The report cites the procurement of the nuclear procurement management system as irregular. Picture: ISTOCK
The report cites the procurement of the nuclear procurement management system as irregular. Picture: ISTOCK

The auditor-general has found key nuclear-related contracts entered into by the Department of Energy are irregular and unauthorised, according to documents seen by DA energy spokesman Gordon Mackay.

However, Energy Minister Mmamoloko Kubayi refused in a meeting of Parliament’s energy portfolio committee on Tuesday to concede that the auditor-general’s report for the year to end-March 2017 highlighted irregularities related to nuclear contracts. The report had not been finalised and she had not yet had a meeting with the auditor-general to discuss his findings, Kubayi said.

Mackay said the report cited the procurement of the nuclear procurement management system, which Kubayi said cost R98m, as irregular. The contract was awarded by the Department of Energy to Central Lake Trading t/a Empire Technology, which is owned by Shantan Reddy, the son of Vivian Reddy, a close friend of President Jacob Zuma. According to Mackay, the original amount of the contract had been inflated from R60,000 to R171m.

Also found to be irregular was the contract for a nuclear transaction adviser awarded to Mahlako-A-Phahla at a cost that Kubayi said was R87m. Mackay said the auditor-general had found the contract was unauthorised as there was a deviation from the original specifications.

The deviation meant the Department of Energy had in fact embarked on a new contract that needed to be subjected to a new competitive tender process.

"The auditor-general’s report further seems to confirm last week’s media reports that indicate Mahlako-A-Phahla obtained a contract extension without the necessary approval from the department’s own bid tender committee or the Treasury, as required by law," Mackay said.

He said the DA had been reliably informed that the department’s director-general, Thabane Zulu, had refused to sign off the auditor-general’s report. He speculated that this could be due to allegations that Zulu had played a direct role in both irregular contracts.

Meanwhile, the minister gave the assurance that a decision on the outstanding power purchase agreements between Eskom and independent power producers will be taken by the end of August. Independent power producers of renewable energy have been waiting for more than a year for a decision after Eskom refused to connect them to the grid on the grounds that the purchase price of the energy they would provide was too high in the context of a burden of surplus energy.

Energy mix

Kubayi told MPs that "positive progress" had been made in the deliberations between the departments of energy and public enterprises and Eskom on bid windows 3.5 and 4 that the government has committed to, but that await signature.

"We have committed to an energy mix understanding that renewables have a key role to play and are part of the energy mix. From our side as the department we remain committed to proceeding," she said.

One of the hurdles to overcome is the interdict sought by the coal industry against the Department of Energy, the National Energy Regulator of SA and Eskom, preventing the signing of power purchase agreements. Kubayi said this would have to be dealt with.

Kubayi told MPs the department was on track to finalise the integrated energy plan and integrated resource plan by end-February 2018, in time for the tabling of the national budget.

In a previous version of this story we reported that Central Lake Trading is owned by Vivian Reddy. It is in fact owned by his son Shantan. Business Day regrets the error.

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