Photo by: Duane Daws
The National Treasury has strongly disputed Eskom’s contention that it has been cooperating with its review of coal contracts involving the Gupta-family-linked Tegeta Exploration and Resources, indicating rather that its “efforts have met resistance” from the utility. It also disputed Eskom’s assertion that the National Treasury had signed off on audits of the contracts.
Further, it expressed surprise at Tegeta’s threat of an interdict should the department release a report into its investigation of Eskom’s coal contracts.
However, the State-owned utility responded, in turn, by saying it was “shocked and perplexed” by the National Treasury statement, and reiterated that it had been cooperating with the investigation.
In its statement, the National Treasury said it “noted with concern” a statement issued by Eskom on Sunday August 28, suggesting that it had been cooperating with the process. “The National Treasury would like to categorically state that its efforts have met resistance.”
NATIONAL TREASURY MEETS ‘RESISTANCE’
The National Treasury countered Eskom's assurances of cooperation by indicating that it had made several attempts to get information from Eskom, including:
- Sending a report to Eskom CEO Brian Molefe and board chairperson Ben Ngubane and a request for comment on it.
- Granting an extension that Eskom requested to provide the comments.
- A request for Eskom to submit a system-generated list of payments made to Tegeta and invoices received from Tegeta for the period September 1, 2015, to April 30, 2016.
- A letter by National Treasury director-general Lungisa Fuzile, requesting that Eskom withdraw its statement suggesting that “all the Tegeta coal contracts with Eskom have been extensively audited by various agencies, including National Treasury”, when “clearly that was not the case”.
Finance Minister Pravin Gordhan subsequently “escalated the matter” to Ngubane, raising concerns about advance payments made to Tegeta and failure to submit the information requested in relation to the matter.
“To date, not only has Eskom failed to honour its undertaking to submit comments to Treasury’s report but it chose to ignore correspondence and put all forms of hindrances,” the National Treasury said, while highlighting that Chapter 13 of the Constitution mandated the National Treasury to ensure transparency, accountability and sound financial controls in the management of public finances.
“It is Treasury’s view that a company or entity that is doing business with government and has nothing to hide should be transparent and welcome reviews of its dealings with the state. Members of the public also deserve to know how public finances are spent. It should therefore concern all South Africans that there are efforts to block and undermine the reviews.”
It also appealed for State entities to practise and respect the principles contained in the chapter of the Constitution on cooperative governance.
In its Sunday statement, Eskom insisted: “Through our normal interactions with the National Treasury, Eskom has repeatedly provided information to the National Treasury and where additional time is required has informed the National Treasury that some of the additional information that it had requested would only be supplied after Board approval.”
The utility also disputed that it had received out-of-specification coal worth more than R134-million from Tegeta, and said it had provided documentation to that effect to the National Treasury.
UNREASONABLE REQUEST
In a subsequent statement issued on Monday, Eskom outlined how it had been cooperating, as follows:
- The first request for information from National Treasury to Eskom was received on July 31, 2015. A response was sent and Treasury came back with their first draft report requesting further information on September 15, 2015. We responded to that request and they came back with a second draft report asking for more information on October 21, 2015. Eskom responded on November 11, 2015, with the required information including all invoices and payments made to Tegeta as an annexure to the response. The third request was received on April 12, 2016. Eskom was asked to comment on a 172-page document. This request came with a specific instruction from National Treasury to provide comments after they had been considered by the Eskom board. The deadline given was April 30, 2016.
- This was an unreasonable request. Consequently, Eskom requested an extension to provide the information, which was granted by the National Treasury. We therefore think it is neither unreasonable that our board will have considered responses to the 172-page document by end of September 2016, nor a reason for the National Treasury to label Eskom as uncooperative. Furthermore, in a letter from Mr Molefe to Mr [Kenneth] Brown dated June 24, 2016 Mr Molefe informed National Treasury of Eskom’s intention to submit the required information after it has been reviewed by the Eskom board, as per National Treasury instruction of April 12, 2016. Eskom has compiled a response to the National Treasury’s report dated April 12, 2016 and the responses are due to be tabled for consideration by the Eskom board as per National Treasury’s instruction during September 2016. These responses have already been tabled and were reviewed by the procurement subcommittee of the Board on 16 August 2016.
- The only letter that Eskom is aware of in which the Minister of Finance refers to prepayments to Tegeta was dated August 17, 2016. Eskom is in the process of compiling a response in this regard in line with our media statements already issued on this topic.
“It is also true that the National Treasury has requested all contracts related to Tegeta (as noted above) and that these contracts were subject to an investigation by the National Treasury. We therefore see no reason to retract the statement to the effect that National Treasury has investigated Tegeta contracts extensively,” Eskom said in a statement.
UNDER THE MICROSCOPE
Tegeta’s relationship with Eskom has come under close public scrutiny ever since it was announced in December that Tegeta had concluded a R2.15-billion transaction to buy all of the assets of Optimum Coal Holdings, which Glencore placed into business rescue in August 2015.
The announcement raised concerns, owing to Tegeta’s association with mining group Oakbay, which itself had links to the Gupta family and President Jacob Zuma’s son, Duduzane Zuma. Adding to the controversy was the revelation that South Africa’s Mineral Resources Minister Mosebenzi Zwane had travelled with a delegation of Tegeta executives to visit Glencore in Switzerland to negotiate the purchase of Optimum Colliery.
Subsequently, some banks terminated business relationships with Oakbay, which resulted in nonexecutive chairperson, Atul Gupta, and Oakbay CEO, Varun Gupta, resigning as directors on April 8.
It also emerged that Eskom extended prepayment terms to Tegeta to enable it to supply the Arnot power station with Optimum coal at a rate of R470/t – a price described by some commentators as being exorbitant. This followed the equally controversial termination of a 40-year, cost-plus supply agreement with the Exxaro-operated Arnot colliery in December.
Molefe has strongly defended the deal, likening the role of the banks and the media in the “hullabaloo” to that of a “kangaroo court”. The utility has also indicated that it will continue to overhaul its coal supply arrangements and that it will not hesitate to cancel other cost-plus contracts, with the Hendrina and Kriel contracts in its cross hairs.