SA National Treasury's vs Eskom: Both sides of the story

PUBLISHED: Mon, 29 Aug 2016 12:16:31 GMT

The National Treasury is surprised by media reports of Tegeta “warning” and threatening to interdict the department should it release a report into its investigation of Eskom’s coal contracts.

National Treasury has also noted with concern the statement issued by Eskom on Sunday 28 August 2016, see below, suggesting that it has been co-operating with the process of reviews of the coal contracts. The National Treasury would like to categorically state that, its efforts have met resistance.

Eskom Media Statement: Eskom continues to co-operate with the National Treasury on its coal contract probes

Sunday, 28 August 2016: Eskom continues to co-operate with the National Treasury on its investigations of the coal contracts. Contrary to the allegations made by theSunday Timestoday, the National Treasury has not issued any conclusive findings against Eskom on any of these contracts.

Through our normal interactions with the National Treasury, Eskom has repeatedly provided information to the National Treasury and where additional time is required has informed the National Treasury that some of the additional information that it had requested would only be supplied after Board approval. 

Meanwhile, the latest correspondence Eskom received from the Treasury was on 17 August 2016, in which the latter supported the extension of the coal supply contract for the Komati Power Station. In approving the extension, the National Treasury stated that the reason provided for the extension is that there is a need for continuous supply of coal to Komati as well as the utilisation of the stockyard at Koornfontein premises to supplement the coal stockyard at Komati. “The National Treasury supports the extension of this contract.”

The Koornfontein Mine is owned by Tegeta Resources & Exploration.

Eskom disputes that it has received out of specification coal worth more than R134-million from Tegeta, and we have provided the documentation to that effect to the National Treasury.

In addition, the Department of Water and Sanitation issued Tegeta with a water use licence on 22 December 2014 (copy attached). The spurious allegations by theSunday Times, which have are being continuously regurgitated, are therefore wholly incorrect, mischievous and misleading.

Since April, the National Treasury has made several attempts to get information from Eskom including:

 Sending a report to the Eskom Chief Executive Officer, Mr. Brian Molefe and the Chairperson of the Board Mr Ben Ngubane and a request for comment on it.

 Granting an extension that Eskom requested to provide the comments.

 A request for Eskom to submit a system generated list of payments made to Tegeta and invoices received from Tegeta for the period 1 September 2015 to 30 April 2016.

 A letter by National Treasury Director General Mr Lungisa Fuzile, requesting that Eskom withdraw its statement suggesting that “all the Tegeta coal contracts with Eskom have been extensively audited by various agencies, including National Treasury,” whilst clearly that was not the case.

Furthermore, Minister Pravin Gordhan escalated the matter to the Eskom Board Chair Mr Ngubane, raising concerns about advance payments made to Tegeta and failure to submit the information requested in relation to the matter.

To date, not only has Eskom failed to honour its undertaking to submit comments to Treasury’s report but it chosen to ignore correspondence and put all forms of hindrances.

It needs to be noted that, Section 217 (1) of the Constitution stipulates that for any goods or services contracted, public entities are required to use a system that is fair, equitable, transparent, competitive and cost effective. In addition, in line with section 54(1) of the Public Finance Management Act, the accounting authority for a public entity must submit to the relevant treasury or the Auditor-General such information, returns, documents, explanations and motivations as may be prescribed or as the relevant treasury or the Auditor-General may require.

Subsequent to Treasury’s statement Eskom released the following:

Eskom stands by its statement that it is cooperating with the National Treasury investigation

Monday, 29 August 2016:Eskom is shocked and perplexed that the National Treasury has chosen to issue a statement that it has issued on the Tegeta contracts as they relate to Eskom.

National Treasury started an investigation into Eskom contracts with Tegeta in July 2015. Eskom wants to reiterate that it has been cooperating with National Treasury. Since then, as outlined below, Eskom has been responding to National Treasury requests.

The first request for information from National Treasury to Eskom was received on 31 July 2015. A response was sent to them and they came back with their first draft report requesting further information on 15 September 2015. We responded to that request and they came back with a second draft report asking for more information on 21 October 2015. Eskom responded on 11 November 2015 with the required information including all invoices and payments made to Tegeta as an annexure to the response. The third request was received on 12 April 2016. Eskom was asked to comment on a 172-page document. This request came with a specific instruction from National Treasury to provide comments after they had been considered by the Eskom Board. The deadline given was 30 April 2016.

This was an unreasonable request. Consequently, Eskom requested an extension to provide the information, which was granted by National Treasury. We therefore think it is neither unreasonable that our Board will have considered responses to the 172-page document by end of September 2016 nor a reason for National Treasury to label Eskom as uncooperative. Furthermore, in a letter from Mr Molefe to Mr Brown dated 24 June 2016 Mr Molefe informed National Treasury of Eskom’s intention to submit the required information after it has been reviewed by the Eskom Board, as per National Treasury instruction of 12 April 2016. 

Eskom has compiled a response to National Treasury’s report dated 12 April 2016 and the responses are due to be tabled for consideration by the Eskom Board as per National Treasury’s instruction during September 2016. These responses have already been tabled and reviewed by the procurement subcommittee of the Board on 16 August 2016.

The only letter that Eskom is aware of in which the Minister of Finance refers to prepayments to Tegeta was dated 17 August 2016 (attached). Eskom is in the process of compiling a response in this regard in line with our media statements already issued on this topic.

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