AS IT HAPPENED #StateCapture: Daniels opens up about Eskom’s ‘Gupta-run’ board

Daniels opens up about Eskom’s ‘Gupta-run’ board

The Gupta family’s influence at Eskom was confirmed by suspended Eskom head of legal Suzanne Daniels, who spoke on how she had met Ajay Gupta and Salim Essa on separate occasions on matters related to executives at the power utility.

Daniels was testifying before the Public Enterprises Committee’s inquiry into state capture at Parliament on Wednesday. She relayed details of how she had first met Essa in March 2015, alongside suspended Eskom executive Matshela Koko. At this meeting Essa asked what it would take to have employees suspended.

Later that year Eskom suspended four of its executives including former CEO Tshediso Matona. Koko was one of the four who “survived” the suspension.

Daniels had met with Essa on July 29, 2017. At this meeting she was introduced to Ajay Gupta and Duduzane Zuma. Ajay had mentioned he would speak to someone at the deputy judge president’s office to have a labour court application lodged by former Eskom CEO Brian Molefe postponed to a more “favourable” date.

The question around Molefe’s early retirement packages were a “smokescreen” from the confusion that arose, she added. Daniels also spoke on the legality of the payments made for a contract with Gupta-owned Tegeta. She added that Molefe had undue influence in the deal.

During the briefing Daniels also spoke about threats to her life for speaking up. Apart from telephone calls she had been intimidated on the road. She explained that the Eskom board was also trying to discredit her Trillian report. 

Guptas tried to intervene on Molefe case - Daniels

Eskom’s suspended head of legal Suzanne Daniels said she had met Ajay Gupta in July 2017, where he mentioned that he would try postpone a case against former CEO Brian Molefe.

Daniels spoke on her first meeting with the Gupta brother who was barefoot with a t-shirt, and wearing a grey tracksuit pants. “My view is he looked worse than if he was at a shebeen,” she said.

Gupta associate Salim Essa had contacted Daniels to meet with him on Saturday July 29, 2017. She had met him at the reception area of the African Pride Hotel at Melrose Arch, thereafter they walked to a set of apartment blocks.

“We went into one of those apartments. As we walked into the lounge area there were four people, of which I was introduced to Ajay Gupta, Duduzane Zuma, Deptuy Minister [of Public Enterprises] Ben Martins and a Chinese lady whose name I could not remember,” she said.

“The purpose of the discussion was around the process of the Molefe court proceedings. Mr Gupta wanted to know how far they were.” Daniels said that she informed him that Eskom was to meet with the deputy judge president to discuss when to set down the matter as the DA, the EFF and trade union Solidarity had joined the application and it was to be heard on the same day. The court application relates to Molefe’s bid to have the Labour Court overturn Eskom’s decision to rescind his reappointment.

Ajay said that he would speak to someone at the deputy judge president’s office to have the hearing take place after December 2017. Daniels said that it appeared that they were trying to push out the date so that it would look more favourable than it does now.

“Nkosazana Dlamini Zuma was mentioned. I could not follow what he was saying because I could not believe where I was, and what I was hearing,” she added. Daniels then drove home from Melrose Arch. “I locked the door and poured myself a stiff whiskey and went to sleep.”

She also spoke on the first time she met Essa. Suspended Eskom executive Matshela Koko had called her to meet at Melrose Arch on March 9, 2015. Koko had met her at restaurant JB Rivers and then they walked to what she now knows is Essa’s office.

After meeting Essa, he had asked about how disciplinary procedures work. Daniels said that she explained that if someone is to be disicplined they should have the right of a hearing. 

"He got specific and asked what must be done to suspend people." Daniels then explained that a valid reason is needed to suspend and employee, and that the employee should be given a chance to respond. Thereafter the employers can make a decision.

“Then he proceeded in the presence of Matshela Koko to sketch out what will happen in the next couple of days,” said Daniels. Essa had informed her that Eskom’s executives would be suspended, including former CEO Tshediso Matona and Koko. There would also be an investigation and that the board would communicate this in due course.

“Little did I know that this was going to happen the next day,” said Daniels.

Later that year in October, Daniels had met Essa at Eskom, where he congratulated her on her position as company secretary.

Payments to McKinsey and Trillian ‘brazen theft’

Payments made by Eskom to Trillian and McKinsey was “brazen theft”, suspended head of legal Suzanne Daniels told the Eskom Inquiry. Daniels spoke on what such a contract meant for South Africans. “In my view, based on what I know and what I have discovered, there is only one way to describe this to people of SA, this was brazen theft.” “The people implicated and who I identify as thieves is Matshela Koko, Anoj Singh, Edwin Mabelane and Charles Kalima.” The current disciplinary inquiry into Koko, over his alleged failure to declare a conflict of interest regarding Eskom contracts awarded to the firm International where his daughter was a director, is a “sham”, Daniels added. 

