Exchange of letters revealed 'ulterior motives', state capture inquiry hears

A controversial exchange of letters between former Eskom boss Matshela Koko and the department of mineral resources has revealed that there were "ulterior motives" at play when Glencore was negotiating the sale of Optimum Coal to the Gupta family.

Former department of mineral resources director-general Thibedi Ramontja, who was testifying at the state capture inquiry on Thursday, described how he signed off a mysterious draft letter that found its way to his office. It was purportedly in response to another letter allegedly penned by Koko, alerting the department to an about-turn by Glencore to take its mine out of business rescue in 2015.

Ramontja said he had signed the letter without much thought, and it had left his office without his knowledge.

The exchange of letters happened after Glencore placed its mine into business rescue due to Eskom - under then chief executive Brian Molefe - refusing to renegotiate its coal supply agreement with Optimum coal mine and further reinstating a controversial R2.1bn penalty for the supply of substandard coal. 

This was also a time when the Gupta family were actively lobbying for the purchase of the mine, and its holding company, from Glencore.

By the end of November that year, Glencore had opted to pull the mine out of business rescue, pledging to bridge the costs of supplying coal to Eskom at a rate lower than its production costs until a time when its contract could be reviewed. However, by then, the Gupta family through their company Tegeta Exploration and Resources, had already made two offers to purchase the mine.

Koko's letter was dated December 6, days after mineral resources minister Mosebenzi Zwane and Gupta associate Salim Essa met Optimum and Glencore bosses in Zurich to discuss a third and final deal.

In his letter, Koko claimed he was disconcerted with Glencore's u-turn on the business rescue, further stating that the company was not acting in the nation's interest. He wanted the department to intervene and did not mention that Tegeta intended to buy Optimum.

Ramontja said he was not aware by the time he received the letter that a sale agreement had already been reached with the Guptas. A draft letter in response to Koko's note, Ramontja said, was found in the in-tray at his office.

"I saw it. I looked at this letter, I looked at this letter of Koko and I knew there were issues happening in this project. And I just signed it," Ramontja said.

He said he did not know how it got to his office. He signed it and before he revisited it, it disappeared from his desk.

Ramontja's letter, among other things, requested Eskom to play an active role in overseeing the deal. The letter proposed that consideration be made for a prepayment to be made for up to a year's supply of coal for the new owners. It proceeded to state that this was to be done on the understanding that the upfront capital injection be made to ramp up production to meet coal supply requirements.

Eskom paid Tegeta more than R600m in a prepayment for coal when they took over Optimum. This is believed to have funded part of the acquisition of the mine from Glencore.

"I never thought there were ulterior motives associated with the letter," Ramontja said, concluding his testimony before the commission.