Molefe ‘sat on key report’ flagging Gupta coal deal
FORMER Eskom CEO Brian Molefe withheld crucial information from the National Treasury and parliament about the Gupta family’s coal contracts at the power utility — for almost a year.
Documents seen by the Sunday Times reveal that Molefe, who is now an ANC MP, and Eskom chairman Ben Ngubane sat on information contained in a crucial report that highlighted several glaring breaches in Tegeta’s R4-billion coal supply contract.
The report by PwC, commissioned by Eskom as part of strengthening its contracting capacity, was made available to Eskom in November 2015.
But the pair told parliament last September — more than 10 months later — that Eskom was satisfied with all contracts entered into with President Jacob Zuma’s friends.
Molefe had said the same to Treasury director-general Lungisa Fuzile a few days earlier.
He wrote to Fuzile on August 30: “At the outset it must be recorded that Eskom has managed and continues to manage its risk relating to coal supply from Tegeta and other suppliers prudently and within the framework provided for in terms of the CSAs [coal supply agreements]. Eskom shall take such necessary steps against suppliers who breach the terms of such CSAs and expose Eskom to risk.”
But several issues raised in the report would have rendered the lucrative tender invalid, but these were not acted on.
For example, the company entered into a contract with Tegeta without running crucial combustion tests on its coal. These tests, a prerequisite before signing a coal supply agreement, are necessary to determine which power station the coal would be suitable for and would have been crucial in negotiations. The PwC report also stated that:
Eskom entered into a contract for 10 years — from 2015 to 2025 — even though Tegeta’s mining licence at its Brakfontein Colliery is valid only until 2020;
Tegeta failed to meet requirements, which invalidated the contract — but Eskom kept quiet;
The company also did not have crucial automechanical sampling equipment for the first 12 months of the contract, despite auto sampling being a requirement for the contract; and
Tegeta repeatedly failed to meet monthly supply targets.
The report’s contents lend further credence to a Sunday Times report last year that Eskom bent over backwards to award the family a 10-year contract.
The Sunday Times revealed that the power utility’s acting CEO, Matshela Koko, suspended four employees from Eskom’s primary energy division after they picked up anomalies with the quality of Tegeta’s coal.
This week Eskom said the suspensions were part of internal investigations processes.
“In this instance, the investigation was completed and two employees returned to work.
“While one employee is following the internal disciplinary process, the other one was dismissed.”
Molefe has consistently denied favouring the Gupta family. He referred all queries to Eskom.
Eskom spokesman Khulu Phasiwe said yesterday: “The recommendations from the PwC report were implemented as part of the contracts management process, and improved the coal quality monitoring and assurance.
“In November 2016, PwC was requested to assess the implementation and controls of the contract management recommendations from their previous report. The controls were considered to be adequate and no material gaps were identified.”
Eskom said the PwC report was shared with neither Treasury nor parliament because there was no obligation to do so: it was an internal Eskom document.
Phasiwe said neither Molefe nor Ngubane were at Eskom during the awarding of the contract.
This contract forms part of the National Treasury’s investigation into several contracts awarded to the family and its business associates.
Allegations about the contracts form part of former public protector Thuli Madonsela’s State of Capture report, in which she details the relationship between Molefe and the Guptas.
This includes his role in helping the family secure Optimum Coal Mine, which was purchased using a R600million pre-payment to Tegeta as well as contributions from other Guptalinked companies.
A spokesman for the Treasury said the investigation into the Eskom contracts had been completed and the report was with stakeholders for final comments.
Tegeta failed to meet requirements, which invalidated the contract — but Eskom kept quiet