Anoj Singh. Picture: ESA ALEXANDER
Anoj Singh. Picture: ESA ALEXANDER

Eskom did not follow correct procedure for the $2bn Chinese loan it got‚ its corporate funding specialist, Sincedile Shweni, said at the state capture inquiry on Monday.

In 2015, Eskom entered into a dubious agreement with China-based Huarong Asset Management, which had approached the cash-strapped power utility with a loan proposal for Eskom to build or refurbish power stations.

Shweni‚ who has been employed at the power utility in various capacities since 2001‚ said Huarong’s proposal for the loan agreement was not sent to the utility’s asset and liability committee for approval.

Former Eskom CEO Anoj Singh allegedly ignored legal advice by independent law firm White & Case and officials at Eskom, who said the loan terms were ambiguous, and signed off on the deal.

The contract outlined a $2bn loan Eskom would receive; but it had caveats. There was a commitment fee of about R400m and an even larger penalty if Eskom backed out.

After Singh resigned under a cloud in January last year‚ Sean Maritz — acting as Eskom’s CEO at the time — allegedly approved the R400m commitment fee or prepayment to Huarong.

Shweni described to the commission chair, deputy chief justice Raymond Zondo, the procedure normally followed when the utility received an unsolicited proposal.

“Whoever comes with an unsolicited proposal meets one of the treasury representatives. The next step is to do some vetting or verification of the entity‚ especially if the entity is fairly new‚ like Huarong. The party will then give us a term sheet, which we will evaluate‚” he said.

"If it is palatable to the needs and requirements of treasury‚ we would take it to an open tender process, which we call an RFP [request for proposal]. Or if it is a bespoke transaction ... the practice note allows us not to go the RFP route. In respect to Huarong‚ we decided to go on the RFP route.

“Once the proposal is acceptable by the team it needs to go to the treasury asset and liability committee. It is discussed and approved for recommendation by the CFO.”

Shweni said the Huarong proposal “did not fulfil this requirement”. He said “it is not normal that we do things that way”. 

Correction:  March 4, 2019

An earlier version of this article misstated the loan amount as R2bn.