Eskom Holdings SOC Limited vs. Financial Mail


Tue, Apr 25, 2017

Ruling by the Press Ombud

25 April 2017

This ruling is based on the written submissions of Ms Kelebogile Galeforolwe of Ledwaba Mazwai Attorneys, on behalf of Eskom, and those of Rob Rose, editor of the Financial Mail magazine.

Eskom is complaining about three articles in the Financial Mail, headlined Damning Eskom Report Exposed: Awkward details, family dealings and self-inflicted load-shedding – The secret Eskom does not want you to see (9 February 2017); Eskom Investigation: Anatomy of a corporate cover-up (9 February 2017); and The full Dentons report Eskom doesn’t want you to see (15 February 2017).

Complaint                                            

Eskom complains that the:

·         magazine obtained its information illegally and dishonestly, and that its journalist was lacking of bona fides to the prescribed legal Promotion of Access to Information Act (PAIA) process in his determination to undermine it;

·         texts contained a myriad of breaches of the Code of Ethics and Conduct – reporting that was misleading, unfair, out of context, presented allegations as fact, unreasonable and negligent (details below);

·         reporters did not obtain Eskom’s views prior to publication; and

·         articles were crafted to communicate the message that Eskom’s current and past leadership was corrupt and incompetent, and was to be blamed for load-shedding and financial assistance it required from the government as its shareholder.

The texts

The articles, written by Sikonathi Mantshantsha, reported that Eskom decided not to release a report by the law firm Dentons into the root causes of its operational and financial meltdown in 2015 – after it earlier had invited the media, promising to release the report. Three different iterations of the final report existed, and Eskom reportedly insisted that details about implicated individuals be omitted from the final report.

The complaint in more detail

In general

Background

Galeforolwe says that on 7 February 2017, Eskom explained at a media conference that it intended to deal with the release of the Dentons report (“Dentons”) within the legal prescripts of PAIA. On that day, the power utility received a request by Mantshantsha for access to information. He specifically asked for the:

·         preliminary report on the Dentons investigation into Eskom;

·         interim report on that investigation; and

·         final report.

The next day, Eskom released a redacted version of Dentons in response to several PAIA requests, removing from that document information which was mandatory to remove, or within its discretion to withhold (in terms of PAIA).

On February 9, FM published its first two articles – without giving Eskom notice of its intention to publish, or affording it a right of reply. The same happened with the story that was published on February 15. In this text, FM reported that the full, un-redacted Dentons report was available on its website.

Turning to the specifics of the complaint, Eskom continues as follows:

Information obtained illegally, unfairly

Eskom says FM obtained its information illegally and dishonestly, and that Mantshantsha was lacking of bona fides to the PAIA process, purporting to seek access in terms and within the purview of that act – but of records that he already had in his possession. This means that he did not necessarily seek to be subject to the PAIA process and was determined to undermine it.

Citing five examples, Galeforolwe says the articles were clearly based on such information, adding that the journalist did not allow the provisions of PAIA to be applied “including those relating mandatory refusal enjoined upon public entities such as Eskom…”

The attorney argues that FM cannot rely on public interest in this matter, as such interest is regulated by PAIA. “It would hardly be in the public interest for a journalist to decide to ignore the prescribed legal process in the manner in which he or she obtains and publishes any records of a public body. PAIA has determined the framework [and] balance of public interest insofar as access to records is concerned,” Galeforolwe states.

She adds that, were FM and the journalist unhappy with Eskom’s decision to withhold parts of Dentons, they could have approached the court for relief and not take the law into their own hands. “Such an action on its own flies completely [in] the face of public interest in this regard,” she submits.

Proper context, balance

Eskom complains the stories omitted to reflect what was written in the introduction to Dentons, which stated: “[T]he findings, views, conclusions and recommendations set out in this Report are…subject to verification and testing…and do not constitute definite findings views, conclusions and recommendations.” Yet, Galeforolwe submits, the stories presented the report as presenting facts – which were still unverified and untested.

She adds that the stories should also have quoted Dentons as stating that:

·         any person intending to rely on any part of that report “should take such verification and other steps, and seek such advice, as may be appropriate”;

·         the report was prepared for the sole and exclusive benefit of Eskom, and it “should not be used or relied upon for any other purpose”; and

·         the contents of the report were strictly confidential and might not be disclosed in full or in part without prior written consent from the Dentons firm.

Galeforolwe concludes that, given these qualifications in Dentons, “it is not fair and certainly completely out of context to criticise Eskom in the decision it had taken all along to keep the report confidential…and [to] seek to attribute suspicions of wrong doing on the part of Eskom…” – and to castigate its chairman for not making that report public.

The first article

First paragraph

“Among the problems it uncovered is that too many in management seemed far more focused on leveraging Eskom’s vast buying power for their self-interest, rather than to drive efficiencies.”

Eskom says this statement purported to report on paragraph 2.2.2 (c) of Dentons. However, the allegation referred to was the view of some officers who had verbally provided examples of some senior executives seeking opportunities ostensibly to benefit themselves. Galeforolwe notes Dentons stated that its investigation had not been long enough to allow the firm enough time to investigate these allegations.

Second paragraph

“Eskom this week decided it would not release a long-awaited report into the parlous state of the power utility after all. This was a major U-turn after it had earlier invited the media, promising to release the two-year-old report that would reveal the root cause of its operational and financial meltdown in 2015, as well as shed light on the inordinate delays and cost overruns at its new power stations.”

Eskom denies it announced that it would no longer release the report – it says it merely stated that access to the document would be restricted to PAIA’s legislative framework. In fact, the utility did release the report (within PAIA legislation.) It is therefore false to state that it “would not release” the report, and that this represented a “major U-turn”.

Paragraph three

“Instead, on Tuesday chairman Ben Ngubane said the board had received ‘legal advice’ to the effect that the report must be released only to those who had requested access to it, in terms of [PAIA].”


Eskom says this statement created the false impression that it had reneged from a promise to release the report, that it was hiding behind legal advice, and that it used PAIA to restrict access to the report. Galeforolwe says the journalist must have known that Eskom had 90 days to respond, as well as about the mandatory and discretionary refusal of disclosure of information (he says the law provides for instances in which access to information may be refused by public bodies such as Eskom).

She argues, “As such it would not be surprising to a journalist for a public body to be refused access or furnished redacted portions of documents requested…”

Fourth paragraph

“However, the Financial Mail has seen three different iterations of the final report, compiled by law firm Dentons, and has been briefed on an earlier interim report. Given the damning findings, it’s evident why the Eskom board were keen to keep it under wraps – until leaks from within made it impossible to maintain the cover-up.”


Eskom says the factual situation is that it released:

·         a redacted report, in terms of PAIA, on February 8 (a day before the publication of the story in the FM); and

·         only the final report and not some different iterations of it.

Galeforolwe argues the FM has in fact admitted that it was reporting on data not obtained in terms of PAIA – which, she says, was dishonest, illegal and unfair.

Paragraph five

“The story is this: In May 2015 Dentons presented an interim report to the board which was explosive, according to those who saw it. It contained, for example, awkward details about how certain Eskom executives and senior managers allegedly diverted contracts to themselves or their families, to the ultimate cost of the taxpayer.”

Eskom says this statement was probably based on Section 2.2.2 (c) of the report – but again, it must be noted that the report itself stated that the allegation referred to was the view of various officers, and that Dentons said that its investigation had not been long enough to allow the firm enough time to investigate those allegations, “rendering the factual accuracy of the information to be in doubt”, the attorney adds.

Galeforolwe reiterates that the journalist neglected to mention this fact – which, she says, amounted to a material omission.

Sixth paragraph

“In the end, Eskom terminated the probe early, and locked the final report in the chairman’s vault.”


Galeforolwe points out the report itself, in its introduction, said that Eskom’s board was satisfied with the investigation and the degree of detail covered in a short period of time, that the investigation provided the board with information it needed to take decisions as to how to manage the affairs of the corporation, and that no further investigatory activities were required.

