Eskom-Tegeta deal: cursory checks?

‘Attempt to backdate tests performed as part of technical evaluation’ – PwC

THURSDAY MAY 11 2017

ESKOM’S coal contract with Tegeta was hastily and poorly drafted and quality requirements were treated in a cursory manner, PricewaterhouseCoopers (PwC) said. This is what National Treasury told Parliament’s public accounts watchdog Scopa.

Solly Tshitangano, a deputy-director general and acting chief procurement officer, said the auditing firm also found that safety and environmental checks were performed at Tegeta’s coal operations only after the company, owned by the Gupta family and President Jacob Zuma’s son Duduzane, had secured its contract with Eskom.

The same applied for two of three burn tests performed as part of the technical evaluation, according to PwC, which noted that there may have been an attempt to backdate an environmental and legal report.

It was discovered during PwC’s investigation that Eskom and Tegeta held three rounds of negotiations before the latter met pre-qualification requirements. The meetings began in May 2014 and Tegeta was only issued with a water licence for its Brakfontein colliery in December that year.

The contract was signed in 2015. Tshitangano said PwC commented that it appeared to have been “copied and pasted” from other contracts and that there was no evidence that the evaluation team fulfilled Eskom’s supply chain management rules. The findings were made during a study Eskom commissioned from PwC after concern arose on the quality of coal supplied.

Tshitangano said Treasury was completing its probe into the contract, and had received input from Eskom late last month.

Eskom’s contract with Tegeta was signed for R3.7 billion over a period of 10 years and Tshitangano confirmed that the parties had sought to increase this by R2.9bn.

He confirmed reports that National Treasury intervened at one point when Eskom wanted to extend its contract with Tegeta without going to tender. In the process Eskom was saved a considerable amount of money because the bidding process forced Tegeta to drop its asking price.

“They were asking R19 per gigajoule,” he said, which was one of the highest prices Eskom pays coal suppliers.

Eskom’s dealings with Tegeta were a major focus of then public protector Thuli Madonsela’s report on allegations of state capture and resulted in then chief executive Brian Molefe resigning.

Scopa members concluded that Eskom be called to respond to the PwC report’s findings. Committee chairperson Themba Godi said Scopa was concerned about the ”constitutional provision of fair, competitive and transparent procurement”.– ANA