The fourth instalment of the commission’s report, which was formally handed to the presidency on Friday morning, digs into the alleged capture of Eskom by the Gupta family — who, in 2015, allegedly benefitted from a R659-million payment and the R1.68-billion guarantee from the state power utility.
The 1 064-page report states that all Eskom officials involved in the transactions to the Gupta-owned Tegeta Exploration and Resources are guilty of theft “and ought to face criminal charges for such corruption related conduct”.
Chief Justice Raymond Zondo, who chaired the commission, singles out erstwhile Eskom executives Koko and Singh for their involvement in the scheme. The pair, Zondo notes, led Eskom to believe that the transactions were for coal when they knew the money would be used by the Guptas to acquire Optimum.
In 2015, the Guptas, through their company Oakbay Investments, started negotiating with Glencore to buy Optimum, which had been supplying Eskom with coal since the 1970s. Glencore initially rebuffed Oakbay’s offers.
But, in August of that year, Optimum went into business rescue, following a lengthy dispute with Eskom over the price of its coal. Eskom allegedly withheld payments from Optimum during this period, further deteriorating the mine’s bottom line.
Negotiations between Glencore and Oakbay resumed in September 2015. According to the Zondo report, evidence shows that Eskom officials fed confidential information to Gupta lieutenant Salim Essa to give the family a leg up in their dealings with Glencore. Koko — as well as former Eskom board chair Ben Ngubane and the utility’s then head of compliance, Suzanne Daniels — allegedly sent confidential documents to Essa through coded email.
In November 2015, Ajay Gupta offered R1-billion to buy the mine. Glencore declined, stating that the amount was not enough to cover Optimum’s R2.5-billion debt. At a meeting the following month, Glencore informed Koko that it had rejected Oakbay’s offer and that it would continue supporting Optimum.
At about this time, then minister of mineral resources Mosebenzi Zwane travelled to Switzerland to urge Glencore chief executive Ivan Glasenberg to sell the Optimum coal mine to the Guptas, according to the Zondo report. Glasenberg agreed to sell the mine to the Guptas for R2.15-billion.
On 10 December 2015 a sales agreement was concluded for the Oakbay Investments’
subsidiary, Tegeta, to purchase Optimum. But Tegeta’s financial position was in question.
This is where Eskom stepped in, approving a R1.68-billion guarantee to Tegeta. The amount, which was meant to prepay Tegeta for a year’s worth of coal, was enough to allow the Guptas to fund much of the Optimum acquisition.
The submission for the prepayment, which was drafted and signed by Koko and Singh, reasoned that the R1.68-billion was needed to stabilise Optimum and secure a supply of coal to Eskom and prevent load-shedding.
But Optimum did not know about the prepayment request, according to Zondo. It was not engaged by either Eskom, Tegeta or the department of mineral resources with regard to this request, “nor did it receive any such prepayment for coal from Eskom”.
The only sensible conclusion, Zondo states in the report, is that prepayment submission by Singh and Koko had nothing to do with addressing the risk of coal supply to Eskom, but everything to do with providing financial assistance to Tegeta.
The R1.68-billion served to demonstrate that Tegeta had sufficient funds to buy Optimum. Eskom later approved a R659-million pre-payment to Tegeta. The money was allocated to buy coal for Eskom’s Arnot Power Station.
The R659-million pre-payment was approved in a late-night board meeting on 11 April 2016, with little regard for its financial effect on Eskom, Zondo notes. The money also enabled Tegeta to suddenly have sufficient funds to make full payment for Optimum, which it acquired just three days later.
The evidence, Zondo states, proves that Koko, Singh, Zwane and former Eskom chief executive Brian Molefe “made themselves complicit in knowingly assisting the Guptas to acquire the Optimum coal mine, and ultimately, all of Glencore’s coal interests in South Africa”.
“What I have described above,” Zondo adds, “demonstrates an act of state capture”.