She argues that this was inconsistent with the suggestion in the story that Eskom terminated Dentons’ mandate and tried to suppress the report. This portrayal, she says, was false and misleading.

Paragraphs 13, 14, 15

·         “The Dentons Report also raises new questions over Eskom’s rationale for load-shedding. Dentons said there had been no significant increase in electricity demand for five years from 2008.”

·         “Yet it was during this period that the country was subjected to daily load-shedding that cost the economy billions of rands – R438m/day, according to Ngubane.”

·         “In 2012 demand was marginally above that of 2008, while from 2013 to 2015, demand only matched 2010 levels during the Soccer World Cup. Today, Eskom produces less power than it did during its highest-ever demand period – 2007. Acting CE Matshela Koko said on January 24 that ‘there was lower demand’.”

Eskom complains the story failed to report the fact that the non-escalation in electricity demand did not translate to the conclusion that load-shedding was not probable. In plain English, this means that the journalist should have reflected the reasons for Eskom to resort to load-shedding.

Sixteenth paragraph

“Dentons points that from 2007, coal prices fell on average by 50% from US$120/t to around $60/t in 2015. Yet Eskom’s coal bill grew by 18%/year from 2006.”

Galeforolwe says Dentons did state the above. However, the report followed this up by stating that the R/$ exchange rate still made it more profitable for coal suppliers to export their product rather than to sell it locally. “This alternative market is a significant driver of the local price in coal,” it said.

Therefore, the attorney argues, the reportage made it seem as if Eskom was negligent when buying coal at high prices while the price of that commodity had dropped. Instead, the journalist should have pointed out that Eskom’s coal bill was subject to the R/$ exchange rate and that the preferred exporting of coal had pushed up its price.

Paragraphs 18, 19, 20

·         “Also, corruption: management diverting opportunities to themselves at the expense of Eskom and the consumer.”

·         “Dentons killer punch, diplomatically delivered, was this line, in one of its earlier reports: ‘If management’s energies are centered on leveraging Eskom’s considerable buying power for self-interest, rather than to drive efficiencies, the notion that the tariff is not cost-effective loses credibility.”

·         “In the final ‘official’ version, this part has been watered down to refer vaguely to need to check whether there are any conflicts of interest with management.”


Regarding the first two quotes cited above, Galeforolwe reiterates her argument about Dentons having stated that it did not have enough time to investigate the veracity of the allegations.

In the third statement, she argues, the journalist intentionally misled the reader into thinking that the report excluded the statements contained in paragraphs 18 and 19. “The writer distorts the facts by suggesting that the section that canvasses conflicts of interest with management has replaced the allegations he quoted [in those paragraphs]” – while, in fact, those allegations were published in the report.

Twenty-first paragraph

“But in earlier versions, it was more direct: ‘There is a significant list of examples of questionable procurements, and poor contract management, even including areas that should be in the spotlight, such as ad hoc arrangements with supplier of diesel not subjected to discounts despite the purchasing power Eskom has’, Dentons said.”


Galeforolwe again proffers the argument that Dentons said it did not have enough time to investigate the allegations. She adds the notion that the final report was less direct was false and misleading, adding that this paragraph portrayed allegations as fact.

Paragraph 22

“The law firm is assiduous in all versions of the report to place on record that it was prevented from finalizing its probe, which was cut off after 45 days, despite Eskom board minutes acknowledging at the outset that the probe could take up to 12 months.”

Eskom denies that Dentons said it had been “prevented” from finalizing its probe – the utility merely requested the law firm to prepare the report reflecting the state of the investigation at that specific time “on the basis that the investigation had revealed sufficient information for the purposes of the board”.

Galeforolwe says this misrepresentation fed into the journalist’s agenda of trying to advance the idea that Eskom had been wanting to cover up matters. She adds, “The fact that the board minutes record that the probe could take 12 [months] does not mean that the probe exclude the possibility of the Report being sufficiently complete in 45 days.”

Thirty-third paragraph

“Yet, in the sanitised report finally adopted as the official one, Eskom made sure that any reference to Hitachi, or allegations of its executives diverting business opportunities to themselves or their relatives, had been expunged.”


Eskom says it is not true that all references to Hitachi were expunged – Hitachi was mentioned in paragraph 5.2 on page 40. The attorney, however, adds that the redacted version did expunge those references.

Paragraph 35

“But instead of digging deeper, Eskom terminated Dentons’ mandate and tried to suppress that information.”

Galeforolwe reiterates that the report itself, in its introduction, said that Eskom’s board was satisfied with the investigation and the degree of detail covered in a short period of time, that the investigation provided the board with information it needed to take decisions as to how to manage the affairs of the corporation, and that no further investigatory activities were required.

She says the journalist based his argument on the opinion that Eskom had asked Dentons to prepare a preliminary as its last submission. She adds that Eskom found the information to be sufficient – but that did not mean that if could not have referred some matters to internal departments for further investigation.

The second story

Twelfth paragraph

“As it turns out, nothing could be further from the truth. After two years, the Financial Mail learnt that the Dentons investigation had been abruptly abandoned. Worse, Eskom took the half-finished report and further sanitised it, brushing out apparent evidence of wrongdoing by executives.”

Galeforolwe repeats that the report itself, in its introduction, said that Eskom’s board was satisfied with the investigation and the degree of detail covered in a short period of time, that the investigation provided the board with information it needed to take decisions as to how to manage the affairs of the corporation, and that no further investigatory activities were required.

Paragraph 42

“It was at this point that the audit & risk committee, which had been mandated by the board to manage the Dentons investigation, lost control of the process. Ngubane took over and steered the board towards agreeing that the names of those mentioned in the report be removed from the final report. This is corroborated by the minutes.”


Eskom denies that the reported information was “corroborated by the minutes”. Galeforolwe says the minutes of the meeting of 14 July 2015 did not record a discussion resolution to the effect that the names of those mentioned in the report were to be removed from the final report.

Forty-third paragraph

“What it means: Inquiries into the progress of the probe were met with aggression and conflicting statements.”


Eskom says the minutes made no reference to any “aggression and conflicting statements”. Galeforolwe argues the journalist drew his own inference based on an untrue allegation, and his reportage was therefore baseless and unfounded.

Paragraphs 44 and 45

·         “ ‘However, concern was expressed with regard to the collection and destruction of initial reports’, read the minutes of a board meeting held on August 14. ‘The company secretary was expected to take the necessary steps to ensure that all original reports were collected in exchange for the final reports,’ it said.”

·         “The chairman of the people & governance committee undertook to ensure all the interim reports ‘were returned to her within seven days for these to be destroyed’. A messenger was sent round to the homes and offices of board members to collect the presentation.”


Eskom says the minutes of 14 August 2015 stated, “The Company Secretary was expected to take the necessary steps to ensure that all original reports were collected in exchange for the final reports… the Chairman of P&G, Ms V Klein undertook to ensure that all reports were returned to her within 7 days for them to [be] destroyed.”

Galeforolwe argues that the reporter distorted the content of the minutes to create the impression that there had been a conspiracy to suppress certain information.

Forty-sixth paragraph

“Dentons had to be convinced to produce a letter confirming that no wrongdoing had been found against anyone, according to the minutes.”


Eskom says this statement is false and misleading – the minutes merely stated that Eskom had received a letter from Dentons confirming that no wrongdoing had been found and made no reference to the law firm having to be convinced to provide such a letter. The impression that Dentons was coursed and pressured into providing such a document was false and misleading, the attorney attests.

The third article

Fourth bullet point of paragraph 13

“Senior executives handpicked suppliers they wished to negotiate with, which meant that other, more capable and more cost-effective contractors were excluded.”


Eskom says the journalist omitted to provide context in that the statements quoted were the views of employees, which Dentons had stated it did not have an opportunity to investigate or verify.

Financial Mail responds

In general

Background

Rose says on 12 March 2015 Eskom publicly announced that the board had resolved to commission an independent enquiry into its activities. In a media statement the corporation said that to “ensure that this process is as transparent and uninhibited as possible” several senior executives, including the chief executive officer, were asked to “step down” for the duration of the enquiry.

