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Sole purpose of Eskom contract was to fund Tegeta – Public Protector

Former Public Protector Thuli Madonsela

Former Public Protector Thuli Madonsela

Photo by Duane Daws

3rd November 2016

By: Martin Creamer

Creamer Media Editor

  

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JOHANNESBURG (miningweekly.com) – In light of the extensive financial analysis conducted, it appears that the sole purpose of awarding contracts to Tegeta to supply Arnot power station was to fund Tegeta and enable it to purchase all shares in Optimum Coal Holdings (OCH).

The only entity which appears to have benefited from Eskom’s decisions with regards to Optimum Coal Mine (OCM) and OCH is Tegeta, which appears to have been enabled to purchase all shares held in OCH.

The favourable payment terms given to Tegeta by Eskom – seven days – need to be examined further.

OCM clearly had 30-day payment terms for the supply of coal to Arnot power station, and Eskom appears to have been aware of this.

It also appears that Tegeta did not meet all its obligations to OCM, as OCM was owed R148 027 783 by Tegeta as at July 31, 2016 and an amount of R289 842 376 as at August 31, 2016.

This may amount to a contravention of sections 38 and 51 of the Public Finance Management Act (PFMA), which states that a board needs to prevent fruitless and wasteful expenditure, which, in turn, is an act of financial misconduct under Section 83(1)(a) of the PFMA and subject to the penalties under Section 86(2) of the PFMA.

It appears that the Eskom board did not exercise a duty of care, which may constitute a violation of Section 50 of the PFMA.

These and many other allegations are part of the 'State of Capture' report by former Public Protector Thuli Madonsela on alleged improper and unethical conduct by President Jacob Zuma and his relationship with the Gupta family.

The report states that Eskom's prepayment to Tegeta of R659 558 079 may not be in line with the PFMA, as evidenced in the business rescue practitioners (BRPs) Section 34 report, in which it was stated that the prepayment was not used to fund OCM, and where it was further emphasised in the financial analysis that the prepayment was used entirely for the purposes of funding the purchase of all shares in OCH.

On April 11, 2016, Tegeta informed the BRPs and Glencore, which, in turn, informed the loan consortium, that they were R600-million short, and on the very same day, Eskom held an urgent board tender committee meeting at 21:00 in the evening to approve the prepayment of R659 558 079.

It is in on this count that the Public Protector’s report states that the Eskom board does not appear to have exercised a duty of care, possibly constituting a violation of Section 50 of the PFMA.

Furthermore, the shareholders of Tegeta – Oakbay, Mabengela, Fidelity, Accurate and Elgasolve – pledged their shares to Eskom in respect of the prepayment and thus knew of the nature of the transaction.

It appears that the manner in which the rehabilitation funds are currently being handled with the Bank of Baroda are in contravention of Section 24P of National Environmental Management Act, as well as Section 7 of the financial regulations, which provide that the financial provision must be equal to the sum of the actual costs of implementing the plans and report contemplated in regulation 6 and regulation 11 (1) for a period of at least ten years forthwith. This cannot be guaranteed by the Bank of Baroda or Tegeta as the funds are consistently moved around between accounts as well as other branches.

If found to be contravening Section 7 of the financial regulations, which is an offence under Section 18 of the financial regulations, Tegeta is, in turn, liable to a fine not exceeding R10-million or the relevant officials face imprisonment not exceeding ten years, or both could apply.

Edited by Creamer Media Reporter

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