Eskom cut corners on Tegeta deal, says report

• State utility failed to follow due diligence, PwC finds • Treasury wants to know if contract was red-flagged

In its haste to award the Guptaowned Tegeta Exploration and Resources lucrative coal supply contracts, Eskom failed to apply due diligence, including ensuring that its evaluation team was not conflicted when deliberating on deals involving Tegeta.

Eskom also did not ensure that Tegeta was put through the power utility’s supplier development programme, a crucial step to ensure that companies doing business with the state-owned entity pass muster.

These details are in a PricewaterhouseCoopers (PwC) report that was commissioned by Eskom, reviewing its coal agreements with Tegeta and the Tshedza Mining Manungu, Keaton Mining Manungu and Universal Coal Kangala collieries. Tegeta’s Brakfontein Colliery and Brakfontein Colliery Extension were looked into.

Solly Tshitangano, chief director of governance, monitoring and compliance in the office of the chief procurement office at the Treasury, presented the report’s contents on Wednesday to Parliament’s standing committee on public accounts. The office of the chief procurement officer is conducting its own review of Eskom’s coal supply agreements with Tegeta, the draft report of which Business Day has reported on.

That review is in its second phase, with Eskom and Tegeta having provided comments on the remedial actions proposed by acting chief procurement office Schalk Human.

One of the proposed remedial actions is that Eskom’s R659m prepayment to Tegeta be deemed a loan, the interest on which would be calculated by an auditing firm and recouped from Tegeta or the relevant officials at the power utility.

The PwC review covered procurement, contracting, contract management, and quality and assurance, reads the summary of the report that was presented to committee.

Eskom board spokesman Khulani Qoma said on Wednesday that the utility expected to be called before the standing committee on public accounts to give its side of the story.

“Eskom commissioned the

PwC report in 2015 to deal with concerns about mines including Tegeta, supplying coal to Eskom. Eskom has invited the Treasury to engage on a number of allegations raised in the Treasury’s draft report, including the PwC report,” said Qoma.

The state-owned power producer had “replied to the allegations contained in the Treasury draft report on April 21 2017 and is awaiting a response from the Treasury to inconsistencies and incorrect conclusions contained in the draft report, as highlighted by Eskom”, said Qoma.

The Treasury has previously confirmed to Business Day that Tegeta met the deadline to provide its responses to the draft report, while Tegeta CEO Ravindra Nath failed to respond to requests for comment.

In the briefing report to the standing committee on public accounts, the Treasury wants the committee to establish whether Eskom’s coal-supply agreement with Tegeta was “red-flagged in the 2015-16 audited financial statements, was the PwC report considered by the board and by external auditors, and which effective and appropriate steps were recommended by Eskom’s audit committee”.

In its report, PwC found that Eskom’s coal-supply agreement contract with Tegeta “appears to have been put together hastily”.