By this she meant that there has been “considerable board interference” in the investigation. Charge sheets so far had been changed twice. Daniels said that she was surprised by the final published charge sheet. The chance of Koko being exonerated from the set of charges is “quite high”, she said. 

Eskom made R1.5bn spreadsheet error in Optimum fine - Daniels

Suspended Eskom head of legal Suzanne Daniels said Eskom’s board tender committee recommended she settle about R200m lower than what the calculations showed regarding the Optimum fine.

The struggling Optimum mine was bought by Tegeta Exploration & Resources, a company owned by the Gupta family and President Jacob Zuma's son Duduzane, after it went into business rescue.

The original fine had been R2.2bn (which saw the firm go into business rescue), but when Daniels met with a committee to discuss this, they discovered there had been an error in the spreadsheet.

“I was shocked at the answer,” she said. “There was an error in the spreadsheet. At that point, I was beyond furious. We have gone out in the media to say it was R2.2bn.”

“The final analysis of the claim showed the fine should have been R722m. I was quite pleased to hear Mr Marsden (Optimum business rescue practitioner) estimated it to be around R700m.”

“I was quite perturbed as there was reputational issue and risks for Eskom.”

She took this new information to the tender board committee. Here, board member Pat Naidoo said she should settle at no less than R500m, according to Daniels.

She was not happy with this, as it should have been around R700m. She said she eventually settled with Optimum (and Tegeta) at R577. R248m had already been paid, so Optimum owed the balance to paid over duration of contract, which ends next year, she said.

Suspended Eskom chief financial officer Anoj Singh told media in July 2017 that the fine was reduced because of a problem with the coal crusher.

Eskom struck a deal with Tegeta on the fine in March during arbitration. However, the power utility refused to disclose the details of the agreement, citing a confidentiality agreement.  "Eskom went into this process with legal opinion saying it should settle this claim," said Singh.

He said the underlying nature that gave rise to the claim was that Eskom was disputing coal quality from the mine. The poor quality was because of a change in sampling equipment in 2010, said Singh. 

"The change meant it was different than the original sampling equipment. The new design had a crusher, which increased the reject coal put in the plant. It gave a false positive of quantity of reject coal. This was the outcome of investigations over three to four years," he explained.

"We realised the contract was punitive and poor quality coal was being delivered. That is why the amount ramped up so quickly. When we realised the crusher was the problem, we understood that we had sufficient information that the crusher was causing this.

"That is why we went into settlement. The contract manager said the claim should be R700m. This was then discounted to R255.4m."

Former Finance Minister Pravin Gordhan listens as suspended Eskom head of legal Suzanne Daniels gives testimony in Parliament on Wednesday.

Eskom legal head believes Molefe had undue influence in Gupta deal

Evidence leader Advocate Nthuthuzelo Vanara asked suspended Eskom head of legal Suzanne Daniels whether former Eskom CEO Brian Molefe could have arranged or been influential in the Eskom meeting on 11 April 2016 through the chair of the board tender committee.

“Based on what I know, as what happened at the time, and based on what has subsequently come out in the media, I am convinced that there must have been some undue influence,” she said.

“It would be very unusual for me to get a phone call from the chairman of the board tender committee for a meeting for that day at such a late hour.”

She had been called by Zethembe Khoza (now acting Eskom chair and at the time the chair of the tender committee board) to set up the meeting late in the evening.

She said had the meeting taken place two days later, Tegeta would not have received the R659m and would not have had time to pay the R600m shortfall it had for Optimum by 14 April 2016.

She agreed with Vanara that the Guptas paid for Optimum with Other People's Money.

She also said that when faced with the Public Protector’s State of Capture report, which detailed Molefe’s phone records, he was surprised, “Mr Molefe was quite surprised by that,” he said.

“I asked for his telephone records so we could verify this information. As I sit here, I have not received them.”

Suspended Eskom head of legal Suzanne Daniels.

Daniels doubts Eskom prepayment to Tegeta was legal

Eskom’s decision to give Gupta-owned Tegeta a R659m prepayment for coal in April 2016 was likely illegal, according to suspended Eskom head of legal Suzanne Daniels.

The Public Protector’s State of Capture report shows how this money was channelled to the Guptas so they could pay for the purchase of Optimum Coal Mine from Glencore.

