The devastation that State Capture wreaks is illustrated by the Gupta-linked Tegeta acquisition of the Optimum coal mine. Former Eskom board chairperson Ben Ngubane claimed ignorance on Wednesday of how a coal pre-payment from the state-owned power utility’s coffers was turned into a bank guarantee at the time of the mine’s purchase. Upstairs from the parliamentary Eskom State Capture inquiry, the mineral resources committee was told of Optimum workers not being paid, the mine’s R3-million debt to the local council, and its failure to honour social and labour plans. By MARIANNE MERTEN.
During Ben Ngubane’s tenure as Eskom board chair, the board approved R1.86-billion and R659,558,079.38 coal pre-purchase agreements from Optimum on 8 December 2015 and in April 2016 respectively. This coincided with the Gupta-linked Tegeta’s acquisition of Optimum mine from Glencore.
“It was indicated that with the funding of the pre-purchase of coal, Eskom was going to achieve a value benefit of R238.9-million. The motivation further indicated that the proceeds of the R1.86-billion prepayment of coal were to be used by OCM (Optimum Coal Mine) to extinguish existing liabilities to ensure that the business continues as a going concern,” according to Ngubane’s written statement to the parliamentary Eskom State Capture inquiry.
This version of events is backed up by previous testimony from board members Venete Klein and Viroshini Naidoo. Of course, former Eskom chief financial officer Anoj Singh had told the State Capture inquiry a somewhat different version, according to which the guarantee was not concealed, although no minutes were kept of the meeting that took that decision in April 2016.
That the Eskom coal pre-purchase agreements came at the same time as the Tegeta deal unfolded was not known, Ngubane claimed. It only emerged in media reports in mid-2017. And he told MPs he wasn’t sure how the R1.89-billion pre-purchase was turned into a bank guarantee:
“The finance department changed that.”
As far as Eskom was concerned the deal was “commercial transactions between two private companies” and all Eskom did “was to secure its interest in coal supply…”
There were also no answers to why that coal from Tegeta came at a higher price – R5 above the previous R150 per ton in one instance and R450 per ton, up from R132, according to questions by EFF MP Marshall Dlamini and African Christian Democratic Party (ACDP) MP Steve Swart.
A rough, back-of-the-napkin calculation shows that even an extra R5 per ton on a contract of 485,000 tons nets an additional R2.4-million for the mine.
Ngubane objected at one stage:
“I’m being asked operational matters. I deal with reports that came to the board through the normal channels.”
It wasn’t in the report. It wasn’t on the agenda. It wasn’t part of the briefing. And apparently no one bothered to ask questions, even if the board is overall responsible for governance at the SoE.
The Tegeta-owned Optimum mine is in trouble. In February no wages were paid to the 560 workers directly employed by the mine. Some 2,5000 contractors employed by various companies operating at the mine had not been paid, or were underpaid, since September 2017.
There were protests in February 2018. The mine is under business rescue. The impact on jobs, the mining sector and otherwise was canvassed by Parliament’s mineral resources committee on Tuesday.
Mineral Resources Department Director-General Thabo Mokoena told Daily Maverick that as the regulator it was working closely with all involved to ensure Optimum’s viability. He didn’t really want to elaborate further, and definitely not on the Tegeta transaction as that happened before his time.
But National Union of Mineworkers (NUM) Highveld secretary Nelson Ratshoshi said while the union wanted government to assist to keep workers in jobs and to find new owners, there were concerns as to how the matter is being handled.
“They are playing with names. They want to take the company from a Gupta company to another Gupta company,” he told Daily Maverick in reference to VR Laser.
Roll back about two years. VR Laser, through complex cross-interests, was involved in VR Laser Asia, the troubled joint venture with Denel. VR Laser Asia is wholly owned by Salim Essa, who also has a 64.9% majority share in VR Laser South Africa, in which Rajesh Gupta and Duduzane Zuma jointly hold a 25.1% stake through other investment companies. According to amaBhungane, Essa through his investment vehicle Elgasolve also holds about 22% of Tegeta Exploration and Resources linked to the controversial Optimum coal mine deal.
The VR Laser Asia-Denel joint venture deal was embroiled in controversy over the lack of ministerial permissions for the deal. In August 2017 Denel announced it was pulling out of the deal.
What happens now is up to Mineral Resources Minister Gwede Mantashe, who is also ANC national chairperson, who on Wednesday for the first time appeared before MPs in his new role in Cabinet. It is understood he’s intending to be hands-on.
But the consequences of the Tegeta-owned Optimum mine teetering on the brink of bankruptcy are clear. Mineral Resources committee chairman Zet Luzipho said he was told of a R3-million debt to the local council. And the promised that R400,000 for a community clinic listed in the mine’s social and labour plans was not paid over. There has been some guarantee over the electricity supply, but not the water supply, he said.
It’s a starkly different situation to that when former Eskom chief executive Brian Molefe was in charge of the power utility at the time of the Tegeta deal. Following his appointment from 2 October 2015 he was paid a guaranteed salary of R7.6-million – plus the usual incentives and bonuses SoEs pay their top officials – and secured an additional 13 years of pension paid for by Eskom which also took on the usual fees and penalties.
That R31-million pension for effectively 15 months at Eskom sparked a public outcry. It emerged after Molefe announced he was stepping down from Eskom “in the interest of good governance” following the public protector’s 2016 State of Capture report.
Controversy subsequently erupted over whether he took early retirement, as per an official letter dated 11 November 2016, or resigned before returning briefly to the power utility after a three-month stint on the ANC backbenches in Parliament.
In late January 2018 the North Gauteng High Court ruled against Molefe’s bid to return to the SoE and ordered him to repay the more than R11-million already received.
The judgment found a “total lack of dignity and shame by people in leadership positions who abuse public funds with naked greed for their own benefit without a moment’s consideration of the circumstances of fellow citizens who live in absolute squalour throughout the country with no basic services”.
On Wednesday Ngubane appeared to shrug off the controversy – he resigned in its midst in June 2017 – or even why a controversy erupted. Molefe’s salary was “no different” to previous Eskom chief executives, he told MPs. And there was nothing to say on the pay gap to ordinary Eskom workers, or perhaps even the unpaid workers of Tegeta mine which supplies Eskom coal.
“The fact that there’s a pay difference… (between the highest and lowest paid at Eskom), may be the business of serious inequality. But this is the system we operate in. I did not come to Eskom to change the processes. I don’t set the pay levels,” Ngubane replied to a question by inquiry evidence leader, Advocate Ntuthuzelo Vanara.
And Ngubane later added:
“I agree, there’s a lot of greed… But that’s the nature of the state we are in.” DM
File Photo: Ben Ngubane (Sapa)
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