Beneficiaries of Eskom’s multibillion-rand ‘error payment’ named

Kusile Power Station
Kusile Power Station

BUSINESS


Eskom has finally disclosed four of the contracts in which a controversial overpayment totalling R4 billion was made, saying that all contracts were related to work at Kusile Power Station in eMalahleni, Mpumalanga, and that several investigations through law enforcement agencies were ongoing.

In May the power utility declined to name the contractors involved in the mysterious overpayment saga which sparked controversy when chairperson of parliament’s standing committee on appropriations Sfiso Buthelezi said he was unwilling to accept an explanation that the transactions were an “administrative error”.

Read: Parliament orders Eskom back to account

In the top three of beneficiaries is Stefanutti Stocks, the JSE-listed engineering and construction firm in which Eskom chief operating officer Jan Oberholzer holds shares, according to a report sent to Parliament on Monday.

According to the report, the company received an overpayment estimated at R1 billion in transactions involving two separate joint ventures, one with Basil Read and another with Izazi, for work in Kusile.

However, Oberholzer is not implicated in the parliamentary report and in April a legal opinion commissioned by Eskom cleared him of all allegations of corruption, dishonesty, abuse of power and conflict of interest. City Press learnt that the legal opinion was yet to be released to the public.

Read: How Eskom was fleeced: Kusile and Medupi tenders ballooned from R200m to more than R20bn

The Eskom officials implicated in the overpayment are listed as “the project director, project employer’s representative and contracts manager at the time, who were involved with the management of these compensation events”.

According to media reports, Stefanutti Stocks, together with Esor Construction and Tenova Mining and Minerals, is among those accused of paying R75 million to Babinatlou Business Services – a Polokwane-based company’s whose account was allegedly almost exclusively used as an apparent slush fund to illicitly enrich Frans Hlakudi, a former contracts manager for Eskom at Kusile, and Eskom colleagues.

Swiss industrial giant ABB SA, which is linked to an alleged irregular contract awarded by former Eskom executive Matshela Koko, also got an estimated overpayment of R1 billion. The company owned by Koko’s stepdaughter, Impulse International, is also listed as a beneficiary, together with another subcontractor, Leago EPC.

“Numerous employees, including the then project director, employer’s representative and contracts managers are being investigated by the Special Investigating Unit (SIU),” according to a parliamentary report.

However, “no consequences or actions have been meted out as yet as the investigation by the SIU and the Hawks is incomplete. None of the main role players are currently working for Eskom.”

It must be noted that once an Eskom employee resigns, he or she is outside Eskom’s scope and law enforcement agencies therefore need to take over the process.
Eskom

Construction company Tubular Construction Projects – which was involved in the arrest last December of former Eskom head honchos Abram Masango and Hlakudi on charges of fraud, corruption and other alleged offences – is also recorded to having benefited from some R613 million of overpayment.

The amount was paid in two transactions – R450 million and R163 million – but in April Eskom “encashed” the R163 million after successfully defending the advance payment bond. A further estimated excess payment of R400 million in the same contract went to General Electric, bringing the total estimated overpayment in the deal to more than R1 billion.

“The project director and project employer’s representative were involved with the negotiations and approval of this modification at that time,” said an Eskom report, which noted that “the Eskom staff involved with this investigation have resigned from Eskom”.

“The SIU referred evidence to support charges against the relevant role players to the National Prosecution Authority (NPA), resulting in the arrest of four individuals, including two former Eskom officials. The SIU is considering the institution of civil proceedings and has requested the appointment of experts to assist in the quantification of losses incurred by Eskom”.

Tenova Mining and Minerals is also estimated to owe Eskom up to R735 million in overpayments, while various unnamed site contractors account for up to R180 million of the balance.

Those involved in the Tenova deal were reported as “the project director, the project’s employer representative and the project senior contracts manager, who at the time were involved with the settlement and negotiations”.

Two of the contracts managers resigned with immediate effect in the face of disciplinary action, when the investigations were initiated.

“The other two Eskom officials involved resigned prior to the investigation. The SIU has referred evidence supporting the institution of criminal charges against the relevant role players – seven in total – to the NPA.”

Parliament heard that the SIU was considering the institution of civil action against the relevant role players to recover losses incurred by the power utility.

“Eskom has initiated the re-evaluation of the previously approved extension of time with forensic planning experts to ascertain actual entitlement. The findings in this regard will inform the SIU’s civil proceedings,” it said.

On the R180 million general claim, Eskom said there were numerous other service, corporate social investment and panel contracts which had been red-flagged in multiple audits and reviews done on the project. Eskom said that although these findings did not fall within the ambit of overpayment, they had been referred to Eskom assurance and forensic, Eskom legal and possibly the SIU for further investigation.

“The project experienced problems in extending contracts to conclude the forensic, delay and quantum investigations. These problems are now mostly resolved and progress is evident.”

Eskom has initiated the re-evaluation of the previously approved extension of time with forensic planning experts to ascertain actual entitlement. The findings in this regard will inform the SIU’s civil proceedings.
SIU

For the purpose of clarity, Eskom said: “It must be noted that once an Eskom employee resigns, he or she is outside Eskom’s scope and law enforcement agencies therefore need to take over the process.”

The power utility said it supported the law enforcement agencies to pursue civil claims against former employees involved in all the contracts mentioned above.

In May, Parliament’s standing committee on appropriations demanded an explanation from Eskom over the overpayment, which the committee had last year been told was an administrative error and that negotiations were under way to recoup the money, according to Buthelezi. The information was revealed in a verbal discussion with Oberholzer.

However, Buthelezi had mistakenly stated that the figure was R5 billion and during a subsequent meeting the committee secretary confirmed in the records of the on-site visit last October at Megawatt Park in Johannesburg that the correct figure was R4 billion and the services related to work at Kusile.

The committee also requested that the report must include the circumstances which led to the overpayment, the officials involved, the names of the contractors and the nature of contracts, as well as the consequences of these actions.

According to the committee’s own report dated October 29 2019, Oberholzer said he believed “that there were contractor overpayments at Kusile specifically”.

On June 5, the office of Public Protector Busisiwe Mkhwebane received a formal complaint that Eskom had, “in error”, made an overpayment of R4 billion or R5 billion to an undisclosed contractor or number of contractors.


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Setumo Stone 

Political Journalist

+27 11 713 9001
Setumo.Stone@citypress.co.za
www.citypress.co.za
69 Kingsway Rd, Auckland Park
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