Corruption alleged in power generation bids
● A company which has corruption fighter and anti-apartheid activist Lord Peter Hain on its board has launched a court challenge to the department of mineral resources & energy’s recent appointment of preferred bidders for emergency power generation.
The company, DNG Power Holdings, alleges the appointment involved undue influence by department officials and “underhanded and corruptive activity” by people connected to mineral resources & energy minister Gwede Mantashe.
DNG was one of the failed bidders in the 2,000MW Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), which the department launched last year to add urgently needed short-term capacity to the grid in the next 18 to 24 months to mitigate SA’s electricity crisis.
After some delay, Mantashe finally announced the results of the programme on March 18, awarding more than 60% of the capacity to Karpowership, a Turkish company that owns and runs gas-fired generators on ships out at sea.
DNG, a black-owned company that was founded in 2013 by South African entrepreneur Aldworth Mbalati, had bid to supply 1,300MW of gas-fired power at three land-based sites at Komatipoort, Malelane and Coega. And though its plants would initially have used imported liquefied natural gas, they would also be designed to connect to imported natural gas from Mozambique.
The court action by DNG, which seeks to halt the award of contracts to the successful bidders and require the department to reinstate its own bid, is expected to delay the implementation of the RMIPPPP.
The case also puts question marks over the whole process by which SA is bringing new independent power producers onto the grid, with the department having now opened window 5 of the programme, which is designed to add new private sector capacity to the grid over the longer term to boost the supply of electricity, particularly renewable energy.
DNG’s case is that the RMIPPPP was set up from the start in a way that favoured the successful bidders, with the programme’s October deadline delayed and undue influence brought to bear to enable Karpowership to submit its bid and gain the exemptions it needed from local content and other requirements that had been included in the tender.
In the affidavit, Mbalati tells of a November meeting he was summoned to at a Pretoria restaurant where he met a “business associate” and a “familial relation” of the minister, as well as a senior mineral resources & energy official who offered to assist with DNG’s bid. He says that when he declined the offer, this was met with anger and vitriol and a department official said to him: “One thing you must understand is that there is a system in this country and if you don’t work in accordance with that system you will fail, even if your project is the best.”
Mbalati says this was unacceptable to him and DNG duly submitted its final bid in December.
Days before Mantashe announced the preferred bidders in March, Mbalati says he received a call from the minister’s “business associate” implying that DNG had won the bid, but “should I not play ball with him and his associates, the applicant [DNG] would not receive the appointment as a preferred bidder”.
Mbalati says the “business associate” enquired after the bids had been announced whether he had “learnt his lesson”.
He says in the affidavit that this was directed at DNG’s “refusal to engage with corruptive elements and individuals” and was a direct enquiry as to whether it would engage with “underhanded and corruptive activity” to secure future success in bidding.
The mineral resources & energy department on Friday confirmed receipt of the high court application by DNG on April 28.
In an e-mail to Business Times, department spokesperson Natie Shabangu said: “The department and minister of mineral resources & energy intend to oppose the matter in court. The department will not at this stage comment on the merits of the case as the matter is sub judice.
“The department wishes to reiterate that the RMIPPPP, as with all IPP procurement programmes, was implemented in accordance with section 217 of the constitution, the PFMA [the Public Finance Management Act], the PPPFA [the Preferential Procurement Policy Framework Act] … and all other procurement-related legislation, which give effect to the principles of a process that is fair, equitable, transparent, competitive and cost-effective, while also complying with the principles in the Promotion of Administrative Justice Act,” said Shabangu.
Eskom declined to comment, saying this was a mineral resources & energy process and Eskom was not party to the evaluation of bids. The preferred bidders for the RMIPPPP would have to be submitted to the Eskom board for a decision before contracts are signed.