Evidence leader Advocate Nthuthuzelo Vanara asked her if she was aware that part of that amount of money was used as part of the purchase price of the Optimum Coal Holding.

She said she became aware of this in the Public Protector’s State of Capture report.

Asked if the payment to Tegeta was legal, she responded:

“The legalities were sort of murky. In the primary energy environment, there is usually this practise amongst suppliers who have more than one source that they supply coal amongst each other.

“What actually makes this very doubtful is this is the exact amount that was claimed to be the shortfall.”

“Based on the agreements that I drew up, yes it did not go to Optimum, it went to Tegeta directly.”

Daniels did not know about a meeting between the business rescue practitioners and the banks, where the Guptas shortfall to pay for Optimum was discussed.

This new evidence, which was provided by former Optimum business rescue practitioner Piers Marsden to Parliament last week reinforced her concerns around Eskom’s prepayment, she said.

Vanara asked if it was a fair inference to say that, after the banks had declined the R600m, Mr Salim Essa or someone powerful made a board to sit and source the shortfall.

“It is a fair and reasonable inference to make,” she said.

Suspended Eskom head of legal Suzanne Daniels is testifying at the Public Enterprises Committee's inquiry into state capture at Parliament.

Evidence leader Advocate Nthuthuzelo Vanara has asked for an explanation of an Eskom meeting that took place on 11 April 2016 with regard to a prepayment to Tegeta, which was owned by the Guptas.

Eskom paid in advance for coal supplied by Tegeta to guarantee supplies to a power plant before winter.

Former Eskom finance director Tsholofelo Molefe (photo by Gallo) told Parliament that it was only after she left and read the news on Eskom that she joined the dots and realised the actions of some executives were part of something bigger than she originally thought when she was still at Eskom. She resigned in 2015 after being suspended in dubious circumstances.

Eskom had skills to deal with financial challenges, says ex-Eskom exec

Former finance director Tsholofelo Molefe said Eskom had the capacity in the company to deal with the financial plan to resolve Eskom’s financial issues in 2014.

She was commenting on why consultants like Regiments – which together with Trillian has been accused of fleecing state-owned entities – was required.

Molefe said the work of the financial plan went on while a draft agreement with Regiments was being discussed.

“We had a good group treasurer and financial controller and economic regulator,” she said.

“We worked as a team to put together a financial plan.

“After the board meeting, the board chair Zola Tsotsi put together an emergency task team. The financial plan was one the solutions.

“We had to look at solutions to reduce costs by R60bn over five years. We had aimed to reduce costs by R9bn in 2014, but by the time I left we had saved about R5bn.

“Every little cent counted for us. We did not want to just go government to ask for equity or tariff increases.”

The result of the efforts led Treasury to grant Eskom a R23bn bailout as they converted debt into equity.

The four executives at Eskom that were suspended in 2015. Only Matshela Koko returned. He has since been suspended again, pending a disciplinary hearing into a contract given to a firm that his step daughter had been a director of.

Former Eskom chairperson Zola Tsotsi. (Photo: Gallo)

Tsotsi was under pressure from people outside, says ex-Eskom exec

Former finance director Tsholofelo Molefe said that it seemed former Eskom chairperson Zola Tsotsi “was under pressure from people outside”.

Molefe, ex-CEO Tshediso Matona, Dan Marokane and Matshela Koko were suspended by Tsotsi in March 2015 in circumstances that eventually saw the appointment of executives Anoj Singh and Brian Molefe at Eskom. Only Koko returned after the suspension was lifted.

Tsotsi also resigned as chairperson a few weeks after he implemented the suspension.

Molefe was asked about the suspension and her eventual exit from Eskom.

“I was suspended on 11 March 2015 alongside three other executives. The board had two meetings – the first on 9 March. This was a new board. The board that had been deliberating on the earlier issues were no longer there.

“We were asked to recuse ourselves from the board meeting on 10 March. We were then called back in and informed that we would be suspended.

“I was issued with a letter of suspension, saying that the board had been instructed to do an investigation and was asked to step aside so that I did not interfere with the process. It was interesting that it said we had done nothing wrong.

“If we did not provide our laptops, further disciplinary measures would take place. This was confusing. We signed the letters.

“It was said that the inquiry would take three months. After two months, we had not been called as it had not started. I started engaging my lawyers. I started asking Eskom’s questions regarding the terms of reference.

“They called to have a discussion to have an amicable exit – they said we could not work together as the investigation would take some time.”

She resigned in June 2015.  

