South Africa

Days of Zondo

Matshela Koko and the Guptas’ Brakfontein coal mess

Eskom executive Matshela Koko at the parliamentary inquiry into alleged corruption at the power utility on January 24, 2018 in Cape Town, South Africa. Koko, Eskom’s head of generation, denied being involved in corruption and implicated former colleagues. (Photo by Gallo Images / Sowetan / Esa Alexander)

On the back of damning testimony about how former Eskom executive, Matshela Koko, fed the Guptas confidential documents, he again featured prominently as his role in allegedly protecting the Guptas in a multibillion-rand coal deal emerged on Tuesday.

The Guptas’ company, Tegeta Exploration and Resources, bagged a 10-year coal deal from Eskom in 2015 before a financial assessment was done to determine the company’s ability to deliver and, important, without adherence to a condition precedent that required a combustion test of coal from their mine in Brakfontein, Mpumalanga.

What followed was poor quality coal that posed a huge risk to Majuba, Eskom’s second-biggest power station, under-delivery and highly questionable interventions by some, including Koko, the State Capture Commission heard.

Eskom’s acting GM of Primary Energy, Daniel Mashigo, testified to the impact of poor quality coal on equipment, plant breakdowns, load shedding, and ultimately, a R500-million penalty left behind by the Guptas as a result.

The Guptas had tried unsuccessfully for several years between 2011 and 2013 to get in on the Eskom gravy train. A water use licence, the final hurdle, was eliminated in 2014 to pave the way for this lucrative deal.

Evidence will show that considerable pressure was placed on Eskom staff to conclude this deal. They were told to finalise the agreement within 48 hours,” senior advocate Kate Hofmeyr told the commission on Tuesday.

Signed on 10 March, 2015, the deal resulted in the suspension of four executives, including Koko, the very next day.

Four months later, he returned with the first order of business allegedly being to send some useful emails to a Gupta-linked email address.

The Guptas had their coal deal, and based on witness testimony thus far, now also a man on the inside batting for them.

Evidence will show that the agreement concluded without a financial due diligence having been done. That was only done in April, after coal supply had started,” said Hofmeyr.

Mashigo confirmed, saying a financial report, signed around 30 April that year, more than a month after Eskom entered into the contract, concluded that “based on issues raised, the company is NOT sound enough financially to be awarded a contract to the value of R4.3-billion”.

Tegeta is now in business rescue. The company stopped supplying coal to Eskom in March 2018, a mere three years into its 10-year contract and a long way off from the termination date. Coal suppliers are sometimes tied to long-term contracts to ensure the security of supply for the power utility and to prevent costly emergency coal purchases.

The commission heard that Eskom staff, who had been pushed to get the deal signed, tried to protect the company by insisting that a full combustion test be done at 4pm on the day the contract was signed.

This was a condition precedent and failure to do that, they ensured, was to effectively invalidate the entire contract, as if it had never come into existence, Hofmeyr said.

Yet, the Guptas started delivering coal as soon as the following month.

Mashigo testified how another condition, the installation of an auto mechanical sampler to collect indiscriminate mini piles of coal for testing to ensure it met specifications for Majuba, was also not adhered to.

In fact, he told the commission that this sampler was eventually pitched to be installed in January 2017.

Other companies could be given three months within which to install this automated sampler as it eliminated the risk of human error, manipulation or fraud, Mashigo said.

The Brakfontein coal deal reached a fever pitch around August 2015 when an accredited Eskom laboratory failed Gupta coal by 15 out of 30 samples tested.

Such tests are done to ensure compliance with specifications for contracted power stations to reduce the risk of damaging equipment, among other things.

The Guptas, the commission heard, cried foul and claimed the lab had solicited a bribe for favourable results.

Now firmly back in the hot seat at Eskom, Koko briefly suspended the Guptas’ coal supply, pending another wave of tests, this time by the SA Bureau of Standards, which failed 29 out of the 30 samples.

Eskom had earlier seconded Dr Mark van der Riet, an award-winning coal specialist, to its primary energy division to investigate the link between poor quality coal and load shedding.

This Brakfontein mess landed on his desk within days of the failed tests in August 2015.

While travelling to Mpumalanga to collect coal samples from the Brakfontein colliery, Koko allegedly called to tell him the sampling would take place without him or members of his team being present.

Van der Riet told him this would be irregular. It fell on deaf ears.

This round of sampling, now done under the utmost mysterious circumstances, then passed resoundingly, as it was suddenly found to be within specifications.

Van der Riet compiled a report and, as he headed into the office to hand it in, he was suspended, along with three colleagues.

He would be on paid suspension for 32 months until a disciplinary hearing in 2018 cleared him, allowing for his return to Eskom. Van der Riet, a holder of a PhD in coal conversion, had worked for Eskom for more than 30 years. He died shortly after preparing his statement for the State Capture Commission.

One of the Eskom employees suspended with him was Sam Phetla.

On Monday the commission was handed email evidence of Phetla’s suspension letter, dated 31 August, 2015 (within days of the Brakfontein coal quality debacle), signed by Koko.

This letter Koko is accused of forwarding to [email protected], a controversial email address allegedly belonging to Gupta kingpin, Salim Essa – possibly to alert him about an impending vacancy.

With Van der Riet and his team out of the way, testing of the Gupta coal samples was now in safe hands. Days later, on 6 September, new samples, ostensibly from Brakfontein, were sent for testing at the SABS.

A colleague of Van der Riet’s determined that those samples differed so materially against earlier ones that they could not have come from the same mine.

The commission’s legal team will introduce further evidence about Eskom, allegedly at the instruction of Koko, later switching testing of the Gupta coal to an unaccredited internal facility, the Kendal Laboratory.

The use of this facility, the commission heard, was out of the norm and a witness is scheduled to testify about it having been an executive decision, by Koko, at the time.

The switch to Kendall resulted in the Guptas’ Brakfontein coal going from a 23% failure rate down to just 3%.

The commission resumes on Wednesday when Clinton Ephron, who was CEO of Optimum Coal Mine, previously owned by Glencore, steps into the witness box. Glencore is the company that sold the Guptas’ Optimum Coal Mine in late 2015 following a flurry of unprecedented political intervention that included a trip to Switzerland by then mining minister, Mosebenzi Zwane. DM


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