Eskom: R139bn theft probed
Rampant looting at new power plants pushes state capture costs to R500bn
● Shocking new figures show the construction of Eskom’s Medupi, Kusile and Ingula power plants prompted an orgy of looting, with 11 contractors now under investigation for stealing a staggering R139bn.
The cost of the looting, together with losses due to state capture, could reach a total of R500bn that has disappeared from the crippled power utility since 2005, two sources close to the investigation said.
The Special Investigating Unit (SIU) is probing the theft of R170bn from Eskom — R139bn of which is directly related to contractors working on the power plants.
SIU spokesperson Nazreen Pandor said that after an “intensive scoping exercise” the unit had prioritised, among other things, investigating “the performance of, and payment made to the value of more than R139bn to 11 identified contractors appointed by Eskom in respect of the Medupi, Kusile and/or Ingula station”.
This makes up a massive chunk of the R334bn spent on building the plants — and suggests that public enterprises minister Pravin Gordhan’s estimate last year that about R100bn was lost to state capture was way below the mark.
The SIU has also identified 1,980 employees who failed to declare their interests to Eskom, and 148 employees who are still conducting business with Eskom, worth billions of rands, in defiance of government policy.
The investigation is one of the biggest the SIU has undertaken, with SIU head advocate Andy Mothibi saying the unit has had to “enhance its capacity” regarding specialist investigators such as engineers.
The scale of the looting comes after Eskom descended into stage 4 load-shedding earlier this month, blaming, among other factors, “shoddy workmanship” at Medupi and Kusile. Eskom has previously admitted that the power plants were poorly built.
The SIU investigation, which began last June, also includes the Hawks, the National Prosecuting Authority (NPA) and the Asset Forfeiture Unit (AFU).
Investigators are now in a race to recover the money, most of which is feared to have been shipped offshore via local subsidiaries of international construction, engineering and project management companies involved in the power stations’ construction.
The SIU confirmed this week it was approaching its international counterparts for assistance.
“We cannot currently disclose where such counterparts are based,” said Pandor.
The unit is also investigating high-voltage transmission projects associated with Medupi and Kusile, and the appointment and payment of former Gupta-linked companies US-based McKinsey, Trillian and Regiments Capital, which rendered services to Eskom.
It has also prioritised its investigations into former Gupta-owned coal-mining company Tegeta Exploration and Resources, and multibillion-rand contracts around the supply of coal to Eskom facilities. Tegeta had a R3.7bn contract with Eskom, which the SIU is trying to set aside in court.
Pandor said coal-transport contracts with 14 service providers and three coal-supply contracts were being investigated. Also under investigation was the payment of more than R2bn to seven diesel suppliers. Pandor did not say what the value of these contracts was, but sources put it at R30bn.
On Friday, Eskom board chair Jabu Mabuza told the state capture commission of inquiry that the board had laid criminal charges against Tegeta and would pursue civil claims.
He said this followed the release of a Treasury-commissioned forensic report into the coal-supply agreement between Tegeta and Eskom, which found senior Eskom executives had violated anti-corruption laws.
The report recommended criminal charges against former Eskom Group acting CEO Matshela Koko, CFO Anoj Singh and board members, and that Singh and Koko be investigated for misrepresenting facts on the Tegeta matter before parliament.
But Pandor said the investigation goes into “many other matters beyond the involvement of the Guptas at the utility”.
“The SIU is looking into many other businesses, both current and former Eskom officials and other parties who have looted funds from Eskom.”
Singh, Koko and former Eskom boss Brian Molefe told the Sunday Times they had not been approached by SIU investigators.
Pandor said the SIU had referred eight matters to the NPA, eight to the AFU and five
The corruption was horrifying. It happened right at the top with very senior executives Eskom whistleblower
Monies are being tracked and accounts inspected Government source
to Eskom for internal disciplinary action.
“Two [Eskom] officials have resigned in the face of disciplinary proceedings. Evidence of criminal conduct by these officials has been referred to the NPA and AFU. The SIU is working closely with the AFU to ensure the forfeiture of the proceeds of crime in appropriate instances.”
NPA spokesperson Luvuyo Mfaku said: “The NPA, SIU and Hawks are in the process of prioritising matters. The NPA will be looking at providing dedicated prosecutors to deal with specific cases.”
Hawks spokesperson Brig Hangwani Mulaudzi said they were working “very closely” with the SIU.
Eskom spokesperson Khulu Phasiwe declined to answer detailed questions on the employees being investigated, saying: “We are co-operating with the SIU.”
A Hawks whistleblower, formerly within Eskom’s legal department, said documents she submitted showed alarming practices had occurred. “The corruption, especially around procurements, was horrifying. It happened right at the top with very senior executives.
“Junior staff, with no experience in international multimillion-dollar procurement contracts, were deliberately placed into procurement departments. Their hands were tied when it came to the signing off on obviously dubious contracts.”
She said the contracts, especially around engineering, construction and project management, were almost all with foreign-based companies, mainly from Germany, the US and China.
“They would use local firms, which became conduits for moving funds offshore.”
A government source said those behind the probe were working closely with foreign law and financial crimes enforcement authorities.
“These authorities are using their countries’ security exchange controls, which have global reach, to investigate foreign bank accounts.
“Monies are being tracked, accounts inspected and financial documents analysed to understand who was behind these flows and how and where the money was moved to.”
The source said payments to the contractors at Medupi, Kusile and Ingula which were involved in electrical and steel works amounted to nearly R150bn.
“This doesn’t include other dodgy payments for contracts around the sourcing, supplying and transporting of coal and diesel to other plants to keep the lights on. Factor in these and up to R500bn could potentially have been stolen since 2005.”