China loan sank Eskom, and Lynne Brown allowed it – Pillay
Interim CEO Sean Maritz signed the R25 billion long-term transaction with HEA in December 2017, 'after Brown gave him a mandate to do so'.
Eskom’s treasurer Andre Pillay is pictured during the Commission of Inquiry into State Capture in Parktown, 01 March 2019. Picture: Refilwe Modise
Under Lynne Brown’s stewardship as public enterprises minister, Eskom executives could get away with anything – disregarding policy and the law – if yesterday’s testimony by the general manager of treasury at the power utility, Andre Pillay, is anything to go by.
Testifying before the Commission of Inquiry into State Capture, Pillay, who has served at Eskom for seven years, spoke of how:
- Eskom former chief financial officer Anoj Singh, in contravention of Eskom policy and advice from lawyers and colleagues, signed a financially risky termsheet in 2017, setting out binding conditions for a R25 billion loan agreement with China’s Huarong Energy Africa (HEA). He left the state-owned enterprise (SOE) four months later.
- Interim CEO Sean Maritz signed the R25 billion long-term transaction with HEA in December 2017, after Brown gave him a mandate to do so. This cost him his job a year later under a new board, chaired by Jabu Mabuza.
Pillay, who has been threatened for speaking out against his seniors for entering into illegal deals, said Singh and Maritz pushed for the HEA transaction at all costs.
Pillay said the Chinese company approached Eskom in 2015, to discuss an unsolicited proposal to loan R25 billion to it. The terms of the agreement drafted by HEA were so onerous to Eskom that an international law firm, which advised against Singh signing the term-sheet, warned of the financial implications the transaction would have on the SOE.
With Eskom’s weak liquidity also threatening the payment of staff salaries, its executives became entangled in talks with HEA, a company with questionable business credentials.
Faced with a staggering R340 billion debt in 2016, and after the National Energy Regulator of SA refused its application for a 16% tariff hike, only being prepared to approve 8%, Pillay described Eskom’s predicament as “a difficult period financially”.
Pillay said an HEA delegation, led by Rajiv Thomas and Wim Terblanche, presented a formal unsolicited proposal in June 2016.
“There was nothing that raised alarm bells because they looked legitimate,” said Pillay.
But the conditions in the HEA term-sheet later raised questions. It was signed by Singh on March 14, 2017, against Pillay’s advice and that of the law firm White and Case.
HEA’s fees ran into millions of rand and a company formed by HEA would house the funds.
Singh left Eskom on July 27, 2017, and Maritz signed the HEA transaction in December 2017, after getting a mandate from Brown.
“Despite the board having resolved that we needed to negotiate, but not sign the deal, Maritz signed the deal,” said Pillay.
Eskom was presented with an invoice for a commitment fee of $24 million and $30 million for cancellation, which the current board has refused to honour.