Eskom’s contract with Tegeta Exploration and Resources for the supply of coal contained discrepancies, was poorly drafted and was in contravention of supply chain management procedures, according to a report by PwC.
Solly Tshitangano, chief director of supply chain governance at National Treasury, has confirmed to members of Parliament the report is PwC’s final recommendations and it has been seen by Eskom management.
Tegeta is owned by the Gupta family and President Jacob Zuma’s son Duduzane and was the focus of former Public Protector Thuli Madonsela’s State of Capture report in 2016.
National Treasury’s Procurement Office presented the draft report to Parliament’s standing committee on public accounts (Scopa) on Wednesday. The report also contains Eskom’s comments on the findings.
PwC’s findings include that:
- The contract with Tegeta appears to have been put together hastily. (Eskom replied that it was in the process of developing revised standard conditions of the contract, which could be the reason for inconsistencies.)
- There were discrepancies in the dates of the environment and legal report, indicating that the reports could have been backdated, as the “number 4 was written over the 5 on the year 2015”. (Eskom said all reports had been signed in 2014).
- The contract was poorly formulated, contained irrelevant information and had ambiguities. (Eskom responded that the contract was compiled with input from its corporate legal team.)
- The Coal Management Procedure required in the contract is in draft format, incomplete and not yet agreed upon, or implemented. (Eskom said the Coal Management Procedure was not signed, because the mine did not have an automatic sampler as required.)
- The report said it could not find evidence of compliance to financial evaluation. (Eskom said a comprehensive financial discussion took place, including financial models.)
Eskom flouted own policy - PwC
In the report PwC also noted that Eskom’s procurement policy prohibits the single adjudication of contracts. Despite this, Eskom continued signing contracts in excess of R3 billion. There was no evidence that tender committees were consulted in the contract with Tegeta.
PwC recommended that a technical and legal review of the contract with Tegeta was urgently required “to inform Eskom’s actions relating to the further implementation and management of the relationship with the supplier”.
National Treasury has been at loggerheads with Eskom over the Tegeta deal ever since it started investigating contracts worth more than R10 million with the power utility.
In an article by amaBhungane, it was revealed that Eskom last year signed three deals to extend coal contracts totalling R10.7 billion. The power utility allegedly did not follow correct procurement procedures.
One of the contracts, amounting R7 billion, would see Tegeta supplying coal to Komati power station. Komati is one of five power stations which have been identified for closure, which raised questions about how Eskom would cover the cost of the contract.
In April, a leaked draft report by Treasury revealed irregularities in the coal contract between Eskom and Tegeta. BusinessLive reported that Treasury wants the R659 million prepayment to Tegeta to be converted to a loan with interest.
At the time, Eskom spokesperson Khulu Phasiwe told Fin24 that the report had not been finalised, and anything being said about it was speculation.