Dentons presented its preliminary findings at a special board meeting on 25 June 2015, delivered a draft report to the board on 3 July 2015 and sent a final report to Eskom’s Audit and Risk Committee on 21 July 2015.

The editor says that, despite having placed the investigation squarely in the public domain, Eskom failed to release any version of the report publicly and also failed to inform the public of the findings and recommendations. He asserts, “Media enquiries by [FM] were met with vague and aggressive responses by Eskom chairman Dr Ben Ngubane, to the effect that the report is ‘not for public consumption’ and that the report had been handed to the minister of public enterprises Lynne Brown and was being used to ‘fix what was wrong’ with Eskom.”

On 24 January 2017 Brown told journalists that the report was “incomplete” and useless, adding that people were mentioned by name in the report “[a]nd we don’t really want to (publish) that”.

Business Day, on 30 January 2017, carried a front-page story, headlined Incriminating Eskom report kept in a vault, which triggered an extensive public debate around the non-release of Dentons. Rose says the introductory paragraph of this story captured the essence of the public interest in this matter: “The Eskom board has for two years been sitting on a damning report that cost millions of rands to produce and resulted in the loss of its three top executives, plunging the embattled company into a further leadership crisis that deepened load shedding, which cost the economy billions. The report has been kept in a vault since its completion in July 2015, fuelling suspicions of a cover-up of corruption by the utility’s leaders.”

On the same day, Eskom issued a media statement in which it explained that after receiving the interim report the board found that “there were no new issues that were revealed by the inquiry” and that instead of continuing with the enquiry, it decided to “implement the recommendations of the review rather than suffer from analysis paralysis”.

Also on January 30, the DA issued a statement saying, “No credible reason for keeping the report secret has been given”, and “South Africans deserve to know how public funds are spent and this report should be made public in the interests of transparency and openness.”

Rose says within days of these events Eskom changed it stance on releasing the report, and invited the media to a briefing on 7 February “where (Dr Ngubane) will be releasing the Dentons report to the public”.

However, at the briefing Ngubane told reporters that Eskom would not be releasing the report after all and that anyone who wanted to see the document should make a formal application in terms of PAIA.

The editor said MiningMx reported on this event as follows: “THE controversy over the Dentons report on the state of Eskom has, if anything, intensified after today’s media conference at the utility’s Megawatt Park headquarters at which the invitation specifically stated the report would be released to the public but – in the event – it was not. Instead, people interested in reading the report will have to apply to Eskom in terms of [PAIA] and the utility would then deal with such applications ‘in terms of the legal framework of the Act’.” [http://www.miningmx.com/news/energy/28927-eskom-discombobulates-release-r20m-denton-report/ ]

FM then duly applied in terms of PAIA for the report. However, the next evening (on February 8) Fin24 reported that it had received a “heavily redacted” copy of the report. The Fin24 reporter tweeted a copy of one of the pages of the released report, showing an entire page had been removed. Rose says that on FM’s calculations, Eskom blacked out about 30% of the version it released, making it completely unusable.

On February 9 FM was told that it may collect its redacted copy of the report requested under PAIA. “Having already seen the redacted copy released to Fin24, FM decided to publish the full, un-redacted report it had received from its sources,” Rose submits.

PAIA

Rose notes Eskom claims that the FM breached the Press Code “in the manner” in which it “crafted” the articles in that they constituted reporting on information that has been obtained outside the prescribed legal process as prescribed in terms of PAIA.

Saying that Eskom’s complaint is totally misguided, the editor argues there is no law that states that the media are obliged to follow the PAIA process in order to obtain documents, or that documents obtained outside the mechanisms of PAIA were “unlawfully” obtained. 

The reporter argues that, essentially, Eskom is implying that FM based its articles on stolen documents. “We deny that we were party to any unlawful conduct or that we obtained the full report illegally. In any event the Press Code, in section 1.4 gives the media the right to use information even if obtained unlawfully, if the public interest so dictates,” he continues.

Rose also refers to a recent judgment of the Johannesburg High Court, in which the court dealt with a similar situation whereby the media obtained an internal South African Airways “confidential” document from sources. At par 65 the court held as follows: “Moreover, the controversy about SAA and its dependence on taxpayer funds seems to me to be a demonstrably obvious topic about which every citizen has a tangible interest to be informed. If the constitutional promise of transparency in public administration is to mean anything, then awareness of what public bodies do with the nation’s money is a low threshold to demand. When an existing controversy is raging, this is all the more so. Accordingly, the public interest in being informed outweighs the right of SAA to confidentiality in the contents of the document.” [Judgment available at http://www.saflii.org/za/cases/ZAGPJHC/2015/293.pdf]

The editor argues that the same rationale applies in this matter. He says FM sought to enhance the rights of the public to the information held and concealed by Eskom. He adds that the magazine repeatedly gave Eskom an opportunity to provide information, but it refused to do so.

By publishing the full, un-redacted report, the FM played its constitutional role as a watchdog of the public, Rose states.

‘Qualified’ report

Regarding the complaint that FM failed to mention a qualification contained in the report itself (the statement that the report did not contain definitive findings, but was subject to verification and testing), Rose denies that FM has in any way misled readers as to the status of the findings in Dentons.

He says:

·         From the start of FM’s coverage of the issue, the public was aware of the fact that the Dentons investigation was never pursued to its finality and that it was cut short;

·         In the first FM story complained of, the findings in the report were clearly presented as “allegations” by “Eskom employees” and “various officers”. It also stated that Dentons was “cut off after 45 days”; that certain findings were based on “prima facie” indicators; that certain conduct “appeared” to have taken place; and that Dentons presented “a snapshot” of what was taking place at a particular time instead of “digging deeper”;

·         The second article reported that, “In all three versions of its report, Dentons stated clearly that it had been stopped in its tracks in the early stages of the investigation. In the end, it conducted 45 days of investigative work, starting on April 20. The results were squeezed into 304 pages and handed to Eskom on July 3 2015, marked as ‘reflecting the state of the investigation as at June 18 2015’. It was only meant to deliver a final report on July 31 that year, and to present progress reports every two weeks… The qualification was repeated in par 30 of the second story, and in par 19 we stated that Dentons saw a need to further investigate these allegations”; and

·         Together with the third story complained of, FM published a complete, un-redacted version of the report on its website, placing all the facts before the readers, including Dentons' disclaimers as contained in the report.

Rose concludes that, in the context of FM’s series of articles on the issue, there cannot be any doubt in readers’ minds about the status of the report, the sources it used and the qualified nature of its findings. “Reasonable readers understand that an interim report is not final and that an investigation that was ‘cut off’ prematurely is not final and definitive. Eskom’s complaint that FM misrepresented the findings as definitive is simply incorrect,” he argues.

‘Secret’ report

Rose says Eskom’s complaint suggests that the utility was obliged by law to keep the report from the media and the public at large.

The editor asserts that Eskom’s reliance on a confidentiality clause in a report that the corporation itself had commissioned and paid for, to justify why it could not release the document publically, is “absurd”. He argues that confidentiality clauses in such reports are standard and that in itself did not prevent Eskom from deciding to release the report, nor did PAIA do so. 

Rose adds that Eskom placed the issue of the investigation into the public domain with its media briefing in March 2015. He submits, “It clearly knew and accepted that the investigation was of great public interest. Yet it persistently refused, for close on two years, to release the report or to even disclose to the public what was found. Only when Eskom’s public utterances on the nature of the report were publicly contradicted by the minister, and public pressure for the release of the report mounted, did they accede. And even then Eskom only released a heavily redacted report.”

Under the circumstances, the reporter concludes, it was entirely reasonable to hold and express the view that Eskom regarded the report as secret and that it did not want the public to see it. “The caption and headlines complained of are clearly opinions expressed by FM, and constitute a reasonable reflection of the stories concerned,” he says.

