Suppliers have run roughshod over Eskom's finances, SCOPA hears


Eskom's board told a Parliamentary committee that it will tighten up spending on operations, procurement and its new build programme, as government seeks solutions to assist the parastatal with its crippling financial woes.

The board was briefing Parliament’s Standing Committee on Public Accounts on Wednesday evening. 

The meeting comes as government continues discussions with labour and business groupings under the National Economic Development and Labour Council on possible funding mechanisms to reduce Eskom's debt burden of R454 billion.

The power producer does not make enough money from selling electricity at current prices and volumes to pay the cost of interest on its debt without state aid.

Eskom chair, Malegapuru Makgoba, told SCOPA on Wednesday evening that the utility was aware that financial assistance would bring no sustainable solutions if Eskom does not fix its systems internally.

"Everybody is worried about the bills and the debt of Eskom. I am not a banker or an investor. But I know that nobody wants to invest in a mess. Nationals are not made of money but idea. I think together we have an idea and a plan, because no investor will say 'they are a mess' and still invest with us," said Makgoba.

Eskom chief operating officer. Jan Oberholzer, told the committee that the utility's new build program was progressing, with five of six units at Medupi power station in operation. The last unit is set to become operational by the end of 2020.

Regarding Kusile, he said: "Six units in Kusile. One unit is in operation. Two and three have been synchronised to the grid successfully. Five and six had an induced fan problem that delayed things and will only be in operation by 2023. Two and three will be in operation this year."

Eskom technician, Solly Mathebula, added the utility was working to improve its procurement system. The power producer will specifically aim to improve how modifications and revisions to contracts are dealt with. 

Mathebula gave the following example.

"A supplier will be given a number of projects. When the supplier is failing, we will do scoping, which is transferring the work to another supplier without competition. One supplier got a R100m, five-year contract in 2006.

"It became apparent that we had to modify the contract and it was modified by R1.3bn to make it R1.4bn. After the modification was done, they continued modifying the contract repeatedly until a R350m modification was done in 2017 after National Treasury introduced measure to curb such revisions."

Mathebula said this and many other cases were under investigation. Companies continue to approach the utility seeking modifications to contracts and extensions to the duration of contracts, he added. 

SCOPA member and ANC MP, Bheki Hadebe, criticised the message that companies continued to seek unjust and possibly unlawful modifications to their contracts, saying Eskom was enabling looting.

"This is looting of the highest order. There are standard practices for procurement. Don't you know that if you variate from a contract you cannot do so at more than 20% of the value of the original contact? This just give a picture of unbridled looting!" said Hadebe.

SCOPA is due to hold another meeting with the Eskom board on March 18 regarding its R454 billion in debt.

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