and maintain good governance practices.

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ACCG. 2016. State of Corporate Governance in Africa: An Overview of 13

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Dibra, R. 2016. Corporate Governance Failure: The Case of Enron and

Parmalat. European Scientific Journal. June 2016. Edition vol12 No 16.

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