How top banks lit a fire under Eskom, Gigaba
The Treasury faced the alarming prospect of having to raise hundreds of billions of rands after the Development Bank of Southern Africa laid down the law to power utility Eskom, warning it to suspend chief financial officer Anoj Singh.
The ultimatum by the development bank to recall its R15-billion loan, as well as serious concerns raised by two other top lenders, sent Finance Minister Gigaba scrambling to save the utility, which is at the centre of the state capture controversy involving the Gupta family. And, in the first indication that the damning Gupta e-mails could at last be officially acted on, a hard-hitting Treasury report is calling for a forensic investigation of Singh and dubious contracts with Gupta-linked Tegeta. The contracts came to the fore at Eskom’s financial results presentation last week, when R3-billion in unauthorised spending was highlighted. During a crisis meeting with the DBSA, Gigaba called Public Enterprises Minister Lynne Brown and discussed the importance of suspend-
ing Singh as a signal to markets. He was placed on special leave hours later.
A government source on Thursday said: “It’s a major sovereignty risk . . . It’s R350billion because once DBSA happens it triggers everyone else. If they all pull out it means Treasury must go and find hundreds of billions by tomorrow.”
It was in fact R361-billion in debt whose recall would have been triggered by the DBSA recalling its loan. Gigaba’s department would have had to fund the R267-billion of this debt that it has guaranteed.
The Treasury report has called for Singh and other Gupta lieutenants involved in the capture of the power utility — among them former acting CEO Matshela Koko — to be investigated.
Gigaba, known for his links to the Gupta family, hinted at a new sense of government urgency to rectify a looming disaster at Eskom, saying this week: “The issues being raised are quite grave. They are grave for governance . . . for how the investor community, especially the lenders and rating agencies, and the public, views the governance of state-owned companies.”
He also said he was worried about the influence of the Guptas, accusing them of using their friendship with President Jacob Zuma to secure contracts with state-owned companies.
Singh, the Gupta family and Zuma have denied any wrongdoing.
The Sunday Times has seen three letters sent to Eskom this week by Rand Merchant Bank, the DBSA and Barclays Africa. They raise grave concerns about Eskom’s qualified audit and its poor governance. The letters reveal that Eskom earlier unsuccessfully attempted to get the DBSA to amend a covenant requiring a clean audit, three days before it postponed announcing its results.
The DBSA rejected this, saying it was “directed at extricating Eskom from the consequences of its own conduct, with only lip-service for the effect on others”.
CEO Patrick Dlamini said in a letter: “Indeed it does not appear to the DBSA that Eskom appreciates the significant commercial financial and reputational risks to which Eskom has exposed the DBSA and its stakeholders following on the event of default and the request made by Eskom in its letter dated July 7.”
Eskom board spokesman Khulani Qoma said: “It is noteworthy that Eskom engaged stakeholders, including shareholder representatives and lenders, prior to the announcement of the results. At no point did Eskom try to mislead the public.”
The draft last year of the Treasury report had found that Eskom’s R659-million prepayment for Tegeta’s Brakfontein coal mine should be considered a loan and have interest charged. The report also suggested that Singh, Koko, and former CEO Brian Molefe bent over backwards for the Guptas when they ignored several critical breaches by the company in the lucrative contract.
Recent media reports have put the value of the Guptas’ coal-supply contracts at about R12-billion over the next 10 years.
Forensic investigation
The latest Treasury move against the Gupta-linked cabal at Eskom is in a final report on the investigation into the process followed to appoint Tegeta Exploration and Resources as a coal supplier to Eskom. The R4-billion, 10-year deal was investigated as part of the Treasury’s chief procurement officer’s investigation into state tenders worth more than R10-million.
The Sunday Times has reliably learnt that new Treasury Director-General Dondo Mogajane approved the first of three recommendations flowing from the report, including that Treasury’s chief procurement officer appoint a firm to carry out a forensic investigation as well as ask law-enforcement agencies to investigate the matter in terms of the Prevention and Combating of Corrupt Activities Act.
The Treasury also investigated Singh’s role in shady Transnet contracts.
Gigaba’s spokesman, Mayihlome Tshwete, confirmed that the report had been finalised, but said the department “was processing” it.