Former Eskom finance director Tsholofelo Molefe pictured in 2014. (Photo: Gallo)

Matjila pushed Eskom ex-finance chief to sign Regiments contract - witness

Former finance director Tsholofelo Molefe has given scathing testimony about how former Eskom CEO Collin Matjila pressurised her to sign a contract with Regiments without following correct procurement processes in 2014.

It has been alleged that former Regiments executive Eric Wood and Gupta associate Salim Essa set up Trillian Capital Partners to fleece contracts at state-owned entities in partnership with McKinsey.

The entrance into Eskom came at a time when former Eskom CEO Brian Dames left the firm and Matjila – a board member at the time – was made acting chief executive. It was during this time that Regiments first made its move on Eskom contracts, it has been reported.

#GuptaLeaks shows that the Guptas received Matjila’s CV shortly before he was appointed acting CEO at Eskom in 2014.

Zola Tsotsi was the board chairperson at the time and Malusi Gigaba was the minister of Public Enterprises.

Matjila also reportedly pushed for the Eskom/New Age breakfast sponsorship deal to go through.

Advocate Nthuthuzelo Vanara asked Molefe to give a briefing on how Regiments was brought to Eskom as a contractor.

She told the Public Enterprises Committee the following:

“A meeting was convened regarding Eskom’s financial plan.

“A gentleman joined us – his name is Salim Essa. The question about how we took the matter forward (financial sustainability). He was asked who should help us – he told us Regiments was the right company. I listened to what would have been the way forward. We were asked to have a meeting with Regiments. I had never heard of Regiments before. We are open to anyone that comes to us and wants to help.

“A meeting was convened with Regiments to see how they could help with Eskom’s financial plan. Eric Wood came to the meeting. Representing Eskom was Steve Lennon. What does the company do, how can they help us, do they understand the challenge and how big the balance sheet is.

"They said they had worked on a EuroBond with Goldman Sachs. They said they normally don’t work alone – they said they normally partner with McKinsey. Mr Matjila asked them to give us a proposal. I went to Steve Lennon – I told him that they would have to follow a procurement process.

"I went to Mr Matjila's office and told him we need to follow a procurement plan. I said we need a robust financial plan but there are companies lining up to work with Eskom.

"He told me that unfortunately we will go with Regiments – he said previous companies had not yielded any results. He said the board needed a plan. I said it was an emergency, (it is clear defined), I said it was urgent but said there are ways to take it through a closed procurement process. He said he could see I was uncomfortable.

"The issue we were faced with was the financial challenges. It was important that we settle those issues since the MYPD 2012/13 tariff agreement. We were highly geared in the company for us to go into the market to seek borrowing. We needed cost-reflective tariffs to back up our revenues. Because we knew we did not have very good financial metrics, we needed government to know what are the challenges: equity, guarantees, tariff adjustments – so we could meet operational requirements. The huge new build programme was one of the reasons we needed the funding.

"Regiments said they would put together a proposal. If it is an emergency, then we told them to bring it back in five days. They brought it back in 14 days – but this was not a proposal, it was a draft agreement with pricing and what they would achieve.

"I wrote an email to Mr Matjila – It was on this basis that this does not constitute an emergency. We could request suppliers to give us responses in 14 days. This therefore did not constitute an emergency. He then called me and reprimanded me for putting such things in an email.

"We had a meeting and said he was not being supported – he had a mandate from the board and shareholder. He said we don’t have the time to go through procurement process. I told him to ask board to change the rules.

"He said he would do no such thing. Legal didn’t make many changes to Regiments draft agreement and I left it on the desk of Mr Matjila. I told him I would not sign it based on the discussions. He threatened to bring a driver to bring agreement to me to sign it. I had to give him reasons in writing why I would not sign it.

"Mr Tsotsi called a meeting based on the letter I had written. In the meeting, I got support from other board members because we had not followed process. The pricing was not competitive. It appeared that we should have followed the process.

"I was told we are wasting time on processes and said heads would roll if this was not done." 

Ex-finance director at Eskom Tsholofelo Molefe testifies

Molefe agreed to leave Eskom in June 2015 after her suspension was lifted following the Dentons investigation found no wrong doing.

In March 2015, Eskom’s former chairperson Zola Tsotsi placed four senior executives, including former CEO Tshediso Matona, on suspension when he announced an inquiry into the utility.

Matona initially challenged the suspension in the Labour Court, but decided to resign on May 18.

The other executives were group executive for group capital Dan Marokane, who resigned on June 1, and technology and commercial head Matshela Koko, who remains on suspension.

Matona testified at the inquiry on Tuesday.

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