How Gupta-owned firm secured Eskom coal deal
Awarded multibillion-rand contract despite red flags over company’s financial viability
THE Zondo commission of inquiry into state capture has heard how Gupta-owned Tegeta was given a multibillion-rand coal contract by Eskom despite red flags over the company’s financial viability and the quality of coal it provided to the power utility.
The commission was yesterday told about how the Gupta-owned company persistently lobbied Eskom since 2011 in a bid to secure the contract to supply it with coal from its Brakfontein mine.
Advocate Kate Hofmeyr, for the commission, said Tegeta placed considerable pressure on Eskom employees to conclude the agreement after the utility finally agreed that it would contract the company for coal supply.
“They were told to finalise the agreement within 48 hours and then have it signed on the 10th of March, 2015. That is when it was duly concluded, and it was to be a contract for coal supply for ten years to the Majuba power plant for a total of R4.3 billion,” Hofmeyr said.
Hofmeyr said the agreement was, however, concluded and Tegeta continued work without the conclusion of a financial due diligence report, which was received a month later.
According to Hofmeyr, the report said Tegeta was “not financially sound enough to be awarded a contract of this value”.
Eskom acting general manager for primary energy, Daniel Mashigo, said awarding the contract to Tegeta without prior evaluation was a departure from Eskom procurement processes.
Hofmeyr also told the commission how former Eskom executive, Matshela Koko, moved in to shield Tegeta after it was flagged for supplying coal whose poor quality was worsening.
“At that point, the existing laboratory nominated and accredited laboratory of Eskom, an independent one – called Sibonisiwe – had failed 15 out of 30 samples of coal that had been obtained from the Brakfontein mine. But there was suddenly an allegation from Brakfontein mine that a bribe had been solicited from them by Sibonisiwe labs,” Hofmeyr said.
She said this resulted in the decision by Eskom to use the South African Bureau of Standards labs to do a re-analysis of the sample which Sibonisiwe Labs used, with the SABS failing 29 out of the 30 re-analysed samples.
Hofmeyr said a team of four, led by the late Dr Mark van der Riet – then Eskom’s coal specialist – was appointed to investigate, and reported to Koko – then head of generation.
“They started investigating, and a decision was taken that on Saturday the 29th of August, Van der Riet and his team would go to Brakfontein and would witness the sampling of a new set of coal to be sent for new analysis. He was called, however in advance of Saturday by Mr Koko and he was told not to attend and that the sampling would take place without any Eskom personnel present,” Hofmeyr said.
She said Van der Riet was summarily suspended, together with his three colleagues just before his team presented its report.