CORPORATE GOVERNANCE OF ESKOM

1. INTRODUCTION

Corporate Governance of Eskom refers to the legal, institutional, financial, ethical, and managerial framework through which Eskom Holdings SOC Ltd, South Africa’s major state-owned electricity utility, is directed and controlled. Eskom is wholly owned by the Government of the Republic of South Africa and operates as a public entity subject to the Public Finance Management Act 1 of 1999 (PFMA). Its governance framework also draws upon the Companies Act 71 of 2008, the Constitution of South Africa, King IV principles, Treasury requirements, environmental legislation, and sectoral energy regulation.

Corporate governance is particularly important for Eskom because the utility performs a strategic public function while simultaneously managing enormous financial resources, infrastructure, procurement contracts, environmental obligations, and electricity-system risks.

2. GOVERNANCE STRUCTURE OF ESKOM

Eskom’s governance model is based upon a separation of roles among the:

Government as shareholder,
Board of Directors, and
Executive Management.

The Board acts as the central governing body and is responsible for strategic oversight, financial accountability, risk management, ethical leadership, and supervision of management. Eskom itself states that its Board’s responsibilities arise from the Companies Act, PFMA, and King IV, while an internal delegation-of-authority framework determines which decisions remain with management and which require Board or shareholder approval.

Under the PFMA, Eskom must also prepare a Corporate Plan and operate against shareholder objectives and performance indicators.

3. KEY PRINCIPLES OF CORPORATE GOVERNANCE

A. Ethical and Effective Leadership

The Board is expected to promote integrity, accountability, transparency, and responsible leadership. King IV places significant emphasis on ethical governance and long-term value creation. Eskom’s 2025 King IV application register expressly identifies the Board as responsible for setting the ethical tone of the organisation.

B. Financial Accountability

As Eskom is a Schedule 2 public entity under the PFMA, its Board constitutes the accounting authority and must take reasonable steps to prevent irregular, fruitless, wasteful, and unauthorized expenditure.

C. Procurement Governance

Public procurement is one of the most significant governance areas at Eskom.

Section 217(1) of the Constitution requires public procurement systems to be:

fair, equitable, transparent, competitive, and cost-effective.

This constitutional principle is reinforced through the PFMA and Treasury requirements.

4. CASE LAW – ESKOM HOLDINGS SOC LTD v. McKINSEY AND COMPANY AFRICA (PTY) LTD

Citation: [2019] ZAGPPHC 185

Facts

The case concerned substantial payments made in connection with contracts involving McKinsey and Trillian. Eskom sought legal remedies relating to transactions that raised questions concerning procurement legality and public financial management.

Legal Issue

Whether procurement arrangements and payments made by Eskom complied with the constitutional and statutory rules governing public procurement.

Judgment

The High Court emphasized that Eskom, as a public entity, is bound by Section 217 of the Constitution and the PFMA. Procurement decisions must therefore comply with a system that is fair, transparent, equitable, competitive, and cost-effective.

Legal Principle / Ratio Decidendi

State-owned companies cannot treat procurement as an ordinary private commercial activity where constitutional public-procurement duties apply.

Significance

The case demonstrates that Eskom’s corporate governance includes a strong public-law accountability dimension, especially in relation to procurement and financial management.

5. CASE LAW – ESKOM HOLDINGS SOC LTD v. SILICON SMELTERS PROPRIETARY LTD.

Citation: [2025] ZAGPPHC 1084

Facts

Eskom challenged arrangements under a Pilot Supplementary Agreement and Demand Response Agreement, arguing that certain payments could amount to double compensation and therefore constitute fruitless and wasteful expenditure under Section 51 of the PFMA.

Legal Issue

Whether the contractual arrangement violated Eskom’s statutory financial-governance duties under the PFMA.

Judgment

The Court found that the arrangements produced a reciprocal financial benefit and therefore did not constitute fruitless and wasteful expenditure under Section 51.

Legal Principle / Ratio Decidendi

The PFMA requires Eskom’s governing structures to assess whether expenditure serves a legitimate purpose and produces value rather than merely examining whether money has been spent.

Significance

The case illustrates the direct relationship between corporate decision-making and statutory financial accountability.

6. CASE LAW – TOPIGS NORSVIN (PTY) LTD v. ESKOM HOLDINGS SOC LTD

Citation: [2026] ZASCA 108

Facts

The dispute concerned environmental and water-law compliance at the Kusile Power Station. Eskom, its managers, Board members, and governmental authorities were implicated in allegations of failure to ensure adequate compliance with environmental obligations.

Legal Issue

Whether Eskom and responsible public authorities had fulfilled their statutory duties concerning environmental management and compliance.

Judgment

The Supreme Court of Appeal required detailed remedial action and reporting concerning compliance at Kusile and addressed the accountability of Eskom’s current Board and responsible environmental authorities.

Legal Principle / Ratio Decidendi

Corporate governance of a state-owned energy company includes environmental compliance and effective Board oversight, not merely financial management.

Significance

The case demonstrates the modern concept of ESG governance, in which environmental responsibilities form part of corporate accountability.

7. MAJOR CORPORATE GOVERNANCE CHALLENGES

Eskom’s governance framework must address several recurring risks:

Political interference,
procurement corruption,
weak internal controls,
financial sustainability,
Board-management accountability,
conflicts of interest,
environmental compliance, and
operational reliability.

Because Eskom performs both commercial and public functions, failures in governance can affect not only shareholders but also consumers, taxpayers, employees, businesses, and national energy security.

8. CONCLUSION

Corporate Governance of Eskom is therefore based upon a combination of company law, constitutional accountability, public-finance legislation, King IV governance standards, procurement rules, and environmental obligations.

Cases such as Eskom v. McKinsey, Eskom v. Silicon Smelters, and Topigs Norsvin v. Eskom demonstrate that Eskom’s Board and management must exercise authority with transparency, financial responsibility, lawful procurement, environmental accountability, and effective oversight.

Thus, good corporate governance at Eskom is not merely an internal management issue. It is essential to electricity reliability, public confidence, prevention of corruption, responsible use of public resources, environmental sustainability, and South Africa’s broader energy security.