/ 13 October 2023

Eskom welcomes coal theft syndicate crackdown

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Embattled electricity supplier Eskom said on Friday it welcomed efforts by the South African Revenue Service (Sars) to track former employees involved in criminal syndicates at its power plants. 

On Thursday, Sars announced a large-scale intergovernmental operation spanning five provinces aimed at dismantling a “sophisticated” criminal syndicate allegedly involved in coal smuggling, which includes former Eskom employees.

“Eskom welcomes Sars’ efforts and the cooperation of other agencies in identifying and disrupting these criminal networks. Eskom will provide the necessary support to ensure successful prosecution and the imposition of appropriate sanctions where needed.”

Sars has said it was focusing on coal-smuggling syndicates, known for their tactics of hijacking high-grade coal deliveries to Eskom and replacing them with lower-grade coal, resulting in suspected tax offences totalling R500 million.

According to Sars: “The alleged coal smugglers and their associated entities are active and have a presence in Gauteng, Mpumalanga, KwaZulu-Natal, the Free State and Limpopo.”

Sars has determined that the suspects violated several tax laws, including non-registration for income tax, failure to submit tax returns, under-declaration of income, claiming undue VAT refunds and making false submissions.

The revenue service said the smugglers significantly contribute to the energy crisis and load-shedding in the country.

“They operate by diverting coal trucks on their way to power stations to designated coal yards where high-grade coal is replaced with low-grade or substandard products,” it said.

“The high-grade coal is then exported or sold to willing buyers, while the low-grade coal, often blended with scrap or other materials, is delivered to power stations, causing damage and leading to prolonged outages.”

The suspects include former Eskom employees who facilitated procurement fraud, with the revenue loss to the fiscus due to their tax crimes amounting to more than R500 million.

Sars head of communications, Siphithi Sibeko, said Sars cannot share the details of the takedown as “the team was still getting the information together.”

He said the team went on the search following a tax matter based on a preservation order granted to Sars to investigate suspects who were suspected of tax evasion.

South African Police Service national spokesperson Brigadier Athlenda Mathe said no arrests were made on Thursday, but investigations were ongoing.

Eskom has been grappling with instances of sabotage and crime for years, with little sign of improvement. This has posed a significant challenge for the utility and the ANC, which has largely been blamed for the looting and dysfunction at Eskom and other state-owned entities.

The country has, over the past year, seen the worst power outages since 2019, which led to stage six load-shedding last month.

Speaking to the M&G, forensic expert Calvin Rafadi suggested that Sars investigate small companies and major corporations involved in the coal syndicates that have disrupted Eskom’s power stations.

Rafadi, who was previously contracted to investigate sabotage at Eskom, emphasised the importance of examining Eskom’s procurement history to identify the major companies involved in purchasing the high-grade coal swapped with lower-grade coal.

“Sars must also investigate who is buying this coal and parts stolen from Eskom to determine if they were properly procured. This is a national key point, and I believe that those involved should also face charges of high treason by the National Prosecuting Authority,” he said.

Mandisa Nyathi is a climate reporting fellow, funded by the Open Society Foundation for South Africa.