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  Eskom’s Klipheuwel wind farm near Bellville
  Eskomís Klipheuwel wind farm near Bellville.


The rapidly changing business environment presents new and increasingly complex corporate governance challenges. It is therefore critical, that an organisation’s governance processes and practices are reviewed on a regular basis to ensure that they are in line with best practices.

Eskom views good corporate governance practices as integral to good performance. It is therefore essential for Eskom to fulfil its mandate in a manner that is in keeping with governance best practices and, in particular, with regard to accountability, transparency, fairness and responsibility.

We have adhered to the statutory duties and responsibilities imposed by the Companies Act as augmented by the Public Finance Management Act (PFMA). Eskom’s systems and processes are regularly reviewed to ensure that compliance is monitored in this regard. In addition, Eskom is also guided on best practices by international developments as well as the King Report on Corporate Governance for South Africa – 2002 (King II) and the Protocol on Corporate Governance in the Public Sector – 2002.

The year has been a particularly challenging one for Eskom because of the capacity challenge and it was necessary that the governance processes, systems and structures were able to deal with a number of issues in a coherent and effective manner.

More frequent meetings of the board of directors and the executive management committee were required. In addition, Eskom had to engage with various stakeholders with regard to the capacity issues. There was a need for alignment with government as shareholder and more intensive communication and interaction with customers and the National Energy Regulator of South Africa (Nersa). At the same time Eskom had to focus on the capacity expansion programme and on the operations of the business and there was a need for quick decision-making on a number of issues.

In addition, the need for more intensive engagement with stakeholders resulted in a number of meetings between Eskom, government and customers, including the key industrial customers and major metros. A number of joint task teams were also established to assist with the resolution of some of the problems.

Admittedly, there were some weaknesses in the processes. The stakeholder communication and engagement could have been more effective and Eskom has acknowledged the criticism in this regard. However, in other respects, the integrity of Eskom’s governance processes and structures was maintained and they functioned effectively. The current challenges and need at times for urgent decision-making did not lead to a deterioration of the high standards of corporate governance. The governance processes were adhered to and duties were fulfilled in a proper manner.

Eskom’s massive capacity expansion programme in itself presents particular challenges for the governance processes. Eskom needs to ensure that there are adequate resources and expertise, and that our processes are beyond reproach. Consequently, a number of initiatives were implemented last year to strengthen our resources in this regard.

The regular review of governance practices was also carried out based on the conclusions of the last board evaluation. This included a review of the committees, the agendas, documentation tabled at board meetings and ongoing director training. In particular, the review of the delegation of authority was completed, with a special focus on procurement processes. The performance of the board committees was considered and areas for improvement were identified. Special information sessions have been introduced prior to scheduled board meetings to allow an opportunity for more detailed information on particular topics to be shared with directors.

An independent board evaluation for the period under review is being conducted.

Shareholding and shareholder’s compact

The government of the Republic of South Africa is Eskom’s sole shareholder. The shareholder representative is the Minister of Public Enterprises.

Each year, Eskom, in consultation with the Minister of Public Enterprises, agrees its performance objectives, measures and indicators in line with treasury regulations under the PFMA. The annual targets are annexed to a list of principles agreed between Eskom and its shareholder (the shareholder compact).

The performance of the organisation against the performance objectives is indicated here.

The compact does not interfere with the normal principles of company law. The relationship between the shareholder and board is preserved. The board ensures that proper internal controls are in place and that Eskom is effectively managed. The compact promotes good governance by helping to clarify the board and shareholder roles and responsibilities and ensures consensus on Eskom’s mandate and key objectives.

Governing bodies

Composition of the board

The details of the directors appear here.

Eskom has a unitary board structure with 13 non-executive directors and two executive directors. All of the non-executive directors are independent directors, appointed by the shareholder, are drawn from diverse backgrounds (local and international) and reflect South Africa’s demographics. They bring a wide range of experience and professional skills to the board. In addition, a number of respected external people have been appointed to a number of the board committees, bringing additional experience to the table.

Eskom’s articles of association stipulate that the shareholder will, after consulting the board, appoint a chairman, chief executive and non-executive directors. The remaining executive directors are appointed by the board after obtaining shareholder approval.

Good corporate governance requires that the composition of the board be reviewed on a regular basis. The rotation of directors at regular intervals is accepted as good practice as it ensures that a board remains dynamic and does not become stagnant in terms of its thinking and abilities. However, it is important that it is managed in such a way that the rotation of directors does not lead to a disruption in the operations of the business and that the board is well balanced in terms of skills, expertise and demographics (race, gender and people with disabilities).

The term of office of non-executive directors is a maximum of three years, which will expire at the annual general meeting in July 2008. The terms of these directors will accordingly be reviewed and they are eligible for re-appointment.

Executive directors are full-time employees and as such are subject to Eskom’s conditions of service.

Board meetings are scheduled annually in advance. Special meetings are convened as necessary to address specific issues. Directors or committee members unable to attend meetings may use teleconferencing facilities. The attendance of members at the 10 board meetings during the reporting period is reflected here.

Delegation of authority

The board has the authority to lead, control, manage and conduct the business of Eskom, including the authority to delegate. Its aim is to ensure that Eskom remains a sustainable and viable business of global stature. Its responsibilities are facilitated by a well-developed governance structure through board committees, including the executive management committee (Exco), as well as subcommittees of Exco and a comprehensive delegation-of-authority framework. This framework assists decision-making without diluting director accountability and responsibility. The board reviews the framework regularly. It was last reviewed in December 2007.

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