PricewaterhouseCoopers found that Eskom’s coal contract with Tegeta was hastily and poorly drafted and quality requirements were treated in a cursory manner, National Treasury told MPs on Tuesday.
Solly Tshitangano, a deputy director general and acting chief procurement officer, said the auditing firm also found that safety and environmental checks were only performed at Tegeta’s coal operations after the company, which is owned by the Gupta family and President Jacob Zuma’s son Duduzane, had secured its contract with Eskom.
The same applied for two of three burn tests that were performed as part of the technical evaluation, according to PwC, which also noted that there may have been an attempt to backdate an environmental and legal report.
And it was discovered during the course of PwC’s investigation that Eskom and Tegeta held three rounds of negotiations before the latter met pre-qualification requirements. The meetings began in May 2014 and Tegeta was only issued with a water licence for its Brakfontein colliery in December that year.
The contract was signed in 2015. Tshitangano pointed out PwC commented that it appeared to have been “copied and paste” from other contracts and that there was no evidence that the evaluation team fulfilled Eskom’s own supply chain management rules.
The findings were made during a study Eskom commissioned from PwC after concerns arose the quality of coal supplied to the parastatal.
The company found that quality specifications were amended but that the changes may have been unenforceable as the both parties needed to agree to the amendment and there was no indication that this was indeed done.
Tshitangano said National Treasury was in the process of completing its own probe into the contract, and had received input from Eskom late last month.
The office of the chief procurement officer was investigating the deal as part of a review of all contracts with a value of more than R10 million entered into by parastatals.
Eskom’s contract with Tegeta was signed for R3.7 billion over a period of ten years and Tshitangano confirmed that the parties had sought to increase this by R2.9 billion.
He confirmed reports that National Treasury intervened at one point when Eskom wanted to extend its contract with Tegeta without going to tender.
“We said no, you can have a closed bid,” he said, adding that in the process Eskom was saved a considerable amount of money because the bidding process forced Tegeta to drop its asking price.
“They were asking R19 per gigajoule,” he said, confirming reports that Tegeta had sought that particular sum, one of the highest prices Eskom pays coal suppliers.
Eskom’s dealings with Tegeta were a major focus of former Public Protector Thuli Madonsela’s report on allegations of state capture released late last year and resulted in then CEO Brian Molefe resigning under a cloud. Madonsela said there were indications that Eskom bent over backwards to favour Tegeta over competitors and advanced it money so that it could buy the Optimum coal mine.
Members of Scopa concluded that Eskom needed to be called before the committee to respond to the findings in the PwC report.
“Scopa is concerned that the constitutional provision of fair, competitive and transparent procurement was not followed. The Committee will also write to the Department of Water and Sanitation to find out how Tegeta’s water-use licence was handled,” the chairman of the committee, Themba Godi, said.
– African News Agency (ANA)
