/ 16 March 2022

Eskom plans to streamline procurement in light of Zondo reports

Eskom Holdings Soc Ltd Chief Executive Officer Brian Molefe Interview
Eskom told Parliament’s standing committee on public accounts that it was targeting suppliers mentioned in the Zondo report

Eskom plans to reduce non-value-adding suppliers and cut the overall cost of procurement in the wake of damning reports on state capture, parliament heard on Wednesday. 

The electricity utility did not fare favourably in the first of a series of reports  by the Zondo commission, which delved into the complexities of the Public Finance Management Act (PFMA) and other procurement laws, as the commission tried to get to the bottom of why state-owned entities (SOEs) were able to be captured.

The portfolio committee on public enterprises on Wednesday held a briefing on policy impediments raised by Eskom and logistics entity Transnet about the Preferential Procurement Policy Framework Act (PPPFA), broad-based black economic empowerment (B-BBEE) and all policies hampering the developmental objectives of SOEs.

Eskom chief procurement officer Jainthree Sankar said the power utility had already made some changes as they related to procurement.

“Post state capture we’ve put in several controls on the procurement and contract management side, which actually shows that the accounting authority and board are looking at expansions and deviations and other transactions,” Sankar said.

“We feel strongly that we can actually manage those and provide monitoring information to treasury and other authorities and be able to give the flexibility and agility in our operations to also demonstrate to lending organisations that we can actually conclude contracts and procurement in a shorter space of time and complete the project timeously so that we can be given the additional funding.”

She said Eskom was reopening its existing contracts to get better-than-market-related prices, while taking into consideration its purchasing power. 

“We have quite a lot of work we have to do, for example with our transmission and other infrastructure projects. We really want to have relationships with suppliers in the long term to build our industry and actually be able to develop the economy. Some of those things have legislative impediments in terms of how we have to use [the] CSD [central supplier database],” Sankar said. 

Department of public enterprises director general Kgothatso Tlhakudi said 

procurement needed to be fast-tracked because the processes were currently taking too long.

“When we do procurement, the number of steps we go through and speaking to different departments and treasury takes time and has an impact on when you are able to spend,” Thlakudi said.

“The slow procurement process has an impact on the economy as well, because if you are not spending fast enough you are not circulating money in the economy to ensure it creates jobs leading to increased economic activity.” 

Transnet chief executive Portia Derby bemoaned legislation hindering procurement. 

“We have no problems with the PFMA as an act. The problem is the series of instructions and regulations that have since been shoved into it, which have made it not the original. So, going back to the original would simplify all of our lives,” she said. 

In 2021 Eskom chief executive André de Ruyter said slow movement on public procurement decisions was hampering the utility’s ability to attend to the extensive maintenance of its ageing power plants. 

Derby said it was not true that the Preferential Procurement Policy Framework Act gave a pricing advantage to its intended beneficiaries.

“Very few black companies are able to benefit from PPPFA because they are new entrants and they don’t have the volume, so they will never be able to compete on price. But if you were able to ensure that SOEs implement B-BBEE, we would get much better outcomes out of SOEs in driving transformation in the South African economy without creating new special projects,” she said.

Anathi Madubela is an Adamela Trust business reporter at the M&G.