Failure to seek comment

Rose denies that FM did not seek Eskom’s views prior to publication. He says the magazine timeously, and on at least three occasions (in three interviews with Eskom's board members and the Minister of Public Enterprises) gave the corporation a right of reply.

In addition, FM:

·         attended a media briefing on January 24 at Eskom head office “where we asked questions and noted responses”;

·         sent Eskom a list of detailed questions on 26 January. The utility responded the next day, but instead of answering the questions numerically as presented, Eskom simply copied and pasted a media statement that did not deal with the specific questions. FM in response pointed out that some of the questions were not addressed, to which there was no reply; and

·         attended a media briefing on February 7 where it put further questions to Eskom’s board, to which it responded verbally.

The reporter says that, based on the above, FM then proceeded to publish the articles, fairly and adequately reflecting the responses.

The first article

Rose responds as follows:

Paragraph 1: This was intended and understood as FM’s view on what Dentons found. Later in the story the report was quoted, ascribing the statement to “various officers” who provided “verbal examples” of the information at hand. 

Paragraphs 2, 3: These paragraphs should not be read in isolation, as Eskom tries to do. Together, they accurately conveyed the background events as outlined above. The media invitation was unqualified: Eskom would be “releasing” the report; and Ngubane himself said, “We wanted to release it to the public, but legal advice said no.” The reference to a “U-turn” was justified. FM also placed an in-article hyperlink to an article headlined, “Eskom relents on Dentons report, agrees to limited release”, which listed Eskom’s reason for not releasing the report publicly.

Paragraphs 4, 5: The complaint about these paragraphs has been dealt with above.

Paragraph 6: Both statements were factually accurate, and the story did not attribute them to Dentons. FM included an article hyperlink to their previous lead story, headlined “Incriminating Eskom report kept in a vault”, which gave context and background to these statements. The story also explained the origin of these statements in paragraphs 25 and 26.

Paragraphs 13, 14, 15: The statistics mentioned were contained in Chapter 3 of Dentons; and the Eskom officials quoted here (Ngubane and Koko) made these statements on January 24, at the media briefing.

Note the following sections in the Dentons report:

·         Section 3.2 “Growth in electricity demand”, paragraph 3.2.1 (a):  “Figure 15 shows the increase in electricity demand (in GWh) during the period 2001 - 2008. During the period 2001 to 2008, the electricity energy demand increased on average by around 3.4% per annum which strongly correlates with the growth in the coal consumption. During the period 2008 - 2015, there was no average annual increase in electricity. Electricity demand effectively peaked in 2008 before the financial crisis. In 2009, electricity demand reduced, then grew marginally in 2010 and 2011 to the same level as 2008. In 2012 demand grew marginally above 2008 consumption but fell away from 2013 to 2015 (similar to 2010 levels) again. During this period, the coal consumption reflected growth in the electricity and remained within a band of 120-125 MTon per annum (2008 consumption 125 MTon)”;

·         Chapter 1 stated that the load-shedding had been caused by Eskom's failure to properly maintain its generation infrastructure;

·         On page 19, section 3.6 dealing with “Plant maintenance”, paragraph 3.6.1: “The Generation Sustainability Strategy document cited information indicating that Eskom has reduced planned maintenance (reflected in the Planned Capacity Loss Factor (PCLF)) in order to maintain "Keeping the Lights On (KLO) strategy”;

·         Paragraph 3.6.2: “The historically low PCLF coupled with the KLO strategy and factors such as coal quality and high utilisation factors have led to a sharp increase in Unplanned Capacity Loss Factor (UCLF) from 2009… The reduction of proactive maintenance due to the deferral of outages has led to more corrective maintenance being required. This has led to a situation where a substantial outage backlog (44% average across the fleet) has been accumulated’; and

·         Paragraph 3.6.4: “The lack of maintenance is a significant contributory factor to the current poor plant performance.”

Paragraph 16: Eskom incurred its cost of coal in rand, for it bought locally – Dentons merely pointed out that suppliers could still profit on their coal sales to entities that paid in US dollar, rather than selling to Eskom (locally).

Paragraphs 18, 19, 20: Eskom stopped Dentons in its tracks, preventing it from taking the allegations forward. It is not true that the firm did not have the opportunity to verify or investigate any of the allegations that it presented to Eskom – the truth is that Eskom prevented it from doing so. He submits, “We have consistently stated that our sources have told us that there were earlier versions of the Dentons report, that Eskom ordered destroyed, or further sanitised, to remove the incriminating information. We stand by this. We have since pointed at the board minutes of 14 August 2015, which confirm the above averment.”

Paragraph 21: In all FM’s reportage, the magazine has stated that Dentons made allegations, and it has not misled the public by portraying allegations as fact.

 

Paragraph 22: The board minutes of 14 July said Dentons must be paid its full contracted fee and stop working. Eskom has conceded in its complaint that it stopped the firm from finishing its work. Ngubane told the magazine on February 7 that there was no point in continuing with the investigation, stating that Eskom was faced with a “trade-off between continuing with a prolonged investigation” and getting on with fixing what was broken. Ngubane said Eskom’s staff morale was already depressed, and the corporation then sacrificed the investigation.

 

Paragraph 33: The magazine constantly pointed out that some of the names survived Eskom's numerous attempts to remove them from the official Dentons report. Eskom was being non-transparent, concealing the truth from the public.

Paragraph 35: On 7 February 2015 Ngubane admitted that Eskom chose to sacrifice the investigation and instead concentrate on fixing the company. At the media briefing he said, “Continuing with the probe would demoralise staff in an already depressed company, and the board chose to implement recommendations from previous probes. Eskom was also running out of money to pay its 49,000 employees.” Together with Venette Klein, they defended hiding the information and destroying the interim report – on the basis that it had been uncorroborated. They declined to verify any part of the allegations, and then they misled the public for two years about it. Klein admitted that Eskom did not want this information falling “into the wrong hands”; she stated she was comfortable with the destruction of the interim report for this reason. Eskom, through Ngubane, is on record as saying, “The Dentons report is not for public consumption.” That translates to suppression of the report.

The second story

Rose continues:

Paragraph 12: This information was based on the board’s version in its minutes of 14 July 2015 – the article did not purport to be a quote from Dentons or from any other Eskom document.

Paragraph 42: The story attributed the information to the magazine’s (six) sources. FM obtained this information from these people – in separate interviews.

Paragraph 43: The statement did not purport to refer to board minutes; instead, it referred to the FM’s interviews at Eskom’s media briefing sessions when Ngubane kept the report hidden from the public. Ngubane was over a period of two years always aggressive and gave conflicting statements when questioned about the Dentons investigation. In the period between April 2015 and January 2017 he interchangeably told FM that Dentons was not for public consumption, that the investigation was complete, that Eskom was using the finding to fix what was wrong, and that the report belongs to the Minister of Public Enterprises.  

Paragraphs 44, 45: The statement in question was true and accurate. The information was not based on minutes, but on sources.

Paragraph 46: FM did not imply it had obtained this information from any board minutes – the data came from people who attended the meeting. These sources said the board asked Dentons to produce a letter stating there was no wrong-doing on anybody’s part. At the media briefing on 07 February 2017, Dentons managing partner, Noor Kapdi, admitted as much: He said, “The investigation is incomplete by a long shot” and stated that Dentons was “not entirely satisfied with the report”. But Eskom was the client, and the law firm acted only on its instructions. There were still “other areas that warranted further investigation”, he said. The investigation was not about finding any wrong-doing by anybody, and yet Dentons produced a letter saying that no wrong-doing had been found anyway. This was a pre-determined outcome:

Section 4 of the Dentons report, dealing with the purpose of the investigation, states on page 8 paragraph 4.9: “The TOR (terms of reference) do not require investigation of misconduct of any specific individuals. Accordingly, no recommendations are made in respect of action to be taken to deal with misconduct by any specific individuals.”

