On the spot: Eskom's top three drop Gupta bombshells
Stunning reversals, a shocking confession and elaborate justifications were among the responses from the chairman, the acting CE and the finance head, write Carol Paton and Charlotte Matthews
Stunning reversals, a shocking confession and elaborate justifications were among the responses from Eskom’s top three officials to questions on the key controversies surrounding the company.
Acting CE Johnny Dladla, chairman Zethembe Khoza and chief financial officer Anoj Singh were on the spot for two hours at the annual financial results presentation on Wednesday. Here is an edited selection of their answers to questions.
Background: In April 2016, Gupta-owned Tegeta bought Optimum mine after it was put into business rescue by Glencore. Among the liabilities, which had forced it into rescue, was a R2bn fine for supplying Eskom with low-quality coal. Eskom CE at the time Brian Molefe repeatedly declared that Tegeta would not be forgiven the fine. In April 2017, Eskom agreed to lower the fine to R577m in an arbitrated process.
Question: Eskom promised that Tegeta would not be forgiven the R2bn fine levied on Optimum mine but this has now been reduced to R577m. Why?
Anoj Singh: Eskom sent Optimum [then owned by Glencore] a letter of demand for the penalty of R2.1bn, which accumulated over a number of years. There was a mechanism in the contract to resolve disagreements through arbitration, which was attempted with Glencore. The subsequent process was arbitration with Tegeta.
The dispute related to substandard coal qualities which were picked up by new coal sampling equipment installed in 2010. The new sampling equipment included a crusher (which had not been there before), which had the effect of increasing the amount of reject coal, giving a false result on the sample.
The claim had accrued to R2.1bn over time because it was based on a penalty of a rand per tonne of coal supplied.
That meant about R1.1bn of the penalty resulted from the false results and about R700m related to substandard coal.
We only understood the problem with the sampling equipment after a three-to four-year investigation as we went to arbitration and the legal opinion we received was that it was best to settle.
Background: Singh has been surrounded by a litany of allegations. This includes various measures to assist the Guptas in buying Optimum — such as a prepayment for coal — and a suspect contract with McKinsey SA, parts of which were subcontracted to Gupta-associated firm Trillian. He has a close relationship with the Gupta family and has been its guest at a luxury hotel in Dubai.
Question: If Eskom is so concerned about improving governance why has Anoj Singh not been suspended?
Zethembe Khoza: We looked at the matters of interest pertaining to Mr Singh. There were three: the prepayment to Tegeta; the arbitration award to Tegeta; and the McKinsey contract.
The prepayment to Tegeta was driven by the generation division and not by Singh. Singh was only involved when members of the board requested him to calculate the value of the diesel [that would have been bought if Eskom ran short of coal] and the cost of the prepayment. He was also asked to establish the surety of the pre-payment. These matters were not initiated by him.
The arbitration award was done by Eskom’s head of legal. Singh only signed the document as Eskom’s finance head.
The McKinsey contract was in place before Singh came into Eskom. He helped us when there was a dispute between Trillian and McKinsey.
So far, from the matters we have seen, there is nothing that warrants anything to the degree that he can be suspended.
Question: The Guptas paid AED18,000 for your stay at the Oberoi hotel in Dubai. later they dumped AED400,000 in a shelf company established for your benefit. Can you explain?
Anoj Singh: This is something I’ve been dealing with over the past couple of weeks and I’m preparing a public report and I will be in a position, when it is complete, to share it with all stakeholders including the media.
Background: McKinsey SA is embroiled in a controversy in which parts of its contracts with Eskom were subcontracted to Gupta-associated Trillian.
McKinsey says this arrangement was the work of a rogue director, Vikas Sagar, who wrote to Eskom without authorisation, advising it to bill Trillian for parts of the contract and pay the Gupta company directly.
When asked in May if Eskom had any contracts with Trillian, it said that "it had not paid a cent" to the company. But at Wednesday’s briefing Dladla said R900m had been paid to McKinsey and R495m to Trillian.
Question: Two months ago you said Eskom had not paid Trillian "a cent". Today we hear that it was paid R495m. Please explain.
Johnny Dladla: I won’t comment on previous statements. Our investigation shows that R495m was paid to Trillian. The issue is we didn’t have a contract with Trillian itself.
So if a person searched [in the system] for a payment to Trillian they would not find it. As it stands now I have asked for an independent review. I’ve suspended McKinsey. There was work done by Trillian under McKinsey but they were not contracted to Eskom. [McKinsey said on Wednesday that it and Eskom had suspended the contracts by mutual agreement.]
Zethemba Khoza: We did not have a contract with Trillian, we had one with McKinsey. But McKinsey wrote to us asking us to pay Trillian directly. If that statement was made [that Eskom never paid Trillian a cent] then it must have been incorrect … to my knowledge there was an invoice [from Trillian] that was submitted and paid for.
Background: At the point that Tegeta was negotiating with business rescue practitioners to buy Optimum in December 2015, it became known that several major banks had given the Guptas notice that they would terminate their bank accounts over concerns about unexplained transfers and movement of money.
This, taken together with the R2bn fine on Optimum as well as the fact that the mine was tied into a loss-making contract with Eskom until 2018, raised many questions as to how the Guptas would make the purchase of Optimum.
While it had been strongly rumoured that Eskom had provided the guarantees to Tegeta, this was always flatly denied by Molefe.
Question: Brian Molefe in particular has previously said that Eskom paid no guarantees to any bank to assist the Guptas to buy Optimum.
On December 27 2015 did Anoj Singh sign a guarantee of R1.6bn to Absa on behalf of Eskom for Tegeta’s purchase of Optimum?
Anoj Singh: The guarantee was issued and cancelled, fortunately. The guarantee was contemplated and then put in place. It then expired. It was not utilised. There was a guarantee.
Question: Did you know about the guarantee? You were head of the tender committee at the time.
Zethembe Khoza: The R1.6bn I don’t recall but I will investigate it. I heard it for the first time [here today].