Eskom defends report pointing to load shedding as a ‘rip-off’

Cape Town – Eskom has defended the emergence of another investigative report conducted for the power utility in 2011, saying the investigations proved it was acting responsibly to sort out its internal issues.

The Times published details of a Deloitte report on Wednesday that followed South Africa’s first spate of load shedding in 2008.

The report claims that an Eskom manager “given the job of buying more than R10bn of emergency coal during the 2008 power crisis negotiated several ‘irregular’ contracts - including one with a friend - and resigned shortly after an investigation was launched”.

The Special Investigating Unit conducted its own investigation following this and handed a report to President Jacob Zuma in 2014.

This follows the release this month of a redacted version of the 2015 Dentons report, which followed its investigations into Eskom’s financial crisis, delayed new build programme and coal procurement process after the 2014/2015 load shedding crisis.

“Both reports point to the possibility of criminal activity related to the emergency procurement of ‘blackout’ coal under the watch of lead procurement negotiator Koos Jordaan,” the Times explained.

Eskom spokesperson Khulu Phasiwe told Fin24 on Wednesday that Eskom should not be criticised for conducting internal investigations and acting on the recommendations.

“Eskom was concerned about activities going on inside the power utility, which is why it appointed these firms to investigate the matters and acted on those findings,” he said.

“As a matter of course to ensure sustainability of the business, coupled with compliance with the laws of the country, Eskom ensured the implementation of all recommendations," he said.

"Consistent with this, Koos Jordaan is no longer part of Eskom consequent to the Deloitte investigation.

"Eskom and SIU are in contact in with regard to the processing of the SIU report. Dentons’ fact-finding exercise was not related to any previous inquiry. It stood on its own specific terms of reference.”

Phasiwe said "it has to be understood that the investigations, including the three-year partnership with the SIU, were initiated by Eskom in an effort to deal with irregular conduct by some of its employees.

"Eskom has also cooperated with the investigations that have been conducted by the National Treasury and the Public Protector on these contracts."

The Deloitte reported looked at emergency procurement contracts concluded in 2008 by Eskom's primary energy division, the Times explained.

“The report details numerous irregularities and strengthens speculation that the blackout emergency, which cost South Africa an estimated R300bn, was engineered to benefit favoured companies.”

It quoted the report as saying: "It would appear that Mr Jordaan, and other Eskom employees, circumvented the prescribed Eskom tender policy and procedure by appointing suppliers under the emergency mandate when, in fact, these services did not relate to the emergency period and should have been dealt with under the normal Eskom procurement policies and procedures.

"From the interviews conducted, it appears that the 2008 emergency was not managed in the best interest of Eskom and resulted in fruitless and wasteful expenditure being incurred."

The Times interviewed Jordaan, who works at a private coal company, and he told them he had done nothing wrong.

Following the Dentons report release, the Democratic Alliance said Eskom “finds itself entangled in a web of lies, contradictions and inaccuracies”.

According to the “cleansed” report by Dentons, some of the contractors - who benefited from the nearly R30bn that Eskom spent on diesel for its open cycle gas turbines between 2013 and 2015 - were companies that had no footprint in the industry and which may have been set up by Eskom employees themselves.

“A cursory review of the web for some of these suppliers conducted by an officer of Eskom contemporaneously suggested they were not well established entities. We were informed that some of the suppliers had rudimentary invoices (for example, prepared in Microsoft Word rather than generated from an accounting system),” Fin24 quoted the official Eskom report as saying.

However, the Financial Mail released a report that quoted previous versions of the report and from interviews with current and past board members and executives.

“There would appear to be prima facie indicators based on the above that Eskom breached the treasury regulations pursuant to the Public Finance Management Act, 1999, and therefore contributed to its own financial challenges,” Dentons said in one of the versions of the report.

It pointed to coal transportation costs being escalated to a point where it was 50% of the cost of the actual coal. In one case Eskom paid R13.4m for R4.2m worth of coal.