Questions raised over De Ruyter 'handpicking' potential service providers for Eskom

MPs are seeking legal advice on whether new Eskom boss Andre de Ruyter crossed a line when he identified companies that would potentially do work with the power utility.

De Ruyter admitted in parliament to handpicking four companies to be included in a pool of service providers for Eskom, arguing that they brought much-needed expertise and innovation to the struggling energy company, especially in dealing with maintenance of boiler tube ferrules.

This emerged during a meeting of parliament's public accounts watchdog Scopa on Wednesday night when EFF MP Mbuyiseni Ndlozi asked the Eskom CEO whether he had ever recommended companies to be appointed at Eskom since his appointment late in 2019.

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In his response, De Ruyter said he believed that part of the value add that a new executive coming into an organisation like Eskom could bring was industry knowledge and industry experience, and part of that industry knowledge and experience was to introduce new practices and new ways of doing work in an organisation like Eskom.

That, he said, included introducing into the organisation potential suppliers.

“This does not mean there is an instruction going from myself or from my office to appoint any contractor. It is an expansion of potential contractors to be considered when requests for work are issued to the supply team,” he said.

“I have introduced [companies] into Eskom for consideration for potential work, to understand if there is any value to Eskom by services rendered through these companies,” he added.

De Ruyter said one of the companies could potentially assist with developing a computer model using artificial intelligence to do predictive maintenance on boiler tube ferrules.

“Initial discussions to explore if this concept is of any value have taken place but I'm not certain what is the current status of that, and once we have understood whether that concept has any value, we will then obviously go through the Public Finance Management Act (PFMA) compliance procurement processes,” he said.

De Ruyter said another company provided advanced maintenance capabilities.

He was at pains to say that while the initial discussions had taken place, whatever process was followed to select a vendor to supply services would have to be appointed in compliance with PFMA processes.

He said various investment banks also approached Eskom from time to time on an unsolicited basis with proposals, again the standard answer was to stress that they had to comply with PFMA process, that Eskom noted what they proposed and a Treasury team at Eskom was involved. Appropriate inquiries were issued and bids assessed before an appointment could be made.

To date, no appointment had been made, he said.

De Ruyter explained while artificial intelligence was not a novel concept (generally), it was a novel concept to Eskom.

“So the novelty lies not in the artificial intelligence but in the application of artificial intelligence to predicting ... If you look at the nature of our maintenance practices and that we have tended to be reactive and conduct maintenance in an ad hoc fashion, it is clear that we need to take advantage of the most advanced techniques that we can to improve predictive maintenance, to understand in advance when we can expect a failure to take place.

“To my knowledge that is indeed novel, there is nothing that I've seen in Eskom that exists to that extent or that has even been considered. We need to improve our maintenance capability and hence we need to look at practices novel to Eskom and introduce those,” he explained, when Ndlozi dismissed artificial intelligence as nothing new.

Ndlozi dismissed De Ruyter's response as “nonsensical”, charging that in many cases, CEOs were involved in the same companies they recommended for work with state entities.

“That's what ends up in corruption. Officials start feeling the indirect pressure. The loophole is that if you want to build artificial intelligence capability it's not wrong to open it up to everyone in that space.”

He said to recommend a single company as a potential player with Eskom was precisely why there were problems in the power utility.

“What about people who don't have access to you and what about companies that do not know you?”

Other MPs jumped in, saying they too were concerned that the CEO would have a preference.

“That the CEO must come with a potential company and place it there, [and say] this company should somewhat be dealing with this kind of activity. That's the point I think we need to deal with,” said the ANC's Sakhumzi Somyo.

ANC MP Bheki Radebe told De Ruyter it was one thing to introduce an idea, and another to bring a potential company to execute that idea.

“It's not principled, it's unethical, it leads to state capture, particularly when it comes from the highest office in the establishment. It can't be,” he said.

De Ruyter was adamant that he had not acted unethically.

“How does a company become aware of new services?

“Does it sit by itself and develop concepts by itself or does it open itself up to engagements with experts, offering services and then, having offered their services, go through rigorous, entirely legal and entirely ethical procurement process to appoint a company that offers the best value for money?

“I am very comfortable in my own mind that I have not acted unethically and I'm restraining myself at this point, because I don't particularly appreciate the implication that I am behaving unethically,” he responded.

Scopa chairperson Mkhuleko Hlengwa said they would consult parliament's legal advisers on how to approach the matter.