Eskom in new R100-million office chair scandal

Treasury suspicious as utility wildly inflates contract for thousands of chairs

08 October 2017 - 00:05 By PREGA GOVENDER and SABELO SKITI
Two weeks ago Eskom was branded the biggest risk to the economy by Goldman Sachs.
Two weeks ago Eskom was branded the biggest risk to the economy by Goldman Sachs.
Image: John Liebenberg

Cash-strapped Eskom wants to burden South Africa's consumers with a huge rate increase next year - while demanding that the Treasury approve the expansion of a contract to buy thousands of office chairs at an average of around R2,600 each.

The power utility - so mired in corruption and mismanagement scandals that it has been named the "biggest risk to the South African economy" - wanted an extra R24-million to buy 9,217 "operator and visitor chairs". This is on top of an existing R72.7-million contract, signed in 2013, to supply office and "soft" chairs. The latest request would have seen Eskom spend a total of R100-million so that its employees and visitors can sit comfortably.

Suspicious of the latest request, the National Treasury conducted a physical inspection of Eskom's offices and power stations countrywide, and sources said it found that only 500 chairs were needed.

Two weeks ago Eskom was branded the biggest risk to the economy by Goldman Sachs following several allegations of corruption related to contracts it signed with companies linked to the Gupta family, friends of President Jacob Zuma.

Coming after a series of controversial bosses, the appointment of information technology executive Sean Maritz as interim CEO is already being viewed in a dim light.

Maritz's first action was to suspend Eskom's head of legal, Suzanne Daniels - a move seen as putting the brakes on Eskom's endeavours to recover R1.5-billion from McKinsey and Trillian. The process followed to appoint the companies is shrouded in controversy.

Earlier this month energy regulator Nersa revealed that Eskom has asked for an average increase of 19.9% from April 2018.

The existing R72.7-million contract for chairs is with Gauteng-based office furniture supplier Gxakwes Projects, for chairs and sofas to all Eskom offices and stations countrywide, "as and when required".

The five-year contract ends next year and the parastatal went to the Treasury earlier this year to ask for an "expansion" of the contract by an additional R24-million for the supply of chairs.

Mzwakhe Gxakwe
Mzwakhe Gxakwe
Image: Supplied

In its motivation to Treasury, Eskom said there was "an urgent need for replacement chairs while initiating a tender process".

The Treasury confirmed that it had demanded a physical inspection of Eskom's offices to "justify the needs" for such a request.

It said that its refusal to support Eskom's request meant that the procurement of the office chairs may not go ahead and that if it did go ahead, the auditor-general may declare it as "irregular expenditure".

Sources close to the Treasury confirmed that officials inspected Eskom's offices in several regions and found that only 500 chairs were required instead of the 9,217. "The application just looked wrong and we suspected collusion between Eskom and the service provider," said a Treasury source who cannot be named. "In some cases there was not even enough space to fit the chairs said to be needed."

Mzwakhe Gxakwe, CEO of Gxakwes Projects, said he could not give details of his contract with Eskom.

"We are not involved in any of the internal processes that involves Eskom and the National Treasury ...Chairs ordered have to be approved by senior managers. There's no one who can create a purchase order unless it goes through the whole process. One office may order one chair and another two. Another may say we need 200 or 300 chairs."

Eskom had not responded to questions at the time of going to print.

In its latest audited financials, Eskom posted an R870-million loss and showed serious lapses in governance as the company got a qualified audit with more than R3-billion in irregular expenditure. The Sunday Times previously revealed that in June the company was left with its last R20-billion in cash - enough to last just three months.

R72.7m is the amount
already paid for the office chairs

Despite this the company paid R13-million in bonuses for its top executives.

A further R4.2-billion in performance bonuses was paid to employees.

The disastrous financial year also saw chief financial officer Anoj Singh placed on special leave for authorising more than R500-million in payments to Gupta-linked company Trillian with no contract.

Last week, Public Enterprises Minister Lynne Brown announced that both Singh and former acting CEO Matshela Koko had been suspended and were facing disciplinary action for a series of actions that benefited the Gupta family.