South Africa

Days of Zondo

Eskom’s fault lines run deeper than the Guptas’ Dubai club

Eskom chairman Ben Ngubane and the power utility’s CEO Brian Molefe during a meeting with Parliament’s Standing Committee on Public Accounts (SCOPA) on May 30, 2017 in Cape Town, South Africa. The Eskom delegation appeared before Scopa to explain how coal contracts were awarded to the Gupta-linked Tegeta company. (Photo by Gallo Images / Sowetan / Esa Alexander)

Notwithstanding a climate of fear and apparent extreme regard for orders from above, Eskom technocrats have found themselves being grilled at the State Capture Commission on whether they did enough to flag or block dodgy instructions from higher-ups like former acting CEO, Matshela Koko, or then CFO, Anoj Singh.

Successive testimony by senior Eskom staff has shown there is a little cover for those who executed questionable instructions from the suits along Mahogany Row – even though this came at a time when fear-induced silence and scandalous suspensions were the order of the day.

At the centre of nearly two weeks of testimony in the Eskom leg of the State Capture inquiry is a series of transactions that effectively helped the Guptas to snatch Optimum Coal Mine (OCM) from commodities giant, Glencore.

They include a R1.6-billion guarantee to facilitate the purchase, an irregular R600-million pre-payment for coal to help the Gupas’ Tegeta Exploration cover a shortfall on the purchase price, and a 10-year coal supply contract for the family’s Brakfontein coal mine, one that also aided their cash-raising initiative for the controversial acquisition of OCM.

Featuring prominently across all these transactions are the names of those popularly dubbed the Dubai Club – some for having enjoyed sponsored trips up north once the Guptas relocated there in 2015 and others for their alleged commitment to aiding the family in their acquisition of OCM.

They include former Eskom chairman, Ben Ngubane, former CEO, Brian Molefe, former head of primary energy, Matshela Koko, former acting CEO, Sean Maritz and the former chief financial officer, Anoj Singh.

But, the actions of current and former technocrats also came under scrutiny in those transactions as well as one other, an attempt to have Eskom conclude a 1.5-billion USD loan deal with a Chinese-linked company, Huarong Energy Africa, that triggered an immediate invoice for R400-million once a draft term sheet was signed.

Along with Eskom treasurer, Andre Pillay, fellow witnesses Johann Bester, a former GM for fuel sourcing, Gert Opperman, a coal supply manager, accountants, Snehal Nagar and Sindecile Shweni, have each provided illuminating testimony about how those controversial transactions came about and what role some of the former executives had played in allegedly bending the rules. They have revealed among other things, how:

  • Eskom signed a 10-year coal deal with Tegeta for coal from Brakfontein even though the company had failed to meet a condition precedent to conducting a combustion test;
  • Koko had called a coal supply manager twice to push Eskom’s Majuba power station staff to accept-reject coal from Brakfontein;
  • They were each allegedly leaned on by the various executives to rush through the series of deals in aid of the Optimum purchase.

But then, each of the “good guys” found themselves having to account before Justice Raymond Zondo for their actions too – either because they could be viewed as unwitting facilitators either as a result of their silence, acts of omission or being so good at their jobs, they could work around system obstacles to make the paperwork add up in the end.

Covering, yes, but not my tracks

Between them, Bester, Opperman, Shweni, and Nagar have highlighted concerns about deviations from due process and attempted to illustrate what they had done to either block or stall the wayward instructions or to insist on valid documents before signing off on aspects of those transactions, and still:

  • Gert Opperman had to explain why he sought to cover “his” tracks when he was requested to complete paperwork to regularise the R600-million pre-payment to Tegeta. Opperman, quick to point out those were not “his” tracks that were being covered, testified that he so was baffled by the request which came a month after the money was released to Tegeta, he spoke to his superior and asked for supporting documentation. Megawatt Park sent him the paperwork, right down to a Board resolution. Opperman said he had little choice but to complete the paperwork which required his signature and input.
  • Shweni was awkwardly tackled for failing to adequately flag a dodgy transaction involving Huarong Energy Africa to the Reserve Bank. He had tried to use the application to the SARB as an opportunity to have an external entity block the deal due to a high number of red flags around a foreign company that Eskom intended paying. However, Shweni’s warnings, the Commission heard, were thin and the SARB, unable to read between the lines, granted approval. Remarkably, this crafty effort on Shweni’s part, however unsuccessful, did not come in isolation; he testified to various other ways in which he sought to stall the internal push to sign off on the Huarong deal.
  • Nagar was interrogated for not pushing hard enough on R1.17-billion in penalties due to Eskom by Optimum Coal Mine. This was based on his calculations but save for a hand-scribbled note reflecting his calculation on a final draft memo prepared to approve a reduced amount, Nagar seemingly abandoned the battle. Eskom ultimately slapped the Guptas with an effective R254-million cash penalty. Just months earlier, the parastatal had demanded R2.1-billion from Glencore, a move that drove the company into business rescue, paving the way for the Gupta purchase of Optimum.
  • On Monday Bester testified to, among other things, why he succumbed to pressure to hurriedly conclude a contract with Tegeta for the Brakfontein coal deal. He resigned on July 20 2015, the day Koko arrived back at Eskom following a four-month-long suspension.

Bester said a contract like this would usually take several months but he was under severe pressure to move swiftly. He too testified that his then superior allegedly told him that he if couldn’t get the deal done, he would find someone else to do it.

Bester was also grilled about why, within days of Tegeta having sought a five-year contract, he then relented to the company’s almost overnight request for a 10-year contract within a day or so.

At the time, Tegeta only had five years left on its Brakfontein mining licence. But, it was sitting on another pot of gold at the nearby Brakfontein Extension, a portion that made it into the final coal supply agreement even though no coal testing had been done there. Asked about this, Bester said he assumed that the usual cross-functional teams had ticked all the relevant boxes. He also believed a 10-year deal was in Eskom’s interest provided the coal was found suitable for its power stations upon testing.

On this front, the commission heard that Eskom, once armed with an approved coal supply contract, submitted an application to National Treasury for the extension to allow for a further R2.9-billion in coal to be sourced from the Brakfontein Extension area.

Why did you go along when you knew this was wrong?’

Earlier in the day, Opperman, the coal contract manager who handled both the Gupta-owned Brakfontein coal supply contract and that of Optimum Coal, later on, named Koko for allegedly having called him twice him to ensure reject coal was accepted at the parastatal’s Majuba power station in 2015.

Opperman detailed how, despite the Gupta coal having failed sampling tests over the course of several months between March and November 2015, he had felt powerless to do more because of those calls from Koko.

Opperman had earlier been grilled about his hand in helping Eskom to regularise paperwork for the Tegeta pre-payment after it was rushed through in 82 minutes on the back of a different Gupta contract, that for the Brakfontein colliery.

Opperman, usually based in Witbank, testified that he was baffled by the request and raised it with his then superior. He then asked for supporting documentation and this came through, right down to a Board resolution.

Opperman said he felt he had little choice.

He also detailed how he had informed Tegeta that their Brakfontein coal had failed a sampling test and suggested the company declares a dispute.

But then, Koko called him and allegedly told him to engage the power station where the coal was destined for and to get them to accept the “reject coal”.

The Gupta coal was out of specification, making it unsuitable for the Majuba power station.

Opperman said although his superior at the time had agreed with him, it was clear that the calls from Koko had to be taken seriously.

Commission chairman, deputy chief justice Raymond Zondo, stepped in and asked Opperman why, knowing that this was not normal practice, did he lobby Majuba to accept the out-of-spec coal.

Why would, maybe good people, knowingly allow themselves to be party to wrong things?” Justice Zondo asked.

Why did you go along when you knew this was wrong?”

Said Opperman: “My viewpoint from the onset was not to go along with it. That’s why I told the CEO of Tegeta, we cannot move this coal.”

But the calls from Koko could seemingly not be ignored.

Opperman then referred to Koko’s management style, corridor talk at Eskom about what happens to people who don’t follow orders, adding, “you hear how people are treated, it’s part of your life”.

At the very stage when Koko allegedly called him the second time to arrange for Majuba to accept the reject coal, Opperman had just learned that Mark van der Riet, an award-winning Eskom coal specialist, had been suspended. He told the commission that he didn’t know the reasons for Van der Riet’s suspension at the time.

Van der Riet passed away earlier this year, shortly after providing his statement on the Brakfontein coal scandal and his suspension to the State Capture Commission.

The commission resumes on Tuesday with further testimony by Bester to be followed by that of Standard Bank’s Ian Sinton and Piers Marsden. DM


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