The third article

Rose again:

Paragraph 13, fourth bullet:  This bullet was accurate. On page 111, section 4.4.34 Dentons states, “In a separate allegation, officers of Eskom have witnessed examples of when suppliers have had bilateral discussions with board members about securing contracts, outside of any formal procurement processes. The inference drawn is that pressure is applied to general managers to accept the terms and choice of suppliers.”

This is an example of the exclusion of other competent suppliers, in favour of those chosen by the board members in their private meetings. FM provided context to this, and did not mislead anybody. “In all our reports we have clearly stated that Dentons made allegations, telling Eskom that it had been ‘told’ by Eskom employees of these allegations.”

For example, consider this extract from paragraph 16 of the second article: “ ‘Although the prescribed methodology (of the investigation) requires review of e-mails, we were not provided with access to any e-mails,” it (Dentons) said in the ‘final’ report. Nor was it allowed to interview the suspended executives. It had also planned to interview all those who had sat on the executive committee in the previous two years, ‘but was unable to do so in the limited time leading up to the presentation of this report’.”

Dentons stated on page 74, paragraph 2.2.2 (c) that, “Moreover, various officers have provided to us verbally examples of senior executives seeking opportunities ostensibly for the benefit of themselves at the expense of Eskom: denying Eskom a path to vertical integration of key suppliers, making deals with suppliers outside of the formal procurement process, and/or turning a blind eye to expensive contract breaches…”

This was immediately followed by Dentons’ tacit observation in paragraph 2.2.3 that, “There would appear to be prima facie indicators based on the above that Eskom has breached Treasury regulations pursuant to the Public Finance Management Act, 1999, and therefore contributed to its own financial challenges.”

To stretch the point further, on page 111, section 4.4.34, the Dentons report stated, “In a separate allegation, officers of Eskom have witnessed examples of when suppliers have had bilateral discussions with board members about securing contracts, outside of any formal procurement processes. The inference drawn is that pressure is applied to general managers to accept the terms and choice of suppliers.”

Rose concludes, “This is an example that excludes other competent suppliers, in favour of those chosen by the board members in their private meetings. To pay Dentons the millions of rand that Eskom did to interview Eskom’s employees, and then call the outcome ‘opinion or rumour’ talks to Eskom’s desperation to cover up its own corporate governance failures in this matter.”

Conclusion

Rose denies Eskom’s claims that the report was generally crafted to communicate a sensation suggesting that its current and past leadership had been corrupt and incompetent of managing it and had to be blamed for the load shedding and financial assistance that it required from the government as its shareholder. This was neither FM’s intention, nor the effect of the stories, he says.

“Our stories were instead carefully crafted to inform the people of South Africa of the state of affairs at Eskom:

·         “Why the utility had run out of capacity to produce adequate electricity to power the economy – causing job losses;

·         “Why it had run out of cash – threatening the non-payment of salaries to 49 000 employees, thereby putting the livelihoods of their 300 000 dependents at risk;

·         “Requiring the state to bail it out with R83bn of taxpayers' money in 2015 – thereby raising taxes (as it happened this year and in 2016); and

·         “Why the prices of electricity have had to rise over the years, to help Eskom out of its financial situation – further increasing the cost of doing business in South Africa.”

Rose says it seems that Eskom, now facing a public backlash for hiding the truth for so long, is seeking to quash further articles which it knows are imminent. This is a reasonable assumption, given how bald most of its allegations are. Worse, in some cases it makes claims that it knows to be false – such as its claim that FM did not ask for comment. The magazine accurately reported on various versions of a report by a third party. The versions of the reports were correctly stated. There is no obligation in law or in the Code of Ethics and Conduct that FM was under an obligation to verify the veracity of Dentons. Notwithstanding, FM gathered comment from sources and other parties in order to verify the content thereof. FM at all times acted in the public’s interest during the investigation.

Eskom replies

In general

Background

Eskom challenges Rose’s depiction of events that have led up to the writing of the stories. The corporation says he lacked certain key facts which consequently led to assertions that were inaccurate and misleading.

Galeforolwe says the editor’s version is mainly premised on these propositions:

·         if Eskom mentions publicly that it is carrying out an investigation then it is enjoined to publish the report irrespective of its content or other legal prescripts suggesting or dictating otherwise;

·         conflating a release of the Dentons Report within the preview of PAIA with a decision not to make that document public;

·         FM’s decision to publish the story was prompted by Eskom announcing its intention to release the Dentons Report in terms of PAIA and then releasing a redacted version; and

·         undue reliance on reporting or publication of other reports to sustain its propositions. 

She denies that Eskom was duty-bound to release the full report, even if it has publicly announced its intention to carry out an investigation. Moreover, Sections 33 and 46 of PAIA provide for not making certain information available.

The attorney adds that FM should have exhausted PAIA first, and says it is wrong for FM to base its argument on “public interest”, as this is regulated by PAIA.

Galeforolwe also contests FM’s argument about the SA Airways court case, saying that this case did not concern itself with the issues where the media had submitted itself to the PAIA legislative framework and thereafter failed to comply and recognise the full extent of that act.

The rest of Eskom’s reply largely repeats its complaint and does not materially add to the argument.

Analysis

Information illegally, dishonestly obtained; undermining PAIA

The scope of my mandate

It is not in dispute that Eskom decided to provide a redacted version of the Dentons Report, and that it justified its decision based on PAIA.

It falls outside my mandate to decide whether Eskom was duty-bound to release the report, and whether its decision to release a redacted version of Dentons was good or bad, right or wrong. That is not for me to say – my focus is on the articles that were published, and not on the complainant.

I am mandated to adjudicate on whether FM was at liberty to have obtained the unredacted report, and to use the (confidential) information contained in that version in its reportage.

Section 1.4 of the Code of Ethics and Conduct is relevant. It reads, “News should be obtained legally, honestly and fairly, unless public interest dictates otherwise.” In the Preamble to the Code “public interest” is described as “information of legitimate interest or importance to citizens”.

From a media ethical point of view (which is what the Press Council and its Code of Ethics and Conduct is all about), I first need to consider the following (tough) questions:

·         Who decides what is in the public interest? and

·         Are the media above the law?

Who decides what is in the public interest?

Eskom’s argument that public interest is defined in PAIA, and that FM therefore should have been guided by that act, goes to the heart of media freedom – and is therefore an extremely important and even crucial matter.

While I am not for one moment saying that the media should or may ignore PAIA, indeed, they may use PAIA to help them determine what is in the public interest, I also need to state that the final decision always has to rest with the media.

The reason for this is simultaneously simple and profoundly important – as the media are called the Fourth Estate because of its watchdog function, which is vital in any democratic state, it follows that they should not be dictated to or “regulated” (to use Eskom’s term) when it comes to the decision what is in the public interest (and therefore what to publish). No outside organisation, or an act for that matter, should make such a judgment on the media’s behalf.

Once the media start venturing along this road, they would soon find themselves on the slippery slope towards the precipice of regulation from outside the media.

It could happen that a medium may make a wrong decision in this regard, which would be problematic, of course – but in the interest of media freedom and of a healthy democracy the fact that the media should have the freedom make such a decision and not be dictated to or regulated by outside influences is more important than the merits of any particular decision.

Therefore, I cannot accept Eskom’s argument that PAIA should have “regulated” FM’s decision on what was in the public interest and what not. Freedom of the media is, after all, protected by the Constitution.

Are the media above the law?

The media certainly are not above the law – which is why the Preamble to the SA Code of Ethics and Conduct states that “[t]hey are subject to the same rights and duties as the individual”.

But there is also a reason for incorporating Section 1.4 into the Code, which makes provision for the illegal obtaining of news when public interest “dictates otherwise”.

This reason is incorporated in the Preamble, which declares that the media’s work “is guided at all times by the public interest” – and, by implication, not by outside influences. That is also why the Preamble adds that the media’s freedom provides for “independent scrutiny of the forces that shape society”.

If that “independent scrutiny” includes scrutiny of Eskom (or PAIA, for that matter) so be it.

