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Eskom mum on ‘invalid’ R4bn Gupta-linked deal – report

Apr 09 2017 15:35

Cape Town - Eskom bent over backwards to award the Gupta family a R4bn coal supply contract, according to the Sunday Times.

Tegeta Exploration and Resources is owned by the Gupta family and President Jacob Zuma's son Duduzane. Treasury has been at loggerheads with Eskom over the Tegeta deal ever since its investigations of contracts worth over R10m with the power utility.

The Sunday Times revealed that former Eskom boss Brian Molefe and Eskom board chairperson Ben Ngubane remained mum on a report commissioned by the power utility, which highlighted breaches in Tegeta’s contract.

The duo is accused of withholding this information from National Treasury and Parliament for almost a year.

Eskom vehemently denied that Molefe or Ngubane misled or lied to Parliament in a media release on Saturday, adding that this allegation was not founded on the truth.

"[T]he contract between Eskom and Tegeta was negotiated before the appointment of Mr Brian Molefe and the current Eskom Board. Therefore, neither Molefe, nor Dr Ngubane were involved in the approval of this contract."

The PwC report is believed to have been made available to Eskom in November 2015. Eskom spokesperson Khulu Phasiwe is quoted as saying that the recommendations from the PwC report were implemented as part of the contracts management process.

Eskom told the newspaper that it was not obliged to share the PWC report with anyone because it was an internal document.

Despite Molefe and Ngubane telling Parliament that Eskom was satisfied with the Tegeta contract, the PWC report raised several issues that would have rendered the deal invalid, reported the Sunday Times. These included:

  • The Tegeta contract was entered into without having vital combustion tests on its coal;
  • The contract was for 10 years (2015 to 2025), despite Tegeta’s mining licence at its Brakfontein Colliery being valid only until 2020;
  • The company did not have key automechanical sampling equipment for the first 12 months of the contract; and
  • Tegeta repeatedly failed to meet monthly supply targets.
Eskom CEO Brain Molefe. (Pic: Gareth van Zyl, Fin2

Image: Former Eskom boss Brian Molefe and Eskom board chairperson Ben Ngubane. (Gareth van Zyl, Fin24)

The Sunday Times further reported that acting Eskom acting CEO Matshela Koko suspended four employees after identifying irregularities with Tegeta’s coal.

Eskom explained that it generally starts a probe when it discovers a coal supplier is not supplying the required coal quality consistent with contractual obligations.

"In relevant circumstances, Eskom allows the mine to implement remedial action. However, as a precautionary measure, Eskom suspends the off-take from the affected mine in order to investigate the root cause of the inconsistencies in the coal quality management process," it said on Saturday.

A spokesperson for Treasury said the investigation into the Eskom contracts had been completed and the report was with stakeholders for final comments, according to the Sunday Times. It seems Eskom's media release on Saturday was in response to this Treasury report.

The power utility said it has been given until April 21 2017 to provide comments on the report. "The Board has, to this end, been asked to work in consultation with the Office of the Chief Procurement Officer." 

National Treasury acting chief procurement officer Schalk Human, who took over from Kenneth Brown who was at National Treasury for 19 years, said his office subscribes to a strong code of ethics.

"The code of ethics is based on ensuring that no abuse of the supply chain system occurs. It is articulated very strongly in legislation regulations and we have been fortunate to have no political intervention in the office of the chief procurement officer at this stage," he told Fin24 last week.

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tegeta  |  eskom  |  gupta family  |  brian molefe  |  coal  |  probe

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