Eskom top brass on spot for corruption questions

Stunning reversals, a shocking confession and elaborate justifications were among the responses from Eskom's top three officials to questions on the key controversies surrounding the company.

Acting CEO Johnny Dladla, chairman Zethembe Khoza and chief financial officer Anoj Singh were on the spot at the annual financial results presentation this week.

BACKGROUND: In April 2016 Gupta-owned Tegeta bought Optimum mine after it was put into business rescue by Glencore. Among the liabilities was a R2-billion fine for supplying Eskom with low-quality coal. Eskom's CE at the time, Brian Molefe, repeatedly declared that Tegeta would not be forgiven the fine. In April 2017 Eskom agreed to lower the fine to R577-million in an arbitrated process.

QUESTION: Eskom promised that Tegeta would not be forgiven the R2-billion fine levied on Optimum mine, but this has now been reduced to R577-million. Why?

Anoj Singh: Eskom sent Optimum [then owned by Glencore] a letter of demand for the penalty of R2.1-billion. There was a mechanism in the contract to resolve disagreements through arbitration, which was attempted with Glencore. The subsequent process was arbitration with Tegeta.

The dispute related to substandard coal qualities picked up by new coal sampling equipment installed in 2010.

The claim had accrued to R2.1-billion over time because it was based on a penalty of a rand per ton of coal supplied. That meant about R1.1-billion of the penalty resulted from the false results and about R700-million related to substandard coal.

BACKGROUND: Singh has been surrounded by a litany of allegations. These include measures to assist the Guptas in buying Optimum and a suspect contract with McKinsey, parts of which were subcontracted to Gupta-associated firm Trillian.

QUESTION: If Eskom is so concerned about governance why has Singh not been suspended?

Zethembe Khoza: We looked at the matters of interest pertaining to Singh. There were three: the prepayment to Tegeta; the arbitration award to Tegeta; and the McKinsey contract.

The prepayment to Tegeta was driven by the generation division and not by Singh. He was only involved when members of the board requested him to calculate the value of the diesel [that would have been bought if Eskom ran short of coal] and the cost of the prepayment. He was also asked to establish the surety of the prepayment. These matters were not initiated by him.

The arbitration award was done by Eskom's head of legal. Singh only signed the document as Eskom's finance head.

The McKinsey contract was in place before Singh was at Eskom. He helped us when there was a dispute between Trillian and McKinsey.

So far, from the matters we have seen, there is nothing that warrants anything to the degree that he can be suspended.

QUESTION: The Guptas paid for you to stay in Dubai, which coincided with the Optimum purchase by Tegeta. They opened a shelf company for you in which they deposited R400,000. Can you explain this?

Anoj Singh: I'm preparing a public report and I will be in a position when it is complete to share it with all stakeholders.

BACKGROUND: McKinsey is embroiled in a controversy in which parts of its contracts with Eskom were subcontracted to Trillian.

McKinsey says this arrangement was the work of a rogue director, Vikas Sagar, who wrote to Eskom without authorisation, advising it to bill Trillian for parts of the contract and pay the Gupta company directly.

When asked in May if Eskom had any contracts with Trillian, it said that "it had not paid a cent" to the company. But at Wednesday's briefing Dladla said R900-million had been paid to McKinsey and R495-million to Trillian.

QUESTION: Two months ago you said Eskom had not paid Trillian a "cent". Today we hear that it was paid R495-million. Please explain.

Johnny Dladla: I won't comment on previous statements. Our investigation shows that R495-million was paid to Trillian. The issue is we didn't have a contract with Trillian itself.

So if a person searched for a payment to Trillian they would not find it.

As it stands I have asked for an independent review. I've suspended McKinsey. There was work done by Trillian under McKinsey but they were not contracted to Eskom.

Zethembe Khoza: We did not have a contract with Trillian, we had one with McKinsey. But McKinsey wrote to us asking us to pay Trillian directly. If that statement was made [that Eskom never paid Trillian] then it must have been incorrect . to my knowledge there was an invoice [from Trillian] that was paid for.

BACKGROUND: At the point that Tegeta was negotiating with business rescue practitioners to buy Optimum in December 2015, it became known that several major banks had given the Guptas notice that they would terminate their bank accounts over concerns about unexplained transfers and movement of money.

This, taken together with the R2-billion fine on Optimum as well as the fact that the mine was tied into a loss-making contract with Eskom until 2018, raised many questions as to how the Guptas would purchase Optimum.

While it had been strongly rumoured that Eskom had provided the guarantees to Tegeta, this was always flatly denied by Molefe.

QUESTION: Molefe in particular has said that Eskom paid no guarantees to any bank to assist the Guptas to buy Optimum.

On December 27 2015 did Anoj Singh sign a guarantee of R1.6-billion to Absa on behalf of Eskom for Tegeta's purchase of Optimum?

Anoj Singh: The guarantee was issued and cancelled, fortunately. The guarantee was contemplated and then put in place. It expired. It was not utilised. There was a guarantee.

QUESTION: Did you know about the guarantee? You were tender committee head at t he time.

Zethembe Khoza: The R1.6-billion I don't recall but I will investigate it. I heard it for the first time [here today].

PLEASE EXPLAIN . . .● Why, after Optimum was bought by Tegeta, its R2-billion fine was reduced to R577-million● Why Anoj Singh helped the Guptas buy Optimum● Why parts of Eskom’s contracts with McKinley were subcontracted to Trillian● Why Eskom gave Tegeta guarantees to help it buy Optimum