Therefore, the question is not whether FM has unlawfully gained access to confidential information; instead, it is if whether FM was justified to do so (if it did) – which leads to the next few questions.

Some conditions

In determining whether FM was justified to obtain confidential information and publish it (even if it was illegal), the following questions come to the fore:

·         Was the information redacted out by Eskom of sufficient legitimate interest or importance to the public? and

·         Was obtaining the unredacted report through sources the only way in which FM could access that information? Or should the magazine have litigated to obtain the full report, using PAIA?

(Please note that I am not saying the magazine has acted illegally – I am concentrating on fundamental questions which will impact on my adjudication.)

Information of sufficient legitimate interest or importance?

The decision of what was in the public interest was FM’s to make, as I have argued above. In order to publish such confidential material, though, there are some conditions to be met – the first being if it was of sufficient public interest to persuade FM to publish.

The most important issues subjected to redaction seem to be the following:

·         The increase in coal prices and volumes (Eskom's biggest expenditure item);

·         The names of beneficiaries of the coal procurement contracts, with the costs;

·         Details of the entire diesel contract, including prices and the beneficiaries, which involved billions of rand;

·         The names of the implicated individuals, particularly Eskom’s own employees, as well as the names of Eskom’s employees who tried to stand in the way of the alleged corruption;

·         The names and details of the alleged offences, including irregular payments, or irregularities of the contractors implicated in the alleged wrong-doing;

·         Ten pages of lists of suspect procurement contract modifications by management;

·         Numerous other cases of huge swathes of evidence, including many pages from chapter 7, and many annexures.

These issues certainly were in the public interest, and it was indeed the magazine’s duty to reveal them.

Given the fact that taxpayers’ money was involved, that by far the greatest majority of citizens were using (and paying for) electricity, and the content of the redacted information, I can come to no other conclusion than that FM merely did its job and acted as a watchdog and a messenger.

The only way?

The second criterion is a situation where the information cannot be obtained through ordinary means. Clearly, the information was not going to come from Eskom. So should the magazine have used PAIA to appeal Eskom’s decision to withhold certain information, or was it justified to use its sources?

I have asked the editor why FM did not use PAIA to approach the courts on Eskom’s decision to withhold certain information, rather than use its sources.

He responded as follows (slightly edited):

“The FM had been requesting that report for two years. Eskom has shown no inclination that it planned to release the report; to the contrary, it simply avoided the question. In fact, it was only after we were able to get this report through our sources that Eskom then said it would release the report, before changing its tune and saying it would only do so based on a PAIA request. This evidently shows we forced its hand. And then it released a heavily redacted version that sought to obscure the truth. Crucial to this point is that Eskom has still not released the version we had, even in response to the PAIA requests from the other media – and has given no indication it would be willing to release this version. It seemed an obvious mechanism to be ‘seen to be doing the right thing’, but to substantively avoid doing this.

“It is important to note that even though Eskom called the press briefing on the 07 February 2017 – the day we were meant to be printing our story containing the contents of the report – so that it could ‘release the Dentons report to the public’ on this day, this was not a voluntary move on Eskom’s part. It was a mechanism to take the sting out of our story by giving it to every news organisation and by so doing to be seen to be transparent. I had told Eskom on numerous occasions when I sought information from them that I would be publishing on the day.

“The press code says that ‘news should be obtained legally, honestly and fairly, unless public interest dictates otherwise’. We did this, by gathering the information over the course of two years, giving Eskom ample time to release this information in the public interest, and warning them of our intentions (as the code says we should) and we gave them more than enough reasonable time, as the code stipulates. Specifically, the code (in 3.3.4) says we can publish if ‘it was reasonable for the information to be communicated because it was prepared in accordance with acceptable principles of journalistic conduct and in the public interest’. In this case, there seems no argument that it contravened this.

“Given that context, this complaint from Eskom is particularly disingenuous, and seeks to pull the wool over the Ombudsman’s eyes by implying it would have been willing to release the information when it has, despite numerous opportunities, patently failed to do this. We feel that in your ruling, it would be appropriate to draw attention to its duplicity in this regard which, if followed by other companies, would be detrimental not only to press freedom, but would allow companies to unethically ‘spin stories’.


With respect, this still does not answer my question as to why FM did not use PAIA to get the unredacted report from Eskom.

Be that as it may, I have little doubt that FM’s decision in this regard was the correct one. It is true that the magazine could have appealed Eskom’s decision in court, but that would have used up one thing which was of the essence (due to the huge public interest) – time.

It also follows that I am not even interested in the question of how FM got hold of the final document, whether legally or illegally – public interest in this matter was of such huge importance that it overrode any other concerns, and clearly, there was no other way of obtaining the information.

For that reason, I am also not concerned about whether the journalist used PAIA or not, when he allegedly had the unredacted document in his possession. If the reporter indeed undermined the PAIA process, that is a legal matter and not for me to adjudicate.

Conclusion

This means that the magazine was justified to obtain and publish the information which Eskom did not want to disclose – even should this be illegal or unfair (as provided for in Section 1.4).

Myriad of breaches

The first article

First paragraph

“Among the problems it uncovered is that too many in management seemed far more focused on leveraging Eskom’s vast buying power for their self-interest, rather than to drive efficiencies.”


In its complaint, Eskom refers to paragraph 2.2.2 (c) of Dentons. In that section, in Chapter 4 under the headline Financial Challenges, and under the sub-heading The causes of the Financial Crisis, the Dentons report stated the following:

“Moreover, various officers have provided to us verbally examples of senior executives seeking opportunities ostensibly for the benefit of themselves at the expense of Eskom: denying Eskom a path to vertical integration of key suppliers, making deals with suppliers outside of the formal procurement process, and/or turning a blind eye to expensive contract breaches. If management’s energies are centered on leveraging Eskom’s considerable buying power for self-interest, rather than to drive efficiencies, the notion that the tariff is not cost-reflective loses all credibility. This investigation was not long enough to allow us the time to investigate these allegations.”

From this, Eskom derives that FM should have made it clear that the allegation referred to was the view of some officers, and that that information had not been verified.

I do indeed take Eskom’s argument seriously in this regard. However, I also note that, immediately following that paragraph, Dentons continued to paragraph 2.2.3, stating: “There would appear to be prima facie indicators based on the above that Eskom has breached Treasury Regulations pursuant to the Public Finance Management Act, 1999 and therefore contributed to its own financial challenges.” (Underlining added.) The “based on the above” included paragraph 2.2.2 (c) – despite its clarification that the law firm did not have enough time to investigate those allegations.

This is the point: Dentons itself used the unverified statements to influence its conclusion. Having done that, I cannot blame the magazine for doing the same.

Based on these considerations, I cannot find for Eskom on this particular issue.

Second paragraph

“Eskom this week decided it would not release a long-awaited report into the parlous state of the power utility after all. This was a major U-turn after it had earlier invited the media, promising to release the two-year-old report that would reveal the root cause of its operational and financial meltdown in 2015, as well as shed light on the inordinate delays and cost overruns at its new power stations.”


Eskom complains that it never denied it would no longer release the report – it merely stated that access to the document would be restricted to the PAIA legislative framework. As such, its decision to release a redacted version of the report could not have been a “major U-Turn”.

I cannot agree with Eskom on this issue – the redaction of parts of the report indeed represented a “major U-turn”, as Eskom has never previously indicated it would not be releasing the full report.

Paragraph three

“Instead, on Tuesday chairman Ben Ngubane said the board had received ‘legal advice’ to the effect that the report must be released only to those who had requested access to it, in terms of [PAIA].”


I do not doubt that Eskom had 90 days to respond to a request, using PAIA, for the full report – but that is not the point. What matters, is that Eskom decided to restrict parts of the report, and that there is no evidence that Ngubane did not make the statement as quoted above.

From the documentation at my disposal, it was not a false impression to suggest that Eskom had reneged on a promise to release the report. FM has done nothing wrong in reporting this particular issue.

