Eskom asks Gigaba for blank cheque

2017-05-28 06:00
Resolute: Finance Minister Malusi Gigaba

Resolute: Finance Minister Malusi Gigaba

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Finance Minister Malusi Gigaba has been asked to approve various components of the nuclear deal and effectively give Eskom a “blank cheque”.

These requests are contained in a letter Eskom chairperson Ben Ngubane wrote to Gigaba earlier this month. In the letter, dated May 10, Ngubane also pleads with the minister to intervene in the stand-off between Treasury and Eskom regarding the Gupta family’s Tegeta Mine.

The letter was sent to Gigaba two weeks after the Western Cape High Court’s ruling that key elements of the nuclear deal were unconstitutional.

The letter appears to be an attempt by Ngubane to set a new tone for the relationship from the somewhat tense one that Eskom had with Treasury under ministers Nhlanhla Nene and Pravin Gordhan. Treasury and Eskom clashed repeatedly in recent years as the former insisted that the power utility abide by the rules and questioned its procurement practices.

In his letter, Ngubane:

. Asked for a direct line to Gigaba;

. Pleaded with Gigaba to revise the Preferential Procurement Policy Framework Act (PPPFA) or rush to introduce the Procurement Act to enable “radical economic transformation”;

. Requested the finance minister to relax the stringent conditions relating to the extension of the power utility’s R350 billion guarantees;

. Appealed to Gigaba to approve various programmes relating to the nuclear deal. These included exempting Eskom from the PPPFA and the approval of the Standard Infrastructure Procurement and Delivery Management; and,

. Raised concerns that Treasury had appointed another service provider to review Eskom’s coal contract with Tegeta and that the stand-off between the two parties regarding the power utility’s coal contracts with the Gupta family’s Tegeta mine had been going on for two years.

Eskom board spokesperson Khulani Qoma said the letter was a “courtesy” and was intended to be a “brief induction on the matters of importance to Eskom”.

He said it was prepared on April 4, before the nuclear ruling, but was only signed on May 10 because Ben Ngubane was unavailable. An updated letter would be sent to the minister.

He said the PPPFA had “already been acknowledged by government as being an impediment to economic transformation” and the request was therefore to ask the minister “to continue to enhance the PPPFA to enable radical economic transformation”.

“Our lessons learnt from the R23 billion equity injection conditions [have] highlighted certain risks that need to be managed appropriately to ensure that ratings agencies and funders continue to have the required comfort,” Qoma said.

Last month, City Press reported that, in August last year, Treasury had shot down Eskom’s request to expand the Tegeta-owned Brakfontein Colliery’s 10-year coal-supply contract by another R2.94 billion.

This would have increased the contract value from R4 billion to R7 billion. City Press had further reported that Treasury had barred Eskom from expanding the Tegeta-owned Optimum Coal Mine’s two-month contract to supply coal to the Arnot power station in Mpumalanga for a further six months without going to tender.

The initial contract was worth R235 million and the contract’s expansion would have increased that amount by R855 million to more than R1 billion.

This information had come from a report that Treasury had commissioned to review whether Eskom had followed proper tender processes when awarding the coal tenders to the Gupta companies.

Last month, City Press also reported Eskom was set to get the nuclear deal underway in June by issuing a request for proposals.

At that time, sources had told City Press that President Jacob Zuma had removed finance minister Gordhan and his deputy Mcebisi Jonas because they were opposed to the nuclear deal and were dragging their feet in having it implemented.

After seeing Ngubane’s letter, a source with knowledge of Treasury’s workings said: “Now you know why Gordhan and Jonas were removed. This is the completion of state capture.”

The source said Ngubane and the Eskom leadership wanted the PPPFA to be relaxed “so that they can do as they please with procurement”.

“Why would they want the conditions that come with guarantees to be relaxed? You must remember, for government to give guarantees, there must be stringent conditions. You simply cannot relax them,” he said.

Such conditions, he said, included a corporate plan that should be seen and approved by Treasury, and procurement policies that were in line with the Public Finance Management Act and the PPPFA.

A senior executive at Treasury said: “Baldwin [Ngubane’s middle name] is saying the previous minister was not a friend of Eskom. He was strict and put Eskom under watch through guarantees and other procurement conditions.

“He is asking the new minister to relax conditions, approve the nuclear deal, exempt Eskom from procurement measures and give the favours as outlined in the letter.”

Read more on:    eskom  |  malusi gigaba  |  ben ngubane

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