The South African Reserve Bank (SARB) was not privy to information that might have put the breaks on the controversial multibillion-rand loan from Huarong Energy Africa to Eskom, the Zondo commission of inquiry into state capture heard on Monday.
During his testimony before the commission, chaired by Deputy Chief Justice Raymond Zondo, Eskom treasury official Sincedile Shweni admitted that he did not disclose information to the SARB which would have counted against the $25-billion Huarong loan from going through.
Shweni revealed during his testimony that prior to applying to SARB for permission to enter into a transaction with non-residential financial institutions, Eskom had received evidence that Ideva International — Huarong’s parent company — had no trading record or proof of revenue.
This information was not included in the application, despite hopes within Eskom’s treasury office that the SARB would not approve the transactions, Shweni told the commission.
The negotiations with Huarong had raised a number of red flags since they commenced in late 2016. During his testimony last Friday, Eskom treasurer Andre Pillay told the commission that he was uncomfortable with steps being taken seemingly to push through the deal prior to Eskom’s internal processes being followed.
One concern was that former chief financial officer Anoj Singh was seemingly determined to sign a term sheet binding Eskom to the conditions of the loan in advance of the conclusion of negotiations between the power utility and Huarong.
The signing of the term sheet, which outlined the material terms and conditions of the agreement, on March 14 2017 went against the advice of the legal team dealing with the transaction. Law firm White & Case warned against the signing of the term sheet because it included “onerous” binding terms on the power utility, including a R400-million commitment fee, and was ambiguous in what was being offered by Huarong.
Both Pillay and Shweni told the commission that it was unusual for a term sheet to be signed at all.
SARB approved Eskom’s application in August 2017.
When probed by evidence leader Advocate Thandi Norman SC about his reasons for not including the information about Ideva in the application, Shweni conceded that this was a mistake.
The SARB may have come to a different conclusion if these concerns were included, he said. “There is no way that the Reserve Bank could have read in between the lines to see that there is something wrong here,” Shweni told the commission.
Shweni reiterated that it was not his intention to mislead the SARB by not disclosing this information.
Norman pushed Shweni on why approvals were being sought by officials at the time despite internal reservations relating to the Huarong loan. Shweni said that he was concerned about being the person seen as frustrating the conclusion of the loan negotiations.
Shweni also admitted that he did not want to be the one to trigger the cancellation fee. The cancellation fee set out in the Huarong term sheet was R42.7-million.
“So in my mind if someone representing the lender sees the application and the application is seen as obstructive … then you trigger the cancellation clause. One could argue that you went deliberately out of your way,” he told the commission.
The Huarong loan has been beset with controversy since it emerged that former executive Sean Maritz was implicated in a kickback scandal in which he was alleged to have signed off a R400-million payment from Eskom to a Hong Kong bank account. The payment was allegedly made to Ideva.