Fourth paragraph

“However, the Financial Mail has seen three different iterations of the final report, compiled by law firm Dentons, and has been briefed on an earlier interim report. Given the damning findings, it’s evident why the Eskom board were keen to keep it under wraps – until leaks from within made it impossible to maintain the cover-up.”


Eskom’s argument does not convince me that FM was wrong in publishing this section. I do not doubt that FM has seen three different iterations of the final report, etc. The fact that Eskom has only released a redacted report, as argued by Galeforolwe, does not mean that FM has not seen three versions of that document.

I have also already indicated that I do not blame the magazine for using information it had not obtained in terms of PAIA.

Paragraph five

“The story is this: In May 2015 Dentons presented an interim report to the board which was explosive, according to those who saw it. It contained, for example, awkward details about how certain Eskom executives and senior managers allegedly diverted contracts to themselves or their families, to the ultimate cost of the taxpayer.”


Eskom again points to paragraph 2.2.2 (c). My argument under the “First paragraph” above is relevant to this issue as well.

Sixth paragraph

“In the end, Eskom terminated the probe early, and locked the final report in the chairman’s vault.”


I accept Galeforolwe’s argument that Eskom’s board had indicated it had been satisfied with the investigation and the degree of detail covered in a short period of time, that the investigation provided the board with information it needed to take decisions as to how to manage the affairs of the corporation, and that no further investigatory activities were required.

However, this argument does not mean the statements, as reported, were factually inaccurate. Again, I do not find anything wrong with the reportage.

Paragraphs 13, 14, 15

·         “The Dentons Report also raises new questions over Eskom’s rationale for load-shedding. Dentons said there had been no significant increase in electricity demand for five years from 2008.”

·         “Yet it was during this period that the country was subjected to daily load-shedding that cost the economy billions of rands – R438m/day, according to Ngubane.”

·         “In 2012 demand was marginally above that of 2008, while from 2013 to 2015, demand only matched 2010 levels during the Soccer World Cup. Today, Eskom produces less power than it did during its highest-ever demand period – 2007. Acting CE Matshela Koko said on January 24 that ‘there was lower demand’.”


The gist of this part of Eskom’s complaint is that the story did not reflect the reasons for its decision to invoke load-shedding. However, Galeforolwe does not clarify what those reasons are, neither does she point out where in Dentons this can be found.

Rose cites from the report in substantiation of the article and argues that Eskom officials were quoted. However, his argument is irrelevant – the complaint is not about what was written, but rather about what was omitted.

I agree that, once the reporter has stated that Dentons raised “new questions over Eskom’s rationale for load-shedding”, it was necessary to clarify that statement by balancing it with what this “rationale” was.

Sixteenth paragraph

“Dentons points that from 2007, coal prices fell on average by 50% from US$120/t to around $60/t in 2015. Yet Eskom’s coal bill grew by 18%/year from 2006.”


Eskom does not complain about this specific sentence, but rather about the fact that the following sentence in Dentons was not reflected in the story – which clarified that the R/$ exchange rate still made it more profitable for coal suppliers to export their product rather than to sell it locally, which in turn pushed up the local price of coal.  Galeforolwe therefore argues that the journalist should have mentioned that the price of coal was subject to the R/$ exchange rate and that the preferred exporting of coal had pushed up its price (in order to explain why Eskom’s coal bill grew while the price of coal fell drastically).

Rose’s argument may have some truth to it (he says Dentons merely pointed out that suppliers could still profit on their coal sales to entities that paid in the US dollar, rather than selling it to Eskom), but that is not a sufficient explanation.

Again, the complaint is not about what was published, but rather about what was omitted.

Given the fact that the journalist did specifically ask why Eskom’s coal bill grew despite the rapid declining of coal prices, he could have referred to the R/$ exchange rate.

However, I do not believe that this was a major factor in Eskom’s growing coal expenses, and therefore the omission cannot be described as material. 

Paragraphs 18, 19, 20

·         “Also, corruption: management diverting opportunities to themselves at the expense of Eskom and the consumer.”

·         “Dentons killer punch, diplomatically delivered, was this line, in one of its earlier reports: ‘If management’s energies are centered on leveraging Eskom’s considerable buying power for self-interest, rather than to drive efficiencies, the notion that the tariff is not cost-effective loses credibility.”

·         “In the final ‘official’ version, this part has been watered down to refer vaguely to need to check whether there are any conflicts of interest with management.”


Regarding the first two bullets (paragraphs 18 and 19), Eskom reiterates its argument about Dentons having stated that it did not have enough time to investigate the veracity of the allegations.

I have already argued this issue above.

Apropos the third statement (paragraph 20) Galeforolwe argues that the journalist intentionally misled the reader into thinking that Dentons excluded the statements contained in paragraphs 18 and 19. “The writer distorts the facts by suggesting that the section that canvasses conflicts of interest with management has replaced the allegations he quoted [in those paragraphs]” – while, in fact, those allegations were published in the report.

Rose’s argument that it is not true that Dentons did not have the opportunity to verify or investigate some allegations, as the utility prevented it from doing so may or may not be true. However, that is not the point Eskom is raising here. The same goes for his argument that there were earlier versions of Dentons.

The question is whether the first two bullets were substantially “watered down”. That does not seem to be the case.

Twenty-first paragraph

“But in earlier versions, it was more direct: ‘There is a significant list of examples of questionable procurements, and poor contract management, even including areas that should be in the spotlight, such as ad hoc arrangements with supplier of diesel not subjected to discounts despite the purchasing power Eskom has’, Dentons said.”


Eskom again raises the issue of Dentons stating that it did not have enough time to investigate the allegations.

Paragraph 22

“The law firm is assiduous in all versions of the report to place on record that it was prevented from finalizing its probe, which was cut off after 45 days, despite Eskom board minutes acknowledging at the outset that the probe could take up to 12 months.”


Eskom denies Dentons said that it had been prevented from finalizing its probe – it says that the corporation merely requested the law firm to prepare the report reflecting the state of the investigation at that specific time “on the basis that the investigation had revealed sufficient information for the purposes of the board”.

I agree that the word “prevented” does not appear in the report, at least not in the section that deals with the period of investigation (subheading 7 under the Introduction).

So, what does the report say on this issue?

Initially, the contract stated that the investigation had to be concluded within three months commencing no later than two days after the signing of the necessary documents. This took place on 17 April 2015. However, it was also noted at a board meeting held on 31 March 2015 that the investigation could take up to twelve months.

Then comes the crucial part: “The contractual three-month period for the Investigation was possible only (i) on the assumption of full cooperation by Eskom for the purposes of the Investigation, and (ii) on the basis of the specified purpose and prescribed methodology of the Investigation (see in this regard paragraphs 4 and 5). In the circumstances we were requested to prepare this Report reflecting the state of the Investigation as at the mid point of the Investigation period on the basis that the Investigation had at that stage revealed sufficient information for the purposes of the Board.”

Paragraphs 4 and 5 set out the purpose, as well as the methodology of the investigation.

Here are my considerations:

·         The report is dated 2 July 2015. For such a report, which consists of 272 pages to be completed, the directive to prepare it must have come at quite an early date. FM says it was 45 days after the signing of the contract, and I have no reason to disbelieve that figure;

·         It is not in dispute that Eskom asked Dentons to finalise its report before it has finished its investigation. The report even speaks of the investigation haven been at its “mid-point”;

·         To me, as an outsider, this does sound strange – why would Eskom not use the opportunity to get all the cards on the table? Why be satisfied with “sufficient information” if such data had not been complete?

Given these considerations, I do not blame FM for using the word “prevented”, even if the word itself does not appear in the report. The message certainly is there.

If a reasonable reader then would interpret the “message” that Eskom wanted to cover up certain information, it should blame itself, and not the messenger.

Of course Eskom is correct that the twelve months mentioned in the board’s minutes did not necessarily mean that the investigation would or should take that long. But surely, that is not the point.

Thirty-third paragraph

“Yet, in the sanitised report finally adopted as the official one, Eskom made sure that any reference to Hitachi, or allegations of its executives diverting business opportunities to themselves or their relatives, had been expunged.”


