Eskom in hot seat over waste

Trea­sury sus­pi­cious as util­ity wildly in­flates con­tract for thou­sands of chairs

Sunday Times - - FRONT PAGE - By PREGA GOVENDER and SA­BELO SKITI

Cash-strapped Eskom wants to bur­den South Africa’s con­sumers with a huge rate in­crease next year — while de­mand­ing that the Trea­sury ap­prove the ex­pan­sion of a con­tract to buy thou­sands of of­fice chairs at an av­er­age of around R2 600 each.

The power util­ity — so mired in cor­rup­tion and mis­man­age­ment scan­dals that it has been named the “big­gest risk to the South African econ­omy” — wanted an ex­tra R24-mil­lion to buy 9 217 “op­er­a­tor and vis­i­tor chairs”. This is on top of an ex­ist­ing R72.7-mil­lion con­tract, signed in 2013, to sup­ply of­fice and “soft” chairs. The lat­est re­quest would have seen Eskom spend a to­tal of R100-mil­lion so that its em­ploy­ees and visi­tors can sit com­fort­ably.

Sus­pi­cious of the lat­est re­quest, the Na­tional Trea­sury con­ducted a phys­i­cal in­spec­tion of Eskom’s of­fices and power sta­tions coun­try­wide, and sources said it found that only 500 chairs were needed.

Two weeks ago Eskom was branded the big­gest risk to the econ­omy by Gold­man Sachs fol­low­ing sev­eral al­le­ga­tions of cor­rup­tion re­lated to con­tracts it signed with com­pa­nies linked to the Gupta fam­ily, friends of President Ja­cob Zuma.

Com­ing af­ter a se­ries of con­tro­ver­sial bosses, the ap­point­ment of in­for­ma­tion tech­nol­ogy ex­ec­u­tive Sean Maritz as in­terim CEO is al­ready be­ing viewed in a dim light.

Maritz’s first ac­tion was to sus­pend Eskom’s head of le­gal, Suzanne Daniels — a move seen as put­ting the brakes on Eskom’s en­deav­ours to re­cover R1.5-bil­lion from McKin­sey and Tril­lian. The process fol­lowed to ap­point the com­pa­nies is shrouded in con­tro­versy.

Ear­lier this month en­ergy reg­u­la­tor Nersa re­vealed that Eskom has asked for an av­er­age in­crease of 19.9% from April 2018.

The ex­ist­ing R72.7-mil­lion con­tract for chairs is with Gaut­eng-based of­fice fur­ni­ture sup­plier Gx­ak­wes Projects, for chairs and so­fas to all Eskom of­fices and sta­tions coun­try­wide, “as and when re­quired”.

The five-year con­tract ends next year and the paras­tatal went to the Trea­sury ear­lier this year to ask for an “ex­pan­sion” of the con­tract by an ad­di­tional R24-mil­lion for the sup­ply of chairs.

In its mo­ti­va­tion to Trea­sury, Eskom said there was “an ur­gent need for re­place­ment chairs while ini­ti­at­ing a ten­der process”.

The Trea­sury con­firmed that it had de­manded a phys­i­cal in­spec­tion of Eskom’s of­fices to “jus­tify the needs” for such a re­quest.

It said that its re­fusal to sup­port Eskom’s re­quest meant that the pro­cure­ment of the of­fice chairs may not go ahead and that if it did go ahead, the au­di­tor-gen­eral may de­clare it as “ir­reg­u­lar ex­pen­di­ture”.

Sources close to the Trea­sury con­firmed that of­fi­cials in­spected Eskom’s of­fices in sev­eral re­gions and found that only 500 chairs were re­quired in­stead of the 9 217. “The ap­pli­ca­tion just looked wrong and we sus­pected col­lu­sion be­tween Eskom and the

ser­vice provider,” said a Trea­sury source who can­not be named. “In some cases there was not even enough space to fit the chairs said to be needed.”

Mzwakhe Gx­akwe, CEO of Gx­ak­wes Projects, said he could not give de­tails of his con­tract with Eskom.

“We are not in­volved in any of the in­ter­nal pro­cesses that in­volves Eskom and the Na­tional Trea­sury . . . Chairs or­dered have to be ap­proved by se­nior man­agers. There’s no one who can cre­ate a pur­chase or­der un­less it goes through the whole process. One of­fice may or­der one chair and an­other two. An­other may say we need 200 or 300 chairs.”

Eskom had not re­sponded to ques­tions at the time of go­ing to print.

In its lat­est au­dited fi­nan­cials, Eskom posted an R870-mil­lion loss and showed se­ri­ous lapses in gov­er­nance as the com­pany got a qualified au­dit with more than R3-bil­lion in ir­reg­u­lar ex­pen­di­ture. The Sun­day Times pre­vi­ously re­vealed that in June the com­pany was left with its last R20-bil­lion in cash — enough to last just three months.

De­spite this the com­pany paid R13-mil­lion in bonuses for its top ex­ec­u­tives.

A fur­ther R4.2-bil­lion in per­for­mance bonuses was paid to em­ploy­ees.

The dis­as­trous fi­nan­cial year also saw chief fi­nan­cial of­fi­cer Anoj Singh placed on spe­cial leave for au­tho­ris­ing more than R500-mil­lion in pay­ments to Gupta-linked com­pany Tril­lian with no con­tract.

Last week, Public En­ter­prises Min­is­ter Lynne Brown an­nounced that both Singh and for­mer act­ing CEO Mat­shela Koko had been sus­pended and were fac­ing dis­ci­plinary ac­tion for a se­ries of ac­tions that ben­e­fited the Gupta fam­ily.

Mzwakhe Gx­akwe.

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