Eskom’s ballooning global contracts to be probed
• Documents given to parliament’s public accounts committee detail numerous cost overruns
Eskom contracts with five international companies will be scrutinised by SA state investigators as part of a widening probe into graft at the debt-laden stateowned utility.
The probe will review agreements with North American engineering services firms WSP Global and Black & Veatch, as well as agreements with Alstom of France, Switzerland’s ABB and Italian firm Tenova.
Documents submitted by Eskom to parliament’s standing committee on public accounts showed that contracts were all repeatedly modified, with the value increasing above their initial approved cost.
WSP’s agreement — signed by a company later bought by the Canadian firm — cost Eskom more than 60 times the original fee. Black & Veatch’s is more than 130 times the initial estimate, according to Eskom.
“There is an audit going on,” said Sikonathi Mantshantsha, Eskom’s spokesperson. “All of them have been handed to the Special Investigating Unit,” as well as a number of others.
The documents filed with parliament’s financial watchdog laid bare the lack of regard for procedure or good governance by Eskom’s management over the past 15 years, during which the company racked up $28bn of debt and is now seen as the biggest threat to SA’s economy.
Eskom is at the centre of the ongoing inquiry state capture inquiry chaired by deputy chief justice Raymond Zondo.
SA authorities have been investigating contracts between state enterprises and international companies for years.
German software giant SAP agreed to hand back about $11m in improper payments in 2018 and is being investigated by US authorities. KPMG and McKinsey & Co were also scrutinised, while ABB said it is being probed for suspect payments.
The Eskom documents detail numerous contract overruns and billions of rand of penalties incurred because of its failure to adhere to contract timelines. The company’s inability to provide adequate plant maintenance has resulted in regular power cuts.
A 2011 agreement with SA construction firm Stefanutti Stocks ballooned from R1.63bn to R13.36bn.
A five-year, R100m contract with WSP’s Parsons Brinckerhoff Africa (PB Africa) was approved by Eskom on February 26 2006, according to the documents. The contract is yet to be completed and is now projected to cost R6.22bn. PB Africa was bought by WSP in 2014.
Isabelle Adjahi, a spokesperson for WSP, referred all queries to Eskom, which said the contract related to engineering and project management work at its Medupi power station, which is years behind schedule.
A 2005 contract with Kansas-based Black & Veatch was initially valued at R114m. As of December 2017, it was set to cost R15bn.
“We were selected by Eskom in an open and transparent process to provide engineering, project management and construction management support services for the Kusile power station,” Black & Veatch said. “The initial project award was extended and the scope significantly increased.”
It said it only performed client-approved work and its “work and billing practices have undergone scrutiny at the client and government level”.
Alstom said it sold the relevant business to General Electric in 2015.
Stefanutti said the contract increased in scope and duration and the company has ended up spending more than it has been paid by Eskom.
Tenova did not immediately respond to queries.
ABB “self-reported to the US Securities and Exchange Commission and the department of justice, to various authorities in SA and other countries potential suspect payments and other compliance concerns in connection with some of the company’s dealings with Eskom and related persons”, it said. “ABB made it public that the company believes that there may be an unfavourable outcome in one or more of these matters.”
Eskom also detailed R6.94bn it has either recovered or is attempting to recover as a result of fraudulent contracts. The company has also paid R8.9bn in penalties because its plants under construction are behind schedule. / Bloomberg