Eskom says it is not true that all references to Hitachi were expunged – paragraph 5.2 on page 40 Hitachi was mentioned. The redacted version, however, did expunge those references.

If the redacted version had omitted the references to Hitachi, as admitted by Eskom, then the reportage on this point was correct.

Paragraph 35

“But instead of digging deeper, Eskom terminated Dentons’ mandate and tried to suppress that information.”


Based on all of the above-mentioned information and arguments, I believe that the journalist was justified in making this statement.

The second story

Twelfth paragraph

“As it turns out, nothing could be further from the truth. After two years, the Financial Mail learnt that the Dentons investigation had been abruptly abandoned. Worse, Eskom took the half-finished report and further sanitised it, brushing out apparent evidence of wrongdoing by executives.”


Eskom again reverts to the argument that the report itself said that its board was satisfied with the investigation and the degree of detail covered in a short period of time, that the investigation provided the board with sufficient information to take decisions as to how to manage the affairs of the corporation, and that no further investigatory activities were required.

I have already dealt with this issue.

Paragraph 42

“It was at this point that the audit & risk committee, which had been mandated by the board to manage the Dentons investigation, lost control of the process. Ngubane took over and steered the board towards agreeing that the names of those mentioned in the report be removed from the final report. This is corroborated by the minutes.”


Eskom denies that the reported information about the removing of names in the report was “corroborated by the minutes”.

I have obtained minutes of the Board and In-Committee board meetings on 2, 14 and 26 July 2015, and on 14 August 2015. None of these minutes corroborated the information, as stated in the story. I also note Rose says that this information came from sources, but not from the minutes.

Forty-third paragraph

“What it means: Inquiries into the progress of the probe were met with aggression and conflicting statements.”


Eskom reiterates that the minutes made no reference to any “aggression and conflicting statements”, and argues that the journalist drew his own inference based on an untrue allegation.

However, the story did not say that this statement referred to board minutes at all. I also accept FM’s perception that Ngubane had been aggressive over the last few years on this issue and that there were conflicting statements (varying from telling the magazine that the Dentons report was not for public consumption, to inviting the media to a conference where Eskom was going to release the document).

Paragraphs 44, 45

·         “ ‘However, concern was expressed with regard to the collection and destruction of initial reports’, read the minutes of a board meeting held on August 14. ‘The company secretary was expected to take the necessary steps to ensure that all original reports were collected in exchange for the final reports,’ it said.”

·         “The chairman of the people & governance committee undertook to ensure all the interim reports ‘were returned to her within seven days for these to be destroyed’. A messenger was sent round to the homes and offices of board members to collect the presentation.”


Eskom notably does not dispute the content of the paragraphs in question, as it says the minutes of 14 August 2015 stated, “The Company Secretary was expected to take the necessary steps to ensure that all original reports were collected in exchange for the final reports… the Chairman of P&G, Ms V Klein undertook to ensure that all reports were returned to her within 7 days for them to [be] destroyed.”

The argument is that the story created the impression that there had been a conspiracy to suppress certain information.

I do not read any trace of a “conspiracy” in the reportage, which seems to have been accurate on this point.

Forty-sixth paragraph

“Dentons had to be convinced to produce a letter confirming that no wrongdoing had been found against anyone, according to the minutes.”


The question is whether the minutes indeed stated that Eskom had to convince Dentons to produce a letter confirming that no wrongdoing had been found against anyone (as stated in the story).

Eskom denies the minutes stated what the story alleged (as fact).

Rose’s argument (namely that FM did not imply it had obtained this information from any board minutes) is rather strange – because that is what the story said. Instead, he submits, it was in fact sources who gave FM this information.

I have perused the minutes and have ascertained that the statement in question is wrong – nowhere did it state that Dentons “had to be convinced” to write such a letter. All it said, is that Eskom had received a letter from Dentons stating that no wrongdoing had been found against anyone.

This means that the magazine was at fault, for two reasons:

·         It incorrectly ascribed the information to the minutes; and

·         It stated as fact an allegation made by sources.

The third article

Fourth bullet point of paragraph 13

“Senior executives handpicked suppliers they wished to negotiate with, which meant that other, more capable and more cost-effective contractors were excluded.”


The complaint that the journalist stated an allegation as fact has no grounds – the sentence immediately following this bullet says, “These are just some of the allegations contained in this version of the report…”

In my finding, sent out on April 25, I have overlooked this sentence (for which I profusely apologise) and therefore upheld the complaint. In the interest of fairness, though, I need to change my finding on this particular issue.

No right of reply

In light of FM’s response to this part of the complaint, I am in no position to find against it in this regard.

Crafted to communicate corruption, incompetency in Eskom

When considered as a whole, I am satisfied that FM did not portray incompetency or communicate corruption – it was merely the messenger.

Finding

Information illegally, dishonestly obtained; undermining PAIA

This part of the complaint is dismissed.

The first article

The complaint about the following paragraphs is dismissed: Paragraphs 1, 2, 3, 4, 5, 6, 16, 18, 19, 20, 21, 22, 33 and 35.

Paragraphs 13-15: The story stated that Dentons had raised “new questions over Eskom’s rationale for load-shedding”, but it did not balance the “questions over the rationale” with a reference to what this “rationale” was – or stating that this was unclear, if this had been the case. This was in breach of Section 1.2 of the SA Code of Ethics and Conduct which says, “News shall be presented in context and in a balanced manner, without any intentional or negligent departure from the facts whether by … material omissions…”

The second story

The complaint about the following paragraphs is dismissed: Paragraphs 12, 43 and 44-45.

Paragraph 42

The statement that the information about the removal of names from the report was “corroborated by the minutes” was inaccurate. This was in breach of Section 1.1 of the Code which says, “The media shall take care to report news … accurately…”

Forty-sixth paragraph

The statement that Dentons “had to be convinced” to write a letter stating that if had found no wrongdoing against anyone was not corroborated by the minutes, as stated in the story. This was in breach of Section 1.1 of the Code which says, “The media shall take care to report news … accurately …”

The third article

Fourth bullet point of paragraph 13

This part of the complaint is dismissed.

No right of reply

This part of the complaint is dismissed.

Crafted to communicate corruption, incompetency in Eskom

When considered as a whole, I am satisfied that FM did not portray incompetency or communicate corruption – it was merely the messenger in this instance.

Seriousness of breaches

Under the headline Hierarchy of sanctions, Section 8 of the Complaints Procedures distinguishes between minor breaches (Tier 1), serious breaches (Tier 2) and serious misconduct (Tier 3).                                                                                        

The breach of the Code of Ethics and Conduct as indicated above are all Tier 2 offences.

Sanction

The first article

FM is reprimanded for omitting to balance the “questions over the rationale for load-shedding” with a reference to what this “rationale” was – or stating that this was unclear, if this had been the case (after stating that “new questions [were raised] over Eskom’s rationale for load-shedding”).

The second story

FM is reprimanded for inaccurately stating that the following information had been “corroborated by the minutes”:

·         The information about the removal of names from the report; and

·         Dentons “had to be convinced” to write a letter stating that if had found no wrongdoing against anyone.

The third article

There is no sanction regarding this text.

The magazine is directed to publish these reprimands.

The text should:

·         be published:

o   on the same page as that used for the offending article;

o   online as well, if the offending article was carried on its website;

  • start with the reprimand;
  • refer to the complaint that was lodged with this office;
  • end with the sentence, “Visit www.presscouncil.org.za for the full finding”; and
  • be approved by me.

The headline should properly reflect the content of the text (read: the reprimand). A headline such as “Matter of Fact”, or something similar, is not acceptable.

Appeal

The Complaints Procedures lay down that within seven working days of receipt of this decision, either party may apply for leave to appeal to the Chairperson of the SA Press Appeals Panel, Judge Bernard Ngoepe, fully setting out the grounds of appeal. He can be contacted at Khanyim@ombudsman.org.za.

Johan Retief

Press Ombud