Eskom took only 3 hours to illegally pay Tegeta R659m – Nagar
Nagar said although the payment was illegal, he and his team had to do as they were told. 'Not following instructions was unheard of at Eskom.'
Eskom official Snehal Nagar is pictured at the Commission of Inquiry into State Capture in Parktown, 05 March 2019. Picture: Refilwe Modise
It took only three hours for Eskom to pay a R659 million advance payment to the Gupta-linked Tegeta Exploration and Resources to fully acquire Glencore’s Optimum Coal Mine (OCM), without any goods or services having been delivered to the utility, the Commission of Inquiry into State Capture heard on Tuesday.
In his testimony, Eskom’s head of finance in the primary energy division, Snelhal Nagar, revealed under cross-examination by senior counsel Isaac Maleka that he was called via an e-mail and by a follow-up call in April 2016 by former Eskom director Maya Naidoo, who told him the board had approved the R659 million payment and that the payment had to be done in hours.
Asked by Deputy Chief Justice Raymond Zondo whether Eskom had in the past made urgent payments of this size, Nagar said “no”.
“Eskom effected urgent payments in cases where the supplier was owed money and there were no disputes,” said Nagar, adding that a prepayment deal was “unusual at Eskom”.
Also abnormal about the Tegeta transaction, said Nagar, was that he was called by a board director about a payment to a service provider – an operational matter with a responsibility that rested with management.
Attached to the e-mail to Nagar was a contract addendum and minutes of the board committee approving the deal, instructing payment to be effected before 2pm on April 12, 2016.
The last straw for Nagar was the realisation that payments to Tegeta were done without any guarantees.
“To make a prepayment was like fooling the system. Normally, goods are received before payment is made,” he said, adding: “No evaluation of the deal was ever done.”
The Tegeta deal was honoured, despite not having been budgeted for. “Buying coal was all that was in the plan,” he said.
Naidoo’s follow-up effort was seen when she made a call at 11am on April 2016 to Nagar, ensuring that payment that had already been approved by the board’s tender committee was made.
Gupta’s Brakfontein Colliery, which already had a contract with Eskom, was used as a ”cover” to process the payment. Although the transaction was illegal, Nagar said he and his team had to do as they were told because they could have been labelled as insubordinate.
”The Tegeta pre-payment was certainly startling and intriguing but I think it was, at that time, all about ‘let’s carry out the instruction, we can worry about the story later’,” he said.
He testified further on Eskom’s penalty against Optimum for poor quality coal back in 2015. Optimum was owned by Glencoreat the time. Nagar said he was asked to calculate the penalty mount and with the help of contract managers and other executives, they came up with an amount of R2.1 billion.
Eskom then deducted R158 million from Optimum, and later a final settlement amount of R254 million was reached between the parties. Nagar said he refused to sign off the agreement for the lesser amount, adding that he believed that Eskom got far less than what it was entitled to from Optimum.
The Fundudzi Forensic Services investigation sanctioned by the National Treasury found that the R659 million payment to Tegeta was done so that the Guptas could meet a R2.1 billion deadline required to purchase Optimum Coal from Glencore. The Guptas’ Oakbay Investments was R600 million short and had unsuccessfully tried to source funding from banks and other lenders, and Eskom came to the rescue.
Former Eskom executives including Koko, Singh and former CEO Brian Molefe and the Gupta family, former president Jacob Zuma, some of his cabinet members and his son Duduzane, are at the centre of the ongoing state capture probe.
The former Eskom executives are alleged to have aided and abetted the Guptas’ plundering of the power utility to its detriment.
According to National Treasury’s report:
- Eskom management prejudiced Glencore by refusing to sign the negotiated coal supply agreement, giving advantage to Tegeta to acquire all assets in Optimum Coal Holdings (OCH) which amounted to the abuse of a position of authority, a breach of trust, and a violation of a legal duty or a set of rules in terms of the Prevention and Combating of Criminal Activities Act (PCCAA);
- Its management prejudiced Glencore by fining OCM R2.1 billion for supplying allegedly “poor-quality coal”, which amounted to the abuse of a position of authority, a breach of trust, and a violation of a legal duty or a set of rules in terms of PCCAA;
- Eskom acted in bad faith when the power utility, represented by interim chief executive Matshela Koko, refused to waiver the historical penalties levied against OCM.