Medupi breaking the law - expert

2013-07-31 20:24
Construction work at Medupi came to a halt on 16 January after a dispute about the payment of year-end bonuses.

Construction work at Medupi came to a halt on 16 January after a dispute about the payment of year-end bonuses.

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Johannesburg - The constitutional principles prescribing how public administration must be governed are breached daily, the Institute for Accountability in Southern Africa said on Wednesday.

"Those are... breach[ed] on a daily basis in South Africa," director Paul Hoffman said at a Free Market Foundation briefing in Johannesburg.

"It isn't the way things are being done."

Section 195 of the Constitution contains nine principles which apply to public administration in all spheres of government and parastatals. One of the problems was that most important public servants were appointed through cadre deployment.

"One of the reasons why our public administration is so terribly, terribly dysfunctional is that people who get into public administration as a consequence of being deployed there as a loyal cadre of the national democratic revolution, are inherently in a conflict of interest situation," said Hoffman.

Hoffman was talking about how public administration and state-owned entities were meant to be run. He used Eskom's Medupi project and the embattled national carrier, SA Airways, as examples of how these principles were not adhered to.

Hoffman said the African National Congress's investment arm, Chancellor House, was benefiting from the Medupi project and so, indirectly, was the party.

Chancellor House was instructed to look around for opportunities to make "quick, easy" money so that the ANC could run election campaigns.

"Chancellor House knows, because Eskom has a chair called Valli Moosa who is also the chair of fundraising at the ANC... that there is a huge tender coming up because we forgot to build power stations for about 10 years," said Hoffman.

"So Chancellor House gets hold of Hitachi... [The two] do an interesting deal, in terms of which a company called Hitachi Power Africa is born."

R5.8bn dividend

Hitachi Power Africa, in which Chancellor House had a stake, was the company that won the tender to supply Eskom with boilers for its Medupi power station. Eskom had to pay for the service, so it went to the National Energy Regulator of SA (Nersa) for additional funding.

"There we go, we have Nersa deciding whether to give Eskom enough of a price increase for the consumers to pay so that money can be paid to Hitachi, dividends can be paid to Chancellor House and funds can be raised by the ANC," he said.

"So, the price increase that Nersa gives is adequate to enable Eskom to pay and for Hitachi Power Africa to declare a dividend."

Wits academic William Gumede estimated that Chancellor House would get a R5.8bn dividend from the contract.

Hoffman said it was clear the deal was collusive and a conflict of interest.

"R5.8bn was built into that contract... You and I are paying for that every time we switch on a light," he said.

In terms of SAA, Hoffman said there was actually no need for South Africa to have a national carrier. As things stood SAA did not seem to be able to get its act together to compete viably.

"We have a national carrier because it looks smart to have a national carrier," said Hoffman.

"It has no use at all other than to satisfy the egos of politicians, and unfortunately satisfying the political need to have a national flag carrier is costing taxpayers in South Africa ever increasing amounts of money."

He said government was not adhering to section 217 of the Constitution, as it allowed SAA to receive capital injections when its competitors were not allowed to.

"I believe it is corrupt to keep throwing money at SAA when it is just incapable of getting its act together year after year."

Read more on:    saa  |  chancellor house  |  service delivery  |  corruption

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