How "morally bankrupt and corrupt" is remuneration of parastatal executives?

JOHANNESBURG -

The saga of Jacob Maroga, who either resigned from or was fired as CEO of domestic electricity monopoly Eskom on 2 November 2009, has once again thrown focus on the gross and foul subject of remuneration of parastatal executives. Parliament's public enterprises portfolio committee chairwoman Vytjie Mentor reacted thus: "Maroga exposes how morally bankrupt and corrupt the system is".

Really? Maroga recently filed a lawsuit claiming either reinstatement, or R85.7m compensation, hinged mainly around the notion that his five-year contract as CEO would/could have run through to April 2012.

While some think that Maroga's lawsuit has as much chance as the proverbial snowball in a piazza oven, the court papers glaringly highlight the kind of caviar swill gulped down by parastatal executives, regardless of performance. According to Eskom's latest annual report, to March 31 2009, Maroga was paid R4.96m in salary for the year. There was no bonus (as in 2008), which is not surprising, given how Eskom fell over early in 2008, panicking the nation.

But according to Maroga's papers, Eskom shelled out a further amount of R2.76m a year for Maroga, including R1m for a "personal assistant", and another R1m for a "driver". The amounts are not disclosed in Eskom's annual report, which raises serious questions over the specific role of Eskom management, its auditors and others.

Despite its fragile and febrile state, Eskom has long been treated as easy meat by all kinds of power mongers and gimcracks. For their precious work in 2009, Eskom's auditors, precious KPMG and precious SizweNtsaluba, were paid a precious R57m. During the year, Eskom paid out R1.97bn (that's nearly two billion rand) for "managerial, technical and other fees", a massive increase on the R1.18bn paid the year before, and four times higher than the amount paid in 2003.

Astronomical "managerial" and "technical" fees are no rarity among parastatals; during 2009, Transnet shelled out R995m in that direction. The recipients of these fees are hardly named, if ever, but raise questions over why parastatal executives are needed in the first place, and, if they are, whether they are worth the astonishing largesse dumped on their innocent heads.

During the 2009 financial year, executives at 14 of South Africa's largest parastatals were paid a nauseating aggregate amount of R446m; the R51m separately paid to non-executives is equally eye-popping. Added, it's nearly half a billion rand. Just 15 selected individual executives were paid a total of R110m, including a total of R56m in bonuses and severances. So shocking has been the general performances of the two biggest parastatals, Transnet and Eskom, that the two now lack full time chief executives and chairmen.

If you aren't throwing up yet, here we go. South Africa's government provided parastatals with R242bn in "financial assistance", a euphemism for bailouts, during the 2005/06 to 2008/09 financial years, according to a written reply in the parliamentary process, as given to the official opposition, the Democratic Alliance. The biggest amount, by far, went to Eskom.

Maroga's R86m claim against Eskom is as flashy as Eskom's performance has been sad and loathsome. He wants R3m to kill his Eskom home loan. Then he wants R45m in "incentives" he anticipated over the balance of his five-year contract. This comprises annual short-term incentive scheme performance bonuses at R10.7m, and a long-term scheme, bizarrely likened to a "golden handcuff", retention bonus at R34.3m for period 2006 to 2012.

Don't laugh . . . not out loud, at least. In 2005, Thulani Gcabashe, the-then CEO of Eskom, and holder of a Bachelor of Arts (Botswana), took home R13.05m, of which R4.3m was for "restraint", the kind of "golden handcuff" bling referred to by Maroga. In 2003, Willem Kok, Eskom finance director, took home R27.4m, of which R20.3m was dressed up as a "termination" benefit.

Write to Barry Sergeant: barry@moneyweb.co.za

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