The Telkom CFO says: "You need to act beyond reproach, never compromise your integrity."
“Courage, to me, means always doing the right thing, being tenacious and knowing when to say no,” says Telkom CFO Tsholofelo Molefe. Seldom did the courage of South African public sector CFOs get tested as unrelentingly as during the years of state capture by the Gupta brothers and associated crooks. In a candid interview, Tsholofelo describes how a web of deceit and corruption was being spun during her tenure at Eskom in 2014 and 2015, she recalls the short nights and the toll on her family – and she provides a blueprint for saying no.
When Tsholofelo Molefe was suspended as finance director at Eskom in March 2015, she finally had some time for something she had been planning to do for a while: get some rest. “I had been sleeping three hours a day during the preceding months. I also finally got to spend good time with my children and my mother, who was taking all the publicity and the suspension really hard.”
While Eskom bosses told the media that Tsholofelo and fellow executives had been suspended to make way for an investigation into the utility’s poor performance, insiders knew better. ‘Tsholo’ tried to complete the puzzle of what happened in the 12 months since she met a “young boy in jeans and All Stars” at Montecasino, who was introduced to her as Salim Essa.
“Even when I was sitting at home, trying to figure things out, I knew I was doing what would have made my father proud,” she says. The strict, protective and inspirational late Abel Molefe, was an Anglican minister who gave Tsholo her focused outlook on life: “If you don’t try, you fail. Take life on. Take a chance, as long as it is not going to kill you. As long as you do the right thing. That was my father,” says Tsholofelo, who was born and bred in Soweto as the fifth of six siblings. “I was introverted and very studious. When others were out, I preferred to sit with my father and read adventure books.”
Tsholofelo (50) speaks about her favourite leadership book: Leadership Wisdom From The Monk Who Sold His Ferrari Robin Sharma. What stands out for her, she says, is the power of positive thinking and the ability to be humble at the same time. The plan is to talk about the strength it takes to say no when the going gets tough. For a CFO, Tsholofelo explains, it always begins with governance and it ends with ethics. “During my time at Eskom, there was a lot of pressure to approve certain things that I did not agree with. I never had any doubt about what to do. If a full board would have told me to carry on with it, I would have stepped down.”
Making a difference
Tsholofelo wanted to be a doctor but her schooling at the business-focused Pace College and a scholarship from the British Council to study in the UK set her on the path to become a CA(SA). After articles at Coopers & Lybrand, Tsholofelo gained experience at IBM, Liberty Life, Absa and FNB, before joining Eskom in 2005, where she later became head of Group Customer Services and loved the interaction with stakeholders ranging from key industrial customers to laymen in rural areas that were receiving electricity for the first time. “I always enjoyed working for Eskom, because I could make a difference and a meaningful contribution to the country.”
When she succeeded Paul O’Flaherty as FD in February 2014, board member Mafika Mkwanazi – a former Transnet chairman – took her aside to emphasise she was now a board member with fiduciary responsibilities. “He said: 'All directors are equal. The buck stops with you.' At the time, I did not know why he was saying this, but it made me strong and it helped me to be clear about my responsibilities.”
Tsholofelo’s promotion to FD came in a time of crisis. Eskom was running out of funds. The new power station projects required piles of money and the utility had started to use a lot of diesel for power generation, which is expensive. “We tried to avoid load shedding, but running costs were R1 billion a month,” she recalls.
When Tsholofelo presented her financial sustainability plan to the board, which was chaired by Zola Tsotsi, it wasn’t well-received. Tsholofelo was disappointed, as she was warned by Tsotsi that “heads were going to roll” if no better plan was presented. Interim CEO Collin Matjila then said he would solve the situation “together with the FD”.
Meeting Salim Essa
Matjila, Tsholofelo explains, appeared keen to use his “executive authority” very loosely, often citing a “mandate from the shareholder”, for example when he wanted to rush the appointment of a consultant to unlock cash on the balance sheet and optimise working capital, claiming that things would “take too long” otherwise. “He always wanted to do his own things on the side, while our procurement policy prescribed a proper technical assessment. We didn’t know why he acted like this. We didn’t know there was involvement of the Gupta family in it. He just said there was a ‘mandate’.”
And then, the conspiracy started unfolding.
“I met the interim CEO on a Sunday at Montecasino. A gentleman came and joined us and was introduced to me as Salim Essa. I was told he had done balance sheet optimisation work with City Power and Transnet and apparently his company Regiments Capital had done a eurobond with Goldman Sachs for Eskom previously. The next day in the office, I was introduced to Eric Wood by Salim Essa. He said, ‘We work with McKinsey in most instances.’ I said, ‘There is a procurement process.’ And Wood said, ‘We will bring a proposal in the next few days.’”
Under pressure to deliver, Tsholofelo suggested they follow the (legitimate) emergency procurement process, which would only take a few days and allowed Regiments to send a proposal alongside a few other candidates. “But the interim CEO said, ‘No, we have tried with the likes of Deloitte for many years. We need to do something different and go with Regiments.’ I only received the proposal two weeks later; however it wasn’t a proposal, but a draft agreement that included pricing and T&Cs.”
