News / South Africa / State Capture

Makhosandile Zulu
5 minute read
22 Feb 2019
1:35 pm

Eskom has filed charges against Guptas’ company – Mabuza

Makhosandile Zulu

He says procurement at the state utility was one of the ways that corruption was carried out.

Jabu Mabuza, November 2 2016. Picture: Jacques Nelles

Eskom board chairperson Jabu Mabuza told the commission of inquiry into state capture on Friday that at the time he took office at the power utility in January last year, the state-owned entity (SOE) was the main theatre where corruption and state capture took place.

He also revealed that the power utility intends to have the Gupta-linked company Tegeta Resources subjected to criminal legal action.

Mabuza said when the new board he chaired was appointed at Eskom, it found there was “a lot of graft, a lot of malfeasances” at the power utility.

“It was the main theatre corruption and state capture took place,” Mabuza said, adding that staff morale was low and that “people were not too proud to be associated” with Eskom.

Mabuza said Eskom was facing a liquidity crisis at the time, with the entity needing a cash injection of R20 billion which would carry it through till the period of August and September.

When he took the chairpersonship of Eskom’s board, Mabuza said he, and the new board, found that Eskom’s funders had “drawn the line” and stated they would no longer put money into the entity without a change of the power utility’s leadership. He added that the last time Eskom was able to source money from the market had been in July 2017.

Furthermore, Mabuza said Eskom at the time had to release its interim results ending September 2017 and that the JSE had indicated that it would delist Eskom’s bonds if those results were not published by a certain date.

Furthermore, auditors would not sign on these results on a going concern basis until the R20 billion injection was made to address the liquidity crisis at Eskom, Mabuza said.

This meant the entity could not be relied on as a going concern and so could not trade as of August 2017.

However, the newly appointed board at the time managed to obtain the interim results, with funders expressing their confidence in the new team, which Mabuza said, “had sufficient integrity and ethical standing so funders would be confident the new board would not steal money”.

Mabuza said he met with certain funders, including the vice president of the World Bank who had previously met with the country’s then deputy president, Cyril Ramaphosa, to inform the latter that the bank would pull the plug on Eskom.

He said the funders believed the new board would clean up and stabilised the entity and so were prepared to give Eskom a bond.

Thereafter, Mabuza’s board continued to address other issues plaguing Eskom at the time, including releasing the interim results from the previous year, raised funds, sought to finalise outstanding disciplinary hearings, “had a complete board, had a new chief executive, and we embarked on appointing a permanent chief executive and a permanent CFO”.

“Over time we tried to address the issues on procurement because, Mr Chairman, what I have come to learn here is that it’s called corruption. The name is corruption but the game is procurement. But the guarantee is quite specific. The guarantee is for capital projects,” Mabuza said.

One of the concerns regarding procurement at Eskom highlighted in a national Treasury report from 2017 is the allocation of coal contracts, among others, to the formerly Gupta-owned Tegeta.

Mabuza said it was not true that Eskom did not suffer any loses in providing Tegeta with a R600 million prepayment to purchase Optimum Coal Mine from Glencore.

He said Eskom was paying about R600,000 quarterly to the banks to service the guarantee.

“I don’t know what that was in that board’s head to do so. I don’t think this board would have agreed to provide a guarantee to a supplier. It’s incorrect to say Eskom did not suffer because the guarantee has lapsed. Eskom has definitely suffered, at least from reputation,” Mabuza said.

Mabuza said if Eskom were to default on any of its guarantees, that would have a “knock-on and fatal effect on the sovereign”, but said luckily the utility had not defaulted on any one of its debt covenants.

Maleka also raised concern about the Eskom board failing to implement remedial action against eight former executives implicated in irregular expenditure flagged in the 2017 report by National Treasury in relation to the R600 million prepayment to Tegeta.

They were former chief financial officer Anoj Singh, former acting chief executive Sean Maritz, Edwin Mabelane, former acting chief procurement officer Charles Kalima, former group head of generation Thava Govender, former head of legal and compliance Suzanne Daniels, former group head of capital Abram Masango, and another former acting CEO Matshela Koko.

But Mabuza said he only became aware of the Treasury report on Tegeta around November 2018, adding that despite that, Eskom was dealing with these matters either through its internal disciplinary processes or pursuing them on a criminal level or in civil proceedings.

“Matshela Koko’s disciplinary deals with, among others, issues of these contracts. It’s a matter of course that he has since resigned barely hours before the disciplinary hearing,” Mabuza said.

“We have laid criminal charges, we have handed over to both the Hawks and the Special Investigating Unit. We will start pursuing those civil claims.”

Mabuza continues to testify after a lunch break adjournment.

(Additional reporting by ANA)

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