How the Eskom board managed to permit the state utility to pay the Guptas R2.1bn so they might purchase the Optimum Coal Mine, was the central focus of just about two days of proof on the State Seize fee as three board members and a gasoline provide supervisor have been grilled on Tuesday and Wednesday.
Deputy Chief Justice Raymond Zondo expressed disappointment a number of instances on the Eskom board members’ lack of diligence in doing their job and so permitting billions to be bled from the already ailing Eskom.
Every board member had their flip to be lambasted by Justice Zondo — very similar to the parliamentarians who got here earlier than him in earlier days — for not asking knowledgeable and probing questions of the chief and performing the oversight position they have been assigned to do. Specifically, Zondo struggled to consider they didn’t discover they have been handing billions of rands to the “proposed homeowners” of a coal mine reasonably than to the mine’s precise homeowners.
Proof chief Pule Seleka SC took former board members Professor Pathmanathan Naidoo, Venete Klein and Ms Viroshini Naidoo to a selected day, eight December 2015, when the board authorised Eskom executives to conclude a R1.68-billion pre-purchase deal for coal from Optimum coal mine, in addition to an April 2016 prepayment deal for an additional R659-million value of coal from the mine.
It was these prepayment offers that financed Tegeta’s buy of the mine from Glencore’s subsidiary, Optimum Coal Holdings.
Tegeta’s majority shareholder, in line with evidence placed before Parliament in 2017, was the Gupta household’s Oakbay Investments, together with Duduzane Zuma’s firm Mabengela.
Testimony by Pathmanathan Naidoo, who took the stand first, set the stage for a way a disaster appeared to have been engineered by new Eskom CEO Brian Molefe, which created fertile floor for Tegeta buying the mine.
Led by Seleka, Professor Naidoo informed how a long-term contract — about 50 years — had existed between the mine, which provided the Hendrina energy station on a cost-plus foundation, and Eskom. Hendrina was constructed to generate electrical energy from low-grade coal, basically provided at value by the mine, which then made its earnings from promoting higher-grade coal on the export market.
However within the 2014-2015 interval, export costs had dropped and the mine, owned by Optimum Coal Holdings (OCH) was dropping cash and sought to invoke a hardship clause in its Eskom contract, requesting a worth enhance from R150 per ton to R422 per ton. This request got here earlier than the board’s Bid and Tender Committee — of which he was chair — on 23 April 2015, the identical day Brian Molefe had been seconded as Group Chief Govt by then Public Enterprises Minister Lynne Brown after a series of very suspicious events.
Nevertheless, Prof Naidoo stated the Bid and Tender Committee (BTC) referred the matter to the board, and the board referred the matter to Molefe to acquire extra data and report again, as they believed it was an operational matter. The problem of his reporting again, which didn’t happen, was a degree Zondo pursued with every board member, asking them why they didn’t observe up. The solutions, to Zondo’s frustration and close to disbelief at instances, have been largely that they thought of the matter to have been handled.
The one report they acquired was a short observe within the Chief Govt’s report contained within the studying pack at a September 2015 board assembly, stating the Optimum contract had been terminated.
The board members stated that earlier than that they didn’t know Molefe had terminated Optimum’s coal contract in July 2015 and, in line with proof earlier than Parliament, levied a R2.1-billion positive in opposition to Optimum for historic coal deliveries beneath specification. This was a positive Eskom inexplicably forgave when Tegeta later supplied to buy the mine.
By four August 2015, Optimum was in enterprise rescue.
The following transfer was the R1.68-billion pre-purchase settlement despatched to the board on eight December 2015.
Klein stated the pressing submission to the board to authorise a request for the pre-purchase settlement acknowledged it was for Optimum Coal Holdings so it might liquidate its debt and proceed to make sure coal provide to the facility station, which was of paramount significance to stop load shedding.
She stated the executives informed the board the deal wanted to be signed inside 24 hours and a round-robin convention was known as — whereby board members make or oppose suggestions with out the choice of discussing them as would occur in a correctly constituted assembly — and the go-ahead was given.
Going by means of the advice made, Seleka drew every board member’s consideration in flip to the wording, which acknowledged the cash could be paid to not Glencore because the homeowners of the mine, and even to Optimum Coal Holdings, however to the proposed proprietor of Optimum coal mine, which opened the door for the fee to go to Tegeta which was by that stage-managing the mine after having negotiated a purchase order settlement with the enterprise rescue practitioners. The very subsequent day, Eskom administration issued a R1.68-billion assure, to not Glencore or Optimum Coal Holdings, however to Tegeta.
It was the dearth of consideration to element by all 12 board members which astounded the often reserved Justice Zondo.
“I don’t perceive how it’s potential to know that so many individuals on the board didn’t decide this up,” stated Zondo, including that the wording containing the phrase “proposed proprietor” was contained within the decision, which was an important a part of the authorising doc.
Though every of the board members pleaded that they have been to some extent hoodwinked, that the urgency of the choice had been impressed upon them, that they have been conscious Optimum was below enterprise rescue, that the heading of the doc referred to pre-payment to Optimum, not Tegeta, and that they firmly believed they have been authorising fee to the Glencore firm, Zondo returned to the purpose time and again, remaining unhappy with the witnesses’ protestations.
Rubbing salt into the wound, a submission for a pre-purchase of coal from the mine was put earlier than the board once more, on Monday 11 April 2016, for an quantity of R659-million. This was the quantity Tegeta wanted to finalise the acquisition of the mine, and was once more dropped at the board as a matter of utmost urgency leading to a teleconference assembly at 9pm.
Seleka identified that parallel to this, Tegeta had unsuccessfully tried to borrow the quantity from the banks, with Gupta right-hand-man Salim Essa having acquired an e-mail turning down the mortgage software late that afternoon of 11 April 2016. But, the submission had been ready over the weekend by Eskom appearing senior supervisor for gasoline sources, Dr Ayanda Nteta, who gave proof earlier than the fee to this impact on Tuesday.
Moreover, a daily board assembly had been scheduled for 13 April 2016, simply two days later, but Zondo famous not one of the board members questioned the urgency and why the matter couldn’t look ahead to the scheduled assembly. As a substitute, they authorised the fee.
Apparently, Klein and Ms Naidoo each talked about that the board had been beforehand rapped over the knuckles and warned to not cross the road and get too concerned in Eskom’s operational affairs. This appears to have had the impact of subduing their oversight of the chief.
There was no proof to recommend any of the three board members positioned within the sizzling seat on Tuesday deliberately colluded with the Guptas to let Eskom finance their buy of the mine, but it was evident that on the very least, their lack of rigour and a spotlight to element had allowed all of them to be performed.
The fee continues on Wednesday, with additional Eskom-related proof from former board member Mark Pamensky. DM