Former Eskom board chairperson Jabu Mabuza’s name is entangled in an R11-billion boiler tube maintenance contract at the ailing power utility, where a company of his distant relative has emerged as one of those that made it through to the final bidding process for the critical contract.
The relationship, and the possibility of a conflict of interest, raised questions inside Eskom in the days before his resignation last week.
Nomvula Mabuza’s company — IDS Industry Service and Plant Construction Africa (IDS Africa) — was formed in April 2018, shortly after a new Eskom board was appointed. It allegedly stands to benefit from 70% of the utility’s boiler tube maintenance contract, if the contract it is bidding for in a joint venture with American outfit General Electric (GE) is successful.
IDS Africa already has a contract valued at R100-million for boiler tube maintenance at Medupi power station, which was awarded in February 2019.
Eskom has, since last year, set aside R50-billion over the next four years for maintenance, with the bulk going towards maintaining boiler tubes.
There were no declarations of a possible conflict of interest by either Nomvula or Jabu Mabuza, regarding the two contracts.
Mabuza and Eskom say that Nomvula is a distant relative and that the former chairperson never sat in on discussions and decision-making processes relating to boiler tube maintenance contracts.
Several insiders and people with knowledge of the scale of the maintenance contract at Eskom expressed surprise that IDS Africa, as a relatively new company, would already be in the running for even a stake in such a lucrative job.
In her IDS Africa company profile, Nomvula claims that the entity has “47 years plant engineering experience” — a direct contradiction to her company’s registration records.
The 35-year-old further claims that IDS Africa is working at Kusile and Medupi power stations, “continuing the legacy started since 2013 when IDS Africa GmbH were roped in by Mitsubishi Hitachi Europe …”
But investigations by the Mail & Guardian show that no company called IDS Africa GmbH ever worked with Hitachi in 2013.
An IDS Industry Service and Plant Construction South Africa (IDS South Africa), however, was registered in May 2013 with two Croation nationals — Drazan Vrca and Marc Vrca — as its directors. It was this company contracted to Hitachi.
It appears on the website of its parent company IDS GmbH, based in Germany.
Directors of the 2018 IDS Africa are Drazan Vrca and Nomvula Mabuza.
Paperwork, including the company profile, submitted by Nomvula to the M&G in her responses to questions, as well as responses from General Electric, show that she conflated the credentials of her new IDS company with that of IDS South Africa so it could tender at Eskom.
She says that the 47 years of experience is through “licenced partnership” although she doesn’t name the partner specifically.
A source with knowledge of the Croatian IDS questioned why Vrca and Nomvula would need to register a separate company in South Africa.
“It simply does not make sense to me because you would not need this complicated arrangement which looks like fronting,” said the source, who left Eskom more than five years ago. They asked not to be named as they still have close commercial ties to Eskom.
The M&G has also established that a whistle-blower wrote to the Judicial Commission of Inquiry into Allegations of State Capture and to Public Enterprises Minister Pravin Gordhan in February and March last year, offering evidence against IDS Africa.
In the letter drafted by the whistle-blower’s lawyers and seen by the M&G, it is alleged that there has been widespread fraud and corruption regarding the awarding of tenders at Medupi and Kusile power stations.
The whistle-blower says in the letter that IDS Africa should be investigated by the commission as one of the companies which benefited from such fraudulent awards.
They claim that: “During the [Medupi] tender process and in particular on the date of award, IDS Africa had no employees and had no experience in the maintenance of boilers… IDS Africa may, in fact, be a front.”
An insider at Eskom told the M&G that the boiler tube maintenance contract has been stalled since December, after the tender committee resolved to scrap and restart the process to appoint a new service provider.
Another high-level source said that although chief procurement officer Solly Tshitangano sent a board submission asking for the process to be halted and restarted, Eskom’s full board is yet to confirm the cancellation.
“The reasons provided were not convincing, so it was not cancelled … the preferred bidders should be awarded soon,” the source said.
Eskom told the M&G: “The bid process has not yet been concluded as the governance approval process is under way, therefore, information cannot be disclosed.”
A senior Eskom insider said there were genuine concerns about the evaluation of the R11-billion contract: “The facts are that the tender was not properly evaluated and due diligence reports indicated that finances of recommended suppliers are not sound.”
They added, however, that some board members felt the cancellation request was made because Babcock International had been disqualified. Mabuza has a 26% stake in Babcock, which he put in a blind trust.
The source suggested that the board “is not concerned about prioritising maintenance but concerned on who should get tenders”.
Because of the age of Eskom’s fleet — the average age of its 13 coal-powered stations is 37 years — and a lack of maintenance in the past, plant breakdowns happen frequently. They are the leading cause of the load-shedding which has become a serious threat to South Africa’s economy.
Compounding this are the delays in the construction of Medupi and Kusile power stations, which are linked to corrupt deals that saw critical design flaws and cost overruns to the tune of R300-billion.
The current boiler maintenance contract, which has been extended three times for a total of 18 months, was awarded to Babcock, Actom, and Steinmuller.
Last year, Eskom’s chief operations officer Jan Oberholzer and senior general manager Andrew Etzinger ascribed the load-shedding to boiler-tube leaks on seven units which caught them by surprise.
At the time, Eskom announced, for the first time, that it would institute stage four load-shedding, and saw public calls for Gordhan to intervene. Since then South Africans have been introduced to an unprecedented sixth stage of load-shedding.
In answers sent just days before Mabuza resigned, both he and Eskom told the M&G that they had no knowledge of Nomvula’s declarations and business dealings.
Eskom said: “Nomvula Mabuza is a distant relative. Her father and Mr Mabuza’s father share the same great grandfather but not the same great grandmother. Mr Mabuza is not aware of what her professional activities involve nor what disclosure she has or has not made to Eskom.”
The utility added that: “Mr Mabuza, as matter of principle does not sit in any meetings nor participate in any discussion or decision-making process relating to boilers … As such the details around this tender and contract management are not in his purview.”
Mabuza’s chief of staff Lwanda Zingwita said: “Mr Mabuza has no knowledge of a company called IDS, what their relationship with Eskom is and has not partaken in anything to do with such an entity. The relationship with Babcock has always been declared and managed appropriately.”
Meanwhile, Nomvula refused to answer any questions about her relationship with Mabuza and whether she had declared the possible conflict of interest. “What relevance does this have to my companies? Please refer to the bid documents submitted. I am sure that Eskom’s procurement division will assist you.”
The complex structuring and conflation of expertise and capacity between IDS South Africa and IDS Africa seems to have got the better of General Electric, which this week said they had partnered with the 21-month old company because of its “specialised resources to fulfil the boiler services tender requirements”.
The company told the M&G that IDS Africa indicated that there were no potential conflicts at Eskom. “IDS Africa was one of several suppliers identified by GE to supply specialised resources to fulfil the boiler services tender requirements to support black women owned and black youth owned EME/QSE’s.”
GE also noted “the affiliation to its parent company IDS GmbH — headquartered in Germany via IDS South Africa” and said: “Based on all the information provided at the time of the tender submission we confirmed the affiliation. GE follows a robust due diligence process in which all possible suppliers undergo background reviews.
“There was intent made by the parent company on potentially availing resources for the project should it be awarded. Further questions on these details should be directed to IDS Africa and IDS GmbH.”