[dropcap]E[/dropcap]skom CFO Anoj Singh on Wednesday promised to submit what he called a “tell-all” report about two trips he allegedly undertook to Dubai that were allegedly paid for by the controversial Gupta family.
Journalists grilled Singh together with interim chairman Zethembe Khoza and interim CEO Johnny Dladla about various governance issues amounting to billions of rand at the presentation of Eskom’s integrated results at its Sandton head office.
This overshadowed the improved operational performance with plant availability up from 71% to 77% and a 14% improvement in earnings before interest, tax, depreciation and amortisation.
Net profit, however, dropped by 82%, from R5bn in the previous financial year, to R1bn — largely as a result of an 82% increase in finance cost to R14bn.
Khoza defended Eskom’s failure to suspend Singh while investigating allegations against him. He said the board found nothing that warranted Singh’s suspension. Singh was not central to the R577m settlement reached with Gupta-owned company Tegeta with regard to a R2.1bn penalty for supplying substandard coal from the Optimum mine, he said.
The penalty was awarded before Glencore sold the mine to Tegeta in a controversial deal that was concluded early last year. Eskom earlier vowed to pursue the penalty irrespective of who owned the mine.
Former public protector Thuli Madonsela found indications that Eskom might have unlawfully squeezed Optimum to sell and assisted Tegeta through a hastily arranged coal prepayment to buy the mine. It was one of the matters she found should be further investigated by a commission of inquiry.
R1.6bn guarantee
At the briefing on Wednesday, Singh admitted that he signed a R1.6bn guarantee to Absa for Tegeta to buy Optimum. Khoza, who has been on the Eskom board and chaired the tender committee at the time, told journalists that this was the first word he heard of such a guarantee. Singh said the guarantee was never used and later cancelled, but did not give any further explanation.
Singh explained that the Optimum penalty was settled after an arbitration process was initiated as provided for in the contract. He said Eskom had investigated the coal quality issue and found that about R700m of the R2.1bn penalty could not be substantiated due to a “false positive” related to a new crusher. Based on a legal opinion, Eskom decided to settle the balance of the claim for R577m.
Dladla admitted that Eskom paid international consultancy McKinsey R900m and Gupta-linked company Trillian R500m. According to recent media reports, Trillian was paid without delivering any substantial value. It allegedly inserted itself in the McKinsey contract and was paid directly by Eskom following a letter from McKinsey to Eskom. Dladla said Eskom had no contract with Trillian, but that Trillian was in fact a subcontractor to McKinsey. He said he is still trying to get to the bottom of the matter.
In a statement issued on Wednesday afternoon, McKinsey, however, denied having subcontracted Trillian or having been suspended from doing any work at Eskom as Dladla said. A McKinsey spokesman said the group and Eskom “mutually agreed” to suspend its work at Eskom “as both parties are undertaking their own investigations into this matter. We have agreed to cooperate with Eskom’s investigation.
“All payments made to Trillian were paid directly by Eskom and presumably governed by Eskom’s rules and processes for approval of third-party payments. As we have previously stated, and based on our investigation to date, McKinsey has never had a subcontract with Trillian either for the work on the corporate plan or the turnaround programme.”
Letter
McKinsey said the letter was written by one of its partners. It “was inaccurate and should not have been written as such. Our investigation, supported by Norton Rose Fulbright, is reviewing how and why the letter was written. We have notified Eskom that the letter inaccurately characterised Trillian as a subcontractor of McKinsey.”
Khoza announced that the investigation into former acting CEO Matshela Koko has been completed. Koko is facing a disciplinary hearing for awarding a contract worth more than R1bn to a company linked to his stepdaughter. He will face charges relating to a conflict of interest and dereliction of his fiduciary duty, Khoza said.
Eskom received a qualified audit opinion due to irregular expenditure of almost R3bn. The auditors reported the matter related to Koko as well as the controversial R30m pension payment to former CEO Brian Molefe to the Independent Regulatory Board for Auditors. Molefe’s matter is currently the subject of court cases.
- This article was originally published on Moneyweb and is used here with permission
