SIU wants Eskom-Tegeta R3.7bn coal contract cancelled

The Special Investigating Unit (SIU) will be taking former Gupta-owned Tegeta Mineral Resources and Eskom to court over a R3.7-billion coal contract.

City Press newspaper reported that in court papers filed in the Pretoria high court on Friday, the coal contract is still in effect and is expected to end in 2025.

The SIU wants the contract, which came into effect in 2015, to be declared “unlawful and invalid”.

The SIU said the “scale of the costs order should be punitive”, and has based its report on former Public Protector Thuli Madonsela’s state capture report and Treasury’s forensic report into Eskom and Transnet, SIU forensic lawyer Jason Schmidt said.

The contract, according to the City Press report, allowed Tegeta to prescribe coal price and coal quality — Tegeta had “blended” good and bad quality coal was “unsuitable” for a coal plant like Majuba Power Station in Mpumalanga Chris van Alphen said.

The respondents in the matter of Public Enterprises Minister Pravin Gordhan, and Tegeta’s business rescue practitioners.

Last year, the Parliamentary portfolio committee into public enterprises held an inquiry into Eskom where it heard how the power utility dismissed procurement procedures during load shedding in 2008. This was possible, the inquiry heard, after the appointment of a “Gupta-alingened board” at Eskom.

READ MORE: Treasury confirmation — Eskom looting was an inside job

The board in 2014 was chaired by Ben Ngubane with Brian Molefe as Eskom’s chief executive. Lynne Brown was the minister of public enterprises at the time.

READ MORE: Gigaba, Koko and Singh named in bombshell treasury report on rot at Eskom, Transnet

In November last year, business rescue practitioner Piers Marsden claimed that Eskom paid Tegeta for coal before the company had acquired Optimum coal mine from Glencore in 2016. This payment, according to Marsden, helped Tegeta buy the mine.

Prior to Tegeta’s purchase of the mine, Glencore had been fined R21-billion for poor quality coal. This amount was discounted by 75%. In March 2017, Tegeta had to pay the power plant R500-million, in place of the R2.1-billion penalty.

According to the court papers filed on Friday, it was not apparent whether Tegeta had paid the fine.

Gordhan’s spokesperson Adrian Lackay said the minister will seek appropriate recourse: “No relief is sought against the minister of public enterprises in this application and the court papers will be studied in detail to advise the minister on the most appropriate course of action.” 

“The Minister has been emphatic in declaring publicly that he will support all efforts by law enforcement agencies of the state to hold those to account and to seek appropriate recourse through the courts from any party that had unlawfully benefited from corruption and state capture, at the expense of the fiscus and the public,” Lackay said.

Eskom spokesperson Khulu Phasiwe has not received court papers from SIU, but he told the Mail & Guardian that the power utility will work with SIU: “Eskom has been and will continue to co-operate with the SIU in getting to the bottom of the alleged malfeasance that happened in the company in the past few years.”

According to City Press, Tegeta’s business rescue practitioners won’t necessarily oppose the application.

Coal supply

In August 2017, Tegeta was sold to Swiss-based Charles King SA for R2.97-billion. It was placed under business rescue this year.

Tegeta’s assets, Optimum Coal Mine, Koornfontein Mines and Optimum Coal Terminal will be bought by South African-based consortium Project Halo to the tune of R3.05-billion, Bloomberg reported last week. Project Halo’s winning bid for Tegeta’s assets, however, has been opposed by Gupta-linked Oakbay investments.

Although the country experienced some load shedding earlier in December, this has been attributed to power plant breakdowns and not coal shortages. He did admit that some power stations are running low on their coal stockpiles, but the matter, he said, was being addressed.

“South Africa generally produces over 250-million tonnes of coal per year, of which over 110 million tons is purchased by Eskom. The balance goes to export markets, Sasol and other users,” Phasiwe tweeted on Sunday.

Last week, President Cyril Ramaphosa announced a high-level task team (the Eskom Sustainability Task Team) to review Eskom’s turnaround strategy and propose alternative financial models. The initial recommendations are expected to be presented to the president by the end of January 2019.

READ MORE: Gordhan cancels Christmas break for Eskom execs

This article has been amended to reflect the full statements from the minister of public enterprises and Eskom.

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