De Ruyter: Unscrupulous suppliers are cheating Eskom with bad coal

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Eskom CEO André de Ruyter.
Eskom CEO André de Ruyter.
Alet Pretorius/News24
  • High coal prices have made it more attractive for corrupt suppliers to try to cheat Eskom.
  • South Africa's exports to Europe have surged in response to strong demand.
  • Eskom said it needs more support from law enforcement on fraud and corruption matters.
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Extraordinarily high coal prices have made it extra lucrative for unscrupulous suppliers to swindle Eskom, the utility's CEO has said.

"What we have found is that, particularly now with the arbitrage created between export coal and the coal that Eskom buys, that there is a three times multiple that you can get by effectively stealing Eskom's coal, replacing it with discard coal … and our coal then gets exported to Europe," Eskom CEO André de Ruyter said at the Joburg Indaba on Thursday.

The discard coal is of low quality, measured by a Calorific Value (CV) of between seven and eight, compared to Eskom required coal qualities of between 15 and 18 CV.

"So you can imagine that it doesn't burn so well," De Ruyter said.

South Africa's coal exports to Europe have surged amid an energy crisis exacerbated by Russia's invasion of Ukraine and subsequent sanctions. Although prices are coming down from highs of over $360 a tonne in August,  coal shipped out of Richards Bay still fetched as much as $255 a tonne, compared with $190 a tonne a year ago and a more historically normal coal price of $60 a tonne 24 months ago.

Among the several wrong turns in Eskom's history that have culminated in the current power supply crisis, as highlighted by De Ruyter during a presentation, is the decision to encourage the transport of coal by truck instead of rail.

"This was to break the alleged monopoly of a small number of mining companies and open up the Eskom coal market, which I think was possibly well-intentioned at the time, but it did open up the space for substantial corruption and fraud in the coal value supply chain," De Ruyter said. "So crime and corruption in the coal supply chain really is a massive problem and we are regrettably not getting the necessary support from law enforcement that we would have liked."

Efforts to divert some trucks back to rail have been successful, notably so at the Majuba power station, where work to fix the Majubu rail load-out station has reduced the number of coal trucks per day from a peak of 2 400 to "a couple [of] hundred", De Ruyter said.

De Ruyter said fraud - and corruption more generally - remained a severe challenge to Eskom. "I cannot stress how significant a problem this is. But it is really a huge challenge," he said. "And again, the absence of significant support and intervention from law enforcement and state security perspective is regrettable. I can't run a security agency [on] the sideline, trying to police extended value chains, extended transmission lines and so forth."

 

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