Something was not right
This was the period when Tsholofelo’s insistence on proper governance started to irk others. “I copied the head of legal, which the interim CEO was not happy about. He said he felt I wasn’t supporting him. By now it was very clear to me that something was not right and I started engaging board members, like the chairs of the investment committee, audit committee and sustainability committee. It turned out there was already tension about the interim CEO after he had signed a R43 million contract for three years of support to the New Age Business breakfast without following due processes.”
Tsholofelo refused to sign the draft agreement with Regiments, which is now known to have funneled gains from oversized contracts to the Guptas, and sent a memo with reasons to the CEO and the board. “Then there was silence for a couple of days. In the next board meeting, the chairman said the interim CEO and I were wasting time with our disagreements. There was one month to go and heads would roll, he warned again. Luckily, the chairperson of the sustainability committee spoke up and we decided to do a ‘high level desktop exercise’ to test the viability of the initiatives suggested by Regiments. I put the proposal together in a week. The whole exercise cost less than R1 million. The Regiments proposal was half a billion rand. Most of their proposed initiatives to unlock cash on the balance sheet had already been started by us, as we had 45 initiatives that had been previously recommended by another financial advisory firm. Others were not sustainable. Only about two or three out of the 10 suggested by Regiments were worth pursuing.”
“For the Interim CEO, it was his way or the highway,” Tsholofelo recalls, also referring to his decision to stop the process to replace T-Systems as IT provider – and her discovery that Salim Essa was involved in T-Systems. “I really had to stand my ground.”
The next drama loomed large in November. “We were releasing interim results during a press conference with key industrial customers and journalists, 300 people had already RSVPed.Then the auditors said they could not sign off the financials, as the board’s investigation into the New Age breakfast contract was not included, even though it was a reportable irregularity.”
Pressure from the outside
With the results presentation on Tuesday, time was of the essence on Saturday morning when Tsholofelo requested a board meeting to rectify the financials. But in the afternoon the chairman called her and said the meeting needed to be cancelled as he had “pressure from the outside”. Tsholofelo didn’t give in: “We couldn’t postpone, because we needed to have audited financials to put together a prospectus for international investors, which was essential.”
The company secretary then sent a text message to cancel the meeting, but Tsholofelo called board members individually to impress upon them to have the meeting proceed. The next day, the chairman had discovered a technical reason that made the board decision null and void and texted that he was with minister Lynn Browne and that she agreed. The only problem for Zola Tsotsi was that Tsholofelo was actually with the minister herself for another matter at the exact time he sent that message. “I showed it to the DG, who shared it with the minister… Lynn Browne had only been in her role for a short time. She didn’t know who to believe. She tried to call the chairman, but didn’t get hold of him. She told me, ‘Do what is right for the company.’ We went ahead and held the board meeting again that Monday and at 19h00 the auditors signed off the financials.”
Despite all the shenanigans and the short nights, Tsholofelo says she still had energy to carry on, even after the “good board” was removed by the minister. “When the only two board members that stayed were the ones I knew were connected with the Guptas, I knew something was wrong. In January it already caused a lot of unnecessary pressure. We had indicated how we wanted to raise funding and had started reflecting on alternatives. Our business plan needed to be approved, but board meetings kept getting cancelled. There were also attempts to not approve the renewal with Optimum Coal. There was always pushback on everything we did, a real battle. Governance had gone out of the door.”
End of the road
Then came the end of the road at Eskom for Tsholofelo. The story was that president Jacob Zuma had asked for a review in Eskom’s underperformance and that government didn’t want executives to “tamper” with the investigation – hence the suspension for her and two other executives. “I had been told by someone a few days earlier that I was going to be suspended and that Salim Essa was part of the plot. It seemed too far-fetched. I didn’t think he had so much power.”
Although Tsholofelo says she was resting during her suspension, she also admits compiling at least five letters with her lawyer and sending them to Eskom to request clarity. “In the third month, Eskom’s lawyers approached me and they said you are agitated, but this will take long. My lawyer concluded they wanted me out in the first place. At first I did not want to believe it, but I knew he was right.”
Tsholofelo said her lawyer and an advocate convinced her to settle with Eskom and terminated her contract. “They explained to me I was dealing with people that are ruthless. They said: We will win but you will have scars. They will fight dirty. They will use the media, which is not always impartial. It will be very easy for them to paint you as an incompetent FD. My mother wasn’t taking it well and I didn’t want a public spectacle.”
Instead of a legal battle, Tsholofelo spent a year at home and project-managed her new house in Midrand. Two years later, the corrupt Eskom bubble burst and last year, during a public inquiry by the parliament’s portfolio committee on public enterprises, Essa, Matjila, Tsotsi and Tsholofelo’s successor Anoj Singh were all implicated in state capture and dodgy dealings with the Gupta family. None of them work for or with Eskom any longer.
What is fascinating and inspiring about Tsholofelo is her consistency. When CFO Magazine met with her in September 2014, she was asked if she was afraid to risk her reputation when accepting such a tricky assignment as Eskom FD. Her reply, despite not revealing any of the tension between her and the interim CEO and chairman, left no room for interpretation: “As long as you know what your values are and you’re bold enough to stand your ground you will be ok. You need to act beyond reproach, never compromise your integrity, always do the right thing and never take shortcuts.”
This article was originally published in the Q1 edition of CFO magazine, available this week in airport lounges countrywide.