Zondo 'troubled' by Eskom board that mistakenly approved R1.6bn for Gupta company
State capture inquiry chairperson, deputy chief justice Raymond Zondo, on Wednesday expressed shock that Eskom's board in 2015 mistakenly approved a R1.6bn prepayment for coal supply to Gupta-owned Tegeta.
Zondo heard from former Eskom board member Prof Pat Naidoo how they approved the prepayment on December 9 2015, having been under the impression that it was for Glencore-owned Optimum Coal Mine (OCM).
But the submission to the board, which gave rise to the board approval, clearly stipulated that the prepayment would be for “proposed owners” of Optimum, Tegeta Exploration and Resources.
The commission chair said it was “troubling” that a whole board of 12 members was so incompetent that it would allow such a costly lapse in oversight.
Naidoo said he at the time was under the impression that Eskom, which had been at loggerheads with Glencore, had made up its differences with the company. It was for that reason, he said, it was recommended that Eskom and Glencore release a joint media statement after the approval of the prepayment.
The prepayment, the board believed, was beneficial to both Eskom and Optimum, which was under threat of liquidation, and that approving the prepayment was going to save jobs.
“I looked at the submission which motivated firstly that there is an agreement between Eskom and OCM, and that OCM requires cash in advance to give them liquidity so they can get on with their business,” said Naidoo, who chaired the Eskom investment and finance committee on the day of approval.
“They also said they are in the process of taking on more BEE partnerships. When we looked at that, we said prepayment is the practice of the business.
“The advance payment of R1.68bn was going to secure future supply of coal to Eskom and OCM was to cede unsupplied coal as security.”
Zondo was in disbelief that the Eskom board ignored a fundamental part of the submission, which clearly stated that the prepayment was for the benefit of OCM's proposed owners.
“How is it possible that the entire board did not see this point? How could none of you say, but hang on, change this submission. What is troubling me is how it is possible for so many members of the board not to have seen what is written here in black and white,” charged Zondo.
“It is troubling me that members of the board of such an important state entity knew that they were being asked to authorise such a large amount of payment to an entity and they do not take the trouble to say, let us make sure that this money goes to the right person or right entity.”
After the board approval of the prepayment, Eskom management a day later extended a guarantee to Tegeta.
Naidoo has concluded his testimony. Eskom-related evidence testimonies continue with former board member Venete Klein now in the hot seat.