State capture inquiry: Eskom forced to conclude multibillion-rand Tegeta coal supply deal in just 48 hours

2019-02-26 16:32
Deputy Chief Justice Raymond Zondo presiding over the commission of inquiry into state capture. (Gulshan Khan/AFP)

Deputy Chief Justice Raymond Zondo presiding over the commission of inquiry into state capture. (Gulshan Khan/AFP)

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There was considerable pressure on Eskom to conclude a coal deal with Gupta-linked Tegeta in less than 48 hours in 2015, the state capture commission of inquiry has heard.

This emerged from one of the commission's evidence leaders, Kate Hofmeyr, on Tuesday.

Hofmeyr was addressing commission chairperson, Deputy Chief Justice Raymond Zondo before she presented the evidence of Eskom's now deceased executive, Mark Van Der Riet, and acting managing director, Daniel Mashigo.

She submitted that at the time of the agreement relating to the R4.3bn deal, Tegeta was not in a good financial position to enable it to provide coal to Eskom.

Tegeta is a Gupta-owned firm which has been under business rescue since February 2018.

During the business rescue period, Tegeta-owned Brakfontein mine was unable to honour its contractual obligations to supply coal to Eskom's Majuba Power Station in Mpumalanga.

READ: Tegeta clinched Eskom contract despite low quality coal

Hofmeyr said the evidence team had an understanding that Van der Riet's affidavit and Mashigo's testimony would shed light on some of the irregularities in the procurement of coal from Tegeta's Brakfontein coal mine.

"Van Der Riet's testimony is important as it looks at the significance of the quality of coal that is supplied to Eskom and its relation to the load shedding incidents the power utility has been experiencing," Hofmeyr submitted.

The commission is also expected to hear evidence relating to how Tegeta dictated the terms it wanted Eskom to adhere to when responding to its offers.

The evidence is expected to corroborate that of Eskom board chairperson Jabu Mabuza, which the commission heard on Friday and Monday.

"R500m in penalties have now been levelled against Tegeta, which has been in business rescue since February 2018," Hofmeyr continued.

 LIVE: #StateCaptureInquiry: Mashigo gives graphic description of coal sampling at Eskom

On Tuesday, Mashigo gave a brief structural outline of what was considered to be acceptable coal.

In 2015, National Treasury started an investigation into Eskom's coal contracts with Tegeta, while another forensic report by Price Waterhouse Coopers (PwC) was later discussed at a meeting of Parliament's Standing Committee on Public Accounts (Scopa).

The PwC report revealed that Tegeta started supplying coal to Eskom before the coal mining group met regulatory requirements.

The coal supply agreement with Tegeta was signed on March 10, 2015 and although Eskom invited competitive bids for coal supply, it only approached Tegeta. 

The initial value of the contract was R3.7bn, but Eskom later intended on expanding it by a further R2.9bn for the Brakfontein operation.

The commission also heard that Tegeta got the tender even though 29 out of 30 coal samples from the Tegeta Brakfontein colliery failed Eskom's analysis tests.

In addition, Mashigo testified that Tegeta did not comply with all the requirements at the time that it started its contract with the power utility.

He told the commission that putting Tegeta under business rescue did not help the situation and led to a dire coal shortage instead.

"They were unable to supply coal as needed by the Majuba Power Station and Eskom had to source coal from other suppliers."

Dormer Glencor CEO Clinton Ephron is expected to take the stand on Wednesday. He is expected to testify about how his company sold the Brakfontein colliery to Tegeta.

Read more on:    eskom  |  johannesburg  |  state capture  |  state capture inquiry
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