Labour unions are seeking a CCMA verdict on who among Eskom employees should be regarded as essential workers
The revelation of a report by the law firm Dentons into the problems at Eskom in recent years has raised serious questions about the entity’s governance.
One of the most glaring is why, when it began to appear that officials had been allegedly acting for personal enrichment, the board abruptly ended the inquiry and then kept it under wraps instead of referring these issues for further investigation.
Under section 34 of the Prevention and Combating of Corrupt Activities Act (Precca), any person who holds a position of authority who knows, ought reasonably to know, or suspects that an offence has occurred must report their knowledge or suspicions to the police.
This week, energy and economics experts called on Eskom’s board to resign.
The redacted version of the report came to light last week after an investigation by the Financial Mail revealed Eskom’s efforts to suppress the document. It highlighted the dire malaise at the utility and indicated that officials were allegedly swinging contracts to benefit themselves at Eskom’s expense.
In a further twist, the magazine released an earlier unredacted version of the report on Wednesday evening. In one case, it raised concerns over the board’s tender committee and its executive committee’s procurement subcommittee’s compliance with Eskom’s procurement procedures.
It related to the modification of an information technology contract with T-Systems South Africa (TSSA) worth billions of rands. In 2015, the amaBhunghane Centre for Investigative Journalism reported how executive meddling led to Eskom canning a tender that could have saved the utility R1-billion if it had replaced the incumbent service provider, TSSA.
Instead Eskom retained TSSA, although questions were raised about the machinations to retain their contract, including unconfirmed allegations that a Gupta family business associate lobbied on TSSA’s behalf.
At the time, Eskom and T-Systems denied any wrongdoing, saying the contract had realised savings for Eskom.
These events took place between late 2013 and 2015, when Eskom became deeply strapped for cash and implemented renewed load-shedding, while the state had to provide the utility with a cash injection of more than R20-billion.
The Dentons inquiry was commissioned by Public Enterprises Minister Lynne Brown in March 2015 to investigate the problems in the organisation that led to these events.
The report also suggests, among other things, that spiralling costs, particularly relating to coal and diesel procurement for its open-cycle gas turbines, may have been left unchecked in part so that senior executives could benefit personally.
The report was not conclusive and repeatedly recommended that various procurement irregularities be investigated.
Even if there is only a suspicion of corrupt conduct, the Act is very clear on what action can be taken, said Corruption Watch head David Lewis.
In December, the organisation laid criminal charges against South African Revenue Service (Sars) commissioner Tom Moyane in terms of the Act for failing to act on allegations of criminal activity by a senior Sars official, Jonas Makwakwa, and his girlfriend, who was also employed at Sars.
“The whole idea of Precca is the obligation to blow the whistle when there is smoke,” said Paul Hoffman, the director of the Institute for Accountability in Southern Africa.
The fact that Eskom had only released a redacted version of the Dentons report “speaks volumes”, he said.
Brown’s spokesperson, Colin Cruywagen, said she would not comment on the report and referred all inquiries to Eskom and its board.
In response to questions this week, Eskom said it had not misled the public or the National Energy Regulator of South Africa (Nersa).
This, it said, was demonstrated in it “having obtained unqualified audits for the past five years from its external auditors who have full access to its records”.
Similarly, Nersa had full access to Eskom information “at any time and, in addition, an extensive public participation process is followed in interrogating Eskom’s tariff applications”.
It also said that it had “conducted forensic investigations, and criminal investigations had been pursued by external agencies such as the Hawks and the SIU [Special Investigating Unit]” but no evidence was found to pursue any civil or criminal prosecution. As such, Eskom was of the view that the Act did not apply.
The utility did not respond to an appeal for more clarity on these investigations or futher comment on the unredacted report.
In the wake of load-shedding in 2014 and 2015, the state convened a “war room” led by Deputy President Cyril Ramaphosa.
Professor Anton Eberhard, a war room member, said on Twitter that both the Eskom board and the minister should resign for curtailing the Dentons investigation and failing to share it with the war room.
Ronnie Mamoepa, Ramaphosa’s spokesperson, said neither the president nor the war room, which completed its work in 2015, had received the report.
Economist Iraj Abedian said that Eskom’s supply chain “was completely captured and perverted” so that questions of cost efficiency and quality control were “thrown out of the window on the altar of total capture”.
Given what is in the report, Abedian said the regulator “has an absolute responsibility to approve nothing until Eskom gets its corporate structures and operations right”.
Despite load-shedding in recent years, Eskom has applied for higher electricity prices through tariff clawbacks, which industry and business have routinely opposed.
In 2016, it requested a clawback in tariff revenues under a mechanism called the regulatory clearing account (RCA). At the time, Eskom sought roughly R8-billion in additional funds to pay for the diesel used to fuel its open-cycle gas turbines.
Although it was only allowed to reclaim R1.3-billion by Nersa, the Dentons report illustrates how diesel procurement for these power stations raised red flags.
It questioned the bona fides of a number of ad hoc suppliers of diesel who proliferated between 2013 and 2015, rising from nine in number to 26.
Among the “concerning elements” about the cost of diesel, Dentons cited anecdotal references suggesting employees had established companies through their family members, and then removed themselves from the board before probity checks, as well as the use of intermediaries – namely a Congolese businessperson who acquired his diesel from South Africa – that was inefficient and “potentially illicit”.
The RCA award has since been frozen after a group of businesses from the Nelson Mandela Bay metro challenged the decision in court. Key to their case has been Eskom’s failure to keep its costs under control.
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