Broken power utility Eskom, which will get a bailout of close to R120-billion over the next two years, has squandered more than R300-million on building flats for construction workers at Kusile power station.
The state-owned entity has abandoned the project and has allegedly spent more than R1-billion to date on renting accommodation for the same employees it had planned to house in the 336 units in the Wilge Residential Development project.
Eskom, which has a debt of R440-billion, has been struggling to keep the lights on over the past few years. The ongoing construction of Kusile has contributed to its financial woes — estimated at at least R161-billion so far.
In July 2012, Eskom entered into a contract with the Liviero Group to construct the Wilge flats.
The group has since gone under voluntary business rescue, and one of its companies has been liquidated. The flats are incomplete and unused, while workers travel up to 50km a day to work at Kusile.
In response to questions about the Wilge accommodation, Eskom said: “Eskom acknowledges that the development was not completed as per contract, including significant over-expenditure on the project. We have terminated the contractor’s obligation to complete the work and decided not to invest further in the project. Due to the fact that the envisaged accommodation was not available, Eskom had to resort to other means to house construction staff.”
The power utility has admitted that the Wilge project is fruitless and wasteful expenditure. It said it is investigating allegations of corruption following an escalation in the costs of the contract, which began at R258-million in 2012.
“Eskom is currently in the process of deciding [on] an appropriate course of action related to the property. We have appointed attorneys to conduct an investigation into allegations of corruption, fraud and financial irregularities in this project.
“The outcome of the investigation will inform Eskom’s decisions in terms of recourse from those who are implicated in wrongdoing. The correct procedures will be followed in terms of reporting fruitless and wasteful expenditure,” said Eskom.
The Liviero Group, which consists of Liviero Building, Liviero Civils, Liviero Mining, Liviero Drill and Blast, Liviero Plant and Liviero Energy, filed for voluntary business rescue in July 2018. The group cited late and nonpayment by its government clients as reasons for its financial problems, according to a Mail & Guardian report in August last year (“State non-payment implodes building company”). The group’s building unit, Liviero Building, filed for liquidation.
In a sworn statement last year in support of the voluntary business rescue, director Luca Liviero said: “Due to the group’s exposure to government projects, Liviero Civils in particular have an amount in excess of R81-million overdue by its government clients. These late and often nonpayments have had an adverse effect on the Liviero Group’s ability to recover its group charges such as plant hire and other costs.”
Other factors cited were industrial action and section 54 stoppages in areas where Liviero Mining operates, which were “through no fault of our own”.
Despite requests for comment this week, the Livero Group did not respond by time of publication.
The Liviero Group was 51% black-owned, through the Masimong Group, which was headed by its controlling shareholder, Mike Teke. Teke, who was a director at the Liviero Group, resigned in January this year. He is the chief executive of Seriti Resources, which is the preferred bidder for the South32 mines. He was also the president of the Minerals Council (the erstwhile Chamber of Mines).
BKS Palace Consortium, which was initially part of the Wilge project, said this week that the project had been badly managed by Eskom from the onset. The company, which was appointed to provide architects, structural and civil engineers and quantity surveyors, said it was sidelined from the Wilge project.
“Eskom said they don’t have money and that is why they canned it. What happened there is that Eskom tried to run the project themselves and that’s what killed that thing, then they were managing Liviero and we said, ‘guys you can’t be a player and a referee at the same time’,” said one of the directors, Ephraim Dlamini. “We were basically on the sidelines, Eskom was running the show even though we had told them the consultant should be managing the project. That project was run in a very funny way.”
This week, during a National Assembly debate, Finance Minister Tito Mboweni said Eskom should be run better and that the right people should be appointed to run it. “Within the context of declining tax revenues due to low economic growth, when members say Eskom must be funded I agree, but where must the money come from? We have to consider that. You can’t have everything every time … One of the key issues we need to solve is appointing the correct people to run Eskom. We must appoint the correct board of directors, a competent management team, and we must be able to hold them accountable for Eskom.”
This week, the National Assembly passed the Special Appropriations Bill to give Eskom R59-billion. This bailout follows a R69-billion commitment made in February’s budget speech.
The struggling power utility, which is owed R25-billion by municipalities, shocked the country when it implemented load-shedding last week after a conveyor belt had broken at one of its power stations.
Last week, the M&G reported that Eskom had burdened taxpayers with a roughly R10-billion bill over the next six years, because it had failed to negotiate a standard price for coal it burns to keep the lights on. This also came after the power utility told Parliament that it had made a R21-billion loss in the past financial year and was expecting to lose a similar amount in the coming year.