Row over Eskom's R43m Gupta breakfast deal
Eskom is in an uproar after recently departed interim chief executive Collin Matjila allegedly disregarded internal legal advice and approved a budget-busting R43-million New Age business breakfasts sponsorship.
The contract with the newspaper, owned by the Gupta family, caused such dismay at board level that the chair of its audit and risk subcommittee went to Public Enterprises Minister Lynne Brown last month to complain about Matjila’s conduct and, on a senior Eskom executive’s version, asked for him to be suspended.
Matjila is close to the Guptas because of deals and mutual associates they shared when Matjila was chief executive of Cosatu investment company Kopano ke Matla.
A senior union leader sympathetic to President Jacob Zuma said that Matjila enjoyed political protection because he was a member of Zuma’s inner circle.
This is corroborated by two ANC national executive committee members, both unionists. The Guptas are also business partners of Zuma’s son, Duduzane.
Concerns over contract
Brown confirmed this week that the chair of the audit and risk committee, Bajabulile Luthuli, came to her with concerns about Matjila and the New Age contract.
Brown denied she vetoed any move to suspend Matjila over the New Age contract. “I don’t take the decisions and I wouldn’t tell anyone you must not charge or suspend someone.”
Brown said talk of suspension was premature as the board was still investigating.
Board chairperson Zola Tsotsi confirmed this, saying: “This matter is being dealt with by the board subcommittee, [which] will then bring it to the board. It’s a little premature to comment until I get feedback from them to tell me what they have uncovered. We shouldn’t prejudge the situation.”
AmaBhungane understands that the contract is an audit risk because it exceeded the sponsorship budget.
It allegedly also contains clauses that are against Eskom’s commercial interests, such as no exit option, which Eskom’s legal team allegedly flagged with Matjila before he approved it. Matjila may also not have had legal authority to grant approval.
Eskom is in a precarious financial position, with revenue shortfalls of more than R200-billion.
Finance Minister Nhlanhla Nene announced plans on Wednesday to find R20-billion to dig Eskom out of debt.
Matjila has enjoyed a charmed existence in public life, emerging from several damning inquiries into his stewardship of Kopano ke Matla to run Eskom for six months.
He has been an Eskom board member and tender subcommittee chairperson since 2011.
AmaBhungane has reported how, as tender committee chair, he intervened in a R4-billion steam generator contract at Koeberg in favour of French nuclear company Areva, in the teeth of the technical team’s recommendation. The award is now mired in a court review.
Matjila’s term as interim chief executive expired shortly after Luthuli’s meeting with the minister. He made way for the permanent appointment of Tshediso Matona, and has now resumed his board duties.
Members of the audit and risk subcommittee, including Luthuli, were tight-lipped about the New Age contract this week and referred queries to Eskom.
Eskom’s acting group executive for technology and commercial, Matshela Koko, responded: “Eskom has had dealings with the New Age since 2011, long before Collin Matjila became the interim chief executive. The new contract is part of the continuing relationship.”
Multi-million rand breakfasts
Last year, City Press revealed that between 2011 and 2012 Eskom paid R1.2-million for each of six breakfast briefings. Koko disclosed that Eskom has since paid for a further four breakfast briefings – two in 2013 and two early this year – at R1.2-million each.
This brings the previous contract to R12-million for 10 New Age breakfast business briefings over three years.
The new contract for R43-million allegedly approved by Matjila commits Eskom to sponsoring roughly one monthly briefing for three years. In the context of declining newspaper advertising revenues, the contract is a boon to the New Age.
Gupta family spokesperson Gary Naidoo said: “This contract was negotiated not with the then acting chief executive, but with functional executives at Eskom and Nazeem Howa, New Age chief executive.
“We have no intention of providing information of a hard-won deal with a competitor [the Mail & Guardian],” Naidoo added.
He ignored a question about the Guptas’ relationship with Matjila.
A senior executive said that the board’s audit and risk committee was “in uproar” when it discovered last month that the contract had obliterated Eskom’s sponsorship budget.
Matjila has a chequered history in the area of corporate governance. Under him, a subsidiary of Kopano ke Matla was stripped by the Financial Services Board (FSB) of its licence to administer a pension fund.
Between 2007 and 2010, the Kopano subsidiary drained R123-million from the pension fund in administrative fees.
FSB investigators unpicked a complex web of payments, including a total of R1.3-million paid to a company owned by Matjila. When confronted, Matjila told the FSB the payments were “personal commissions”.
The FSB handed its report to the police and the Asset Forfeiture Unit in 2011, but no action has been taken.
Cosatu also commissioned a forensic report by SizweNtsalubaGobodo last year into various allegations of financial impropriety at the union and its investment arm.
This revealed that Matjila only passed a summary of the FSB pension fund investigation on to Cosatu in 2011, and held on to the full report – which included details of the on-payments in which he was implicated – until confronted by Cosatu general secretary Zwelinzima Vavi last year.
The SizweNtsalubaGobodo report, finalised in February this year, also investigated the sale of Cosatu’s old offices and purchase of new headquarters.
It found Kopano had acted for Cosatu and that a task team led by Matjila negotiated both property transactions.
The report quotes Matjila as saying that the Kopano task team was “informally assisted” by a Salim Essa, who had “previously worked with Kopano ke Matla on an energy project, through an entity named Inca Energy, which was jointly owned by Kopano and Essa”.
AmaBhungane has identified Essa as a majority partner in a precision steel cutting company whose minority partner is owned by Rajesh Gupta and Duduzane Zuma.
The report found Matjila sold the old Cosatu property for R9.5-million less than it was valued, and paid R6.3-million more for the new property than it was valued.
Cosatu had to find R14-million to pay for the new building, doing this through the sale of Kopano shares.
According to an email exchange included in the report, a disgusted Vavi exclaimed: “Please don’t rub the salt! We have been screwed literally by these fellows.”
Vavi said he regretted that political squabbling had prevented action on the FSB and Cosatu House matters.
Eskom sources complain of deteriorating corporate governance during Matjila’s term, and a bullying campaign against senior executives and line managers who insisted on following due process.
One source said that Matjila “worked closely” with Koko, whom Matjila appointed after he became chief executive, and that they had “an unhealthy relationship”.
Koko has either suspended or threatened to suspend at least three line managers and staff who refused to comply with instructions from Matjila, said the source.
Koko said: “That’s not correct. I do what I’m expected to do within Eskom’s rules, and I derive no pleasure in bullying people. And I’m not an agent of Collin and I will never be. I am a professional, and that is what I want to be judged on.”
Matjila’s tenure as chief executive has also coincided with at least three resignations by other long-serving senior executives.
Matjila has not replied to calls, voicemails and detailed SMSes, inviting him to comment.
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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.