Zuma Jnr benefits from coal deals

2016-02-15 08:00

If the R2.1 billion deal to buy Optimum Coal is approved, President Jacob Zuma’s son Duduzane will have become the beneficiary of no fewer than four Eskom coal contracts.

Just two days after Economic Freedom Fighters leader Julius Malema coined the catchy new phrase “Zuptas” for the commercial romance between the Zuma and Gupta families, the Competition Commission revealed that Duduzane Zuma is one of the buyers of the Mpumalanga coal mine, along with the Guptas’ Oakbay Investments.

In December, an announcement was made that Tegeta Exploration and Resources would buy several Optimum Coal assets from Glencore.

At the time, it was well known that the Gupta family held a stake in Tegeta – what was not known until Thursday was that the other shareholder was Mabengela Investments, whose two directors are Duduzane Zuma and Rajesh Gupta.

Although it has been widely reported that Duduzane holds a stake in Mabengela, being listed as a director does not necessarily mean that he is also a shareholder. City Press’ attempts to confirm this went unanswered.

Tegeta has been shy about disclosing details of the company’s shareholding and financials.

Last year, Tegeta chief executive Nazeem Howa hit back at a Sunday Times article that claimed that state power utility Eskom had bent the rules to hand the Guptas a lucrative R4 billion Eskom coal contract through Tegeta.

“Oakbay Investments, the family’s primary vehicle, holds less than 50% of the shareholding in Tegeta, so to place the Guptas in the headline is once again mischievous and misleading,” he said. (Both Howa and Eskom also denied that Tegeta had received preferential treatment.)

Tegeta’s contract, which began in April, is for 2.4 million tons of coal a year, supplied to Eskom’s Majuba Power Station from their Brakfontein Colliery.

The acquisition of Optimum will add three more Eskom contracts to their books:

. A 5.5 million-tons-per-year contract to supply Eskom’s Hendrina Power Station from the Optimum Coal Mine at R150 a ton until 2018;

. A short-term contract to supply an estimated 50 000 tons of coal a month to Eskom’s Arnot Power Station from the Optimum Coal Mine at R406 a ton, which should run until March;

. A short-term contract to supply an estimated 166 000 tons of coal a month to Eskom’s Komati Power Station from Optimum’s Koornfontein mine for an undisclosed price. The Koornfontein contract was due to expire at the end of December last year, but it was quietly extended by Eskom until at least the end of this month.

Asked to comment on these contracts, Howa said: “It is worth noting that, at its maximum, Tegeta’s contribution to Eskom’s coal supply will only be 5%. This is in contrast to the big five [companies], who supply more than 80%.”

Last year, Eskom bought 119 million tons of coal.

As Howa points out, the majority comes from major mining companies such as Anglo American, Exxaro and South32 – according to a 2014 report, these three companies alone contributed 93 million tons of coal to Eskom.

However, Eskom’s policy of only signing new supply contracts with majority black-owned mines has helped new suppliers, including Tegeta, to get a foot in the door.

Among the smaller players, Ichor Coal has some of the most ambitious expansion plans. Chaired by former ArcelorMittal CEO and JSE chair Nonkululeko Nyembezi-Heita, Ichor said last year it was producing about 2 million tons of coal a year, but was hoping to expand production to 15 million tons by 2017.

Compared with the majors, Tegeta’s potential eight million tons a year is a small stake (6.6% of Eskom’s total supply), but among the new entrants, this makes them a significant force.

However, a circular to shareholders released by the Guptas’ listed company Oakbay Resources and Energy last month, shows that Tegeta has plans to sell their Brakfontein Colliery just before they acquire Optimum.

If approved by shareholders, the deal, worth R2.1 billion, will see Tegeta selling Brakfontein and the 2.4 million-tons-per-year Eskom contract to Oakbay Resources and Energy, which is 64% owned by
Atul Gupta.

The disclosure of Zuma’s stake in the Optimum deal adds to accusations that have already been made that the Guptas’ political influence has been at play in securing not only the Brakfontein contract with Eskom but also the Optimum deal.

There was an outcry last month when it was revealed that Mining Minister Mosebenzi Zwane travelled to Switzerland with Tegeta in December and met with Glencore shortly before Tegeta’s takeover of Optimum was announced.

On Friday, Howa dismissed questions about whether Tegeta planned to use political muscle to secure a sweetheart deal from Eskom, saying: “Regarding alleged political connections, we deal only in facts and not speculation or innuendo.”

April 22 2018