Scopa steps in to scrutinise Eskom’s Medupi and Kusile

Eskom’s mega coal-fired power stations Medupi and Kusile were doomed from the very start and were a breeding ground for corruption, parliament’s standing committee on public accounts (Scopa) has found.

Briefing the media after site visits to the two power stations and meeting with Eskom management this week, committee chair Mkhuleko Hlengwa said Scopa stepped in to assist in saving SA’s failing power utility.

“We want to categorically emphasise that we are adopting Eskom as one of our key focus areas until we bring all the matters to a logical conclusion,” said Hlengwa. “We will be using parliamentary processes in every material respect to make sure we turn things around at Eskom.”

Delays and enormous cost overruns at Medupi and Kusile have greatly contributed to Eskom’s poor financial and operational performance. Not only is the utility struggling with a R440bn debt burden but it has also struggled to meet power demand this year.

Both power stations have been riddled with technical defects which has resulted in severe underperformance of their units  in commercial operation.

“There is admission on the part of Eskom, which we can confirm from observation, [that] the project, from inception, was not conceptualised properly,” Hlengwa said. “There is a pay-as-you-go correction approach. Material deficiencies and defects are identified as and when things happen.”

He said contract management, and deviations were a major issue and that there are matters which require disciplinary action. “It’s evident that corruption has taken place — [there’s] no running away from that. We will be working with the Special Investigating Unit (SIU) to refer cases so that those implicated can be dealt with.”

Scopa will have no hand in the work of restructuring Eskom but is instead concerned with the utility managing its finances correctly. Hlengwa said the committee will  not tolerate any further cost escalations at the two mega-projects.

Medupi, which originally had a capital cost of R79bn, is now expected to cost R146bn, while Kusile’s capital costs are expected to have grown from R81bn to R161bn. These figures do not account for financing costs.

Medupi and Kusile are expected to be completed by 2020 and 2023, respectively.

Following the site visits, Scopa is awaiting additional information from Eskom and, once received, will develop a detailed report that will be tabled in parliament and give direction on the way forward.

Hlengwa, however, said Scopa’s efforts will not be a silver bullet, but form part of a broader parliamentary process that seeks to address Eskom’s issues. “This is not an event, it is a process,” he said. “With every explanation there are more questions.”

steynl@businesslive.co.za