Eskom CEO Brian Molefe this week dismissed as irrelevant evidence in the State of Capture report showing that the Guptas’ mining company lied about the money it needed upfront to provide emergency coal to the Arnot Power Station.
Former public protector Thuli Madonsela’s report shows how R659 million was used to partially fund Tegeta Exploration and Resources’ acquisition of the Optimum Mine – not for equipment to make the coal deliveries possible.
Eskom paid Tegeta this money after a board tender committee meeting held late at night – on the same day that Tegeta had come up R600 million short for its acquisition of the Optimum coal mine on April 11.
Eskom this week held two separate media briefings, one to report earnings and one to respond to Madonsela’s State of Capture report.
Regarding the prepayment, Molefe said: “If I buy a car for R200 000 at Toyota, does it matter what they do with the money?” he said. “We paid for coal and we got coal.”
Molefe and other members of the Eskom board not only defended the Eskom-Tegeta transactions flagged in Madonsela’s report, they held them up as incredibly beneficial to Eskom and South Africa.
The three Gupta coal deals with Eskom saved the consumer billions, the power utility claimed.
The Eskom prepayment formed part of a frantic scramble for funds by the Gupta family and its companies to buy Optimum early this year.
There were 32 transfers to the Bank of Baroda totalling R2.5 billion, which are detailed in Madonsela’s report.
At the time, there was lots of speculation about how Tegeta would pay R2.15 billion for the mine.
Tegeta got the Bank of Baroda to issue a letter saying that it was ready to pay over this sum.
“The conduct of the Bank of Baroda appears highly suspicious,” said Madonsela.
They had written a letter to Optimum creditors making it seem as though they were funding the deal with debt.
Instead, they allowed a flood of disparate transactions over four months to put R2.5 billion into an account, which was then used to pay for the Optimum mine.
“Accordingly, it is safe to say that the frequency and amounts deposited should have attracted attention and an investigation by other financial institutions’ anti-money laundering departments due to money laundering risks,” said Madonsela.
One of the companies contributing to this fund was Albatime, seemingly owned by Eskom board member Viroshini Naidoo’s husband.
Eskom’s prepayment seemed to have been the last top-up Tegeta needed to seal the deal.
“It appears that the prepayment possibly amounts to fruitless and wasteful expenditure as it appears that the prepayment was not used to meet production requirements at Optimum Coal Mine and was thus made in vain.”
This could be a contravention of the Public Finance and Management Act, she wrote.
Molefe and his team avoided answering questions about what the prepayment was for.
“They supplied the coal, it has been delivered. The prepayments are settled. I don’t know what the Public Protector means by ‘wasteful expenditure’,” said Molefe.
Eskom was still deciding whether to launch a review application against the report on the basis of “inconsistencies” contained in it, said Eskom’s company secretary, Suzanne Daniels.
Molefe is seemingly mulling his own legal action, particularly in relation to his cellphone records, with Madonsela subpoenaed without his knowledge to establish his relationship with the Guptas.
PUTTING THE SQUEEZE ON GLENCORE
Madonsela’s report supports the allegation that Eskom unfairly forced Glencore to put the Optimum mine into business rescue.
“It can only be inferred that Eskom wanted to exert pressure on [Optimum],” she wrote.
The mine was making massive losses due to its decades-old contract to supply coal at R150 a ton to the Hendrina Power Station. Eskom also slapped it with a R2 billion penalty related to coal quality.
The evidence of bullying is that Eskom went through several rounds of painstaking renegotiation of the Optimum-Hendrina contract and then suddenly just refused to sign off on an amended contract giving it a higher price the month Molefe joined the company – April 2015.
“On the information provided, the only party who probably stood to benefit from [Optimum] being financially distressed … would be a prospective suitor. In this case, that prospective suitor was Tegeta,” said Madonsela.
Molefe on Thursday said that he did indeed scrap the renegotiations of the Optimum-Hendrina contract.
He portrayed himself as a new broom that could not accept the costly terms Glencore wanted.
“I think it is all because I refused to give Glencore R570 for coal.”
Because he did not, a “domino effect of phenomenal proportions” led to the current situation.
According to Molefe, all that really matters is that Eskom is now still getting coal from Optimum at R150 a ton.
Now that the business rescue is concluded, the R2 billion penalty originally levied on Glencore will be pursued against Tegeta, he said.
Madonsela’s report says that “Molefe’s relationship with the Gupta family as well as the directors of Tegeta cannot be ignored”.
“There was a firm line of communication between Mr Ajay Gupta and Mr Molefe.”
This relationship is inferred from cellphone records that seem to prove Molefe visited the Guptas in Saxonwold 14 times, and that he called Ajay 44 times around the crucial time Glencore was allegedly being squeezed to exit Optimum to make way for Tegeta.
Ajay himself also told Madonsela that he and Molefe were “very good friends”, and that Molefe does in fact often visit the infamous Saxonwold house.
Molefe this week avoided confirming whether he was in fact habitually visiting the Gupta home.
Instead, he attacked the cellphone evidence, saying it only shows he was “in the area”.
Molefe said that Madonsela may as well have concluded he went to the strip club Teazers every day because he drives past one on the way to work.
However, he did not deny having visited the Gupta home in Saxonwold or being a family friend.
CONFLICTS? WHAT CONFLICTS?
Madonsela observed that half of the Eskom board appointed at the end of 2014 – a few months before the Guptas started doing business with the state-owned company – had some or the other link to the family.
These conflicts of interest were “of no consequence”, board member Pat Naidoo said at the media briefing on Friday.
This is because the relevant people recused themselves from board meetings dealing with Tegeta – or were never on those board committees to begin with.
One board member, Viroshini Naidoo, apparently failed to disclose that her husband was the sole director of one of the many companies that chipped in to help Tegeta buy Optimum.
According to Madonsela, however, “even if board members are not present during said meetings, they are still privy to minutes of meetings as well as other commercially sensitive information that would definitely give certain individuals and/or entities an advantage”.
She pointed to Naidoo’s husband as being a particularly serious conflict, but this was not dealt with by Eskom at its briefings other than to, in a presentation, call this link “alleged”.
Eskom chair Baldwin Ngubane told journalists that “there is a big agenda from some quarters to discredit this government”.
He described Madonsela’s observations as “speculative”.
“My gripe with the whole situation is that the Public Protector never called me or [Eskom financial chief Anoj] Singh.
“She subpoenaed us, but cancelled the meeting. I thought the Constitution also talked about the right to be heard. It was painful for me.”