Business

New, concrete evidence Eskom bent over backwards to ensure Guptas got multibillion-rand coal deals

2018-11-19 00:36

The Hawks should prosecute no less than nine senior Eskom officials and the whole board of Gupta-owned Tegeta Exploration and Resources – and at least investigate two more officials, recommends the forensic investigation report into the state-owned power utility released by National Treasury on Friday.

The voluminous report, one of three released, covers in minute detail Eskom’s enormous efforts to accommodate the Gupta family’s coal-mining ambitions, to the detriment of other suppliers and of Eskom itself.

It openly speculates that former Eskom bosses such as Matshela Koko, Ayanda Nteta, Suzanne Daniels, Vusi Mboweni, Anoj Singh and Edwin Mabelane “may have received gratification for assisting Tegeta (the Guptas’ coal company)”.

It also recommends that the implicated Eskom officials, who have since resigned, be banned from working for any state institution for five years.

Most of the saga is already well known and has been partially documented both in former public protector Thuli Madonsela’s State of Capture report and in a previous investigation by Treasury.

However, the new report – compiled by Fundudzi Forensic Services – provides new, concrete evidence that Eskom officials flouted procedure to ensure that the Guptas received multibillion-rand coal deals.

The report also reveals that Anoj Singh, the chief financial officer at Eskom – and before that, at Transnet – never used his ample salary from these state-owned companies.

Instead, he seemingly lived off some other, unknown, source of income which the Hawks should look into, the report recommends.

National Treasury released three different forensic reports – one on Eskom, the second on Transnet, and the third on the two state-owned companies dealing with the Gupta-linked consultancy firms McKinsey, Regiments Capital and Trillian.

The bulk of the report on Eskom details the Brakfontein and Optimum coal deals.

The Fundudzi report confirms and adds to many previous reports.

It finds that Eskom bent over backwards to award Tegeta a R3.7 billion, 10-year coal supply agreement for Brakfontein. This was despite the mine’s coal repeatedly failing quality tests.

Tegeta initially made an unsolicited bid to supply coal from its Brakfontein mine in early 2014.

As early as June 2014, Eskom had determined that only some of the coal from this mine, the so-called seam 4 lower coal, was usable.

However, Tegeta persisted and Eskom entertained this by repeating tests of new samples. The power utility ultimately signed the deal in March 2015, despite all the required tests not even being complete.

Later that year, a new test of the coal was apparently manipulated with a sample from an entirely different mine being provided for testing.

Ultimately, “Tegeta was arbitrarily allowed to start making deliveries without any confirmation on the part of Eskom that their coal was compliant with Eskom’s quality requirements,” reads the report.

Between May 2015 and February this year, when the Gupta business empire went into business rescue, Eskom paid Tegeta R1.3 billion for coal deliveries – including some that seem fictitious and some where the low-quality coal was delivered to stations against the express advice of Eskom experts.

The report recommends that everyone involved in the deal be investigated by the Hawks and that a possible case of fraud be investigated with regard to the apparent fake sample.

Without citing any particular evidence, the report recommends that the officials who dealt with this highly suspicious deal be investigated for possibly receiving “gratifications”.

The two main role players at Eskom were Nteta, its former acting head of fuel sourcing, and the ubiquitous Koko, its former head of generation.

OPTIMUM

The Fundudzi report revisits the infamous R659 558 079 “prepayment” made to Tegeta so that it could buy the Optimum Coal Mine in 2016.

That prepayment was approved at a last-minute, late-night meeting of a special board tender committee the day before Tegeta would otherwise have lost the deal.

The report recommends that the members of that committee – Zethembe Khoza, Nazia Carrim, Viroshini Naidoo and Chwayita Mabude – be prosecuted for possibly receiving bribes.

This was the bid by the Gupta family – and co-shareholder Duduzane Zuma – to become a serious Eskom supplier with a good mine.

The report also supports the long-established narrative that Eskom and the department of mineral resources conspired to force Optimum into business rescue specifically so that the Guptas could buy it from its previous owner, multinational firm Glencore.

At Eskom the main role player was Koko, who refused to budge on a R2.1 billion penalty from 2012 that Optimum owed Eskom – or the mine’s unsustainable price agreement, which saw it sell to Eskom at below cost.

When the mine went into business rescue, he ignored and avoided the business rescue practitioners who wanted to meet to negotiate.

When the company was then wound up and the mines were put up for sale, Eskom also refused to negotiate the penalty or price with the only potential buyer that actually had enough money – the Phembani Group.

However, when the Guptas’ Tegeta wanted to buy it, Eskom gave it the money it needed and subsequently renegotiated the selling price and agreed to arbitration, which saw the formerly sacrosanct penalty lowered to R577 000.

Shortly before the deal was done, then president Jacob Zuma’s son Duduzane was given shares in Tegeta through Mabengela Investments, the report notes.

Eskom managers “abused their position of authority” and disregarded their legal responsibilities every step of the way, the report finds.

“Eskom acted in bad faith when the company, represented by Koko, refused to waiver the historical penalties levied against OCM [Optimum Coal Mine], which led to OCM going into business rescue, but reduced the said penalties through arbitration after Tegeta purchased the assets.”

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June 16 2019