PwC report umbrellas Zupta-owned Tegeta, Eskom over R10bn supply contracts

pwcAs much as those implicated in ‘shady deals’ may try to keep Pandora’s box closed, the truth will eventually come out. And that seems to be the case with Eskom’s coal supply deal with the Gupta and Zuma-owned Tegeta Exploration and Resources. And it’s no surprise the parties are fighting the claims tooth and nail given the total value is in excess of R10 billion. The box was jarred last year when former Public Protector Thuli Madonsela broke the shackles with the State of Capture Report. Spurring certain sectors of government into action. None more so than National Treasury, which is investigating more of Eskom’s supply deals. The latest PwC report pokes further holes into the Tegeta one. – Stuart Lowman

By Liesl Peyper

Cape Town – Eskom’s contract with Tegeta Exploration and Resources for the supply of coal contained discrepancies, was poorly drafted and was in contravention of supply chain management procedures, according to a draft report done by PriceWaterhouseCoopers (PwC).

The mining company is owned by the Gupta family and President Jacob Zuma’s son Duduzane and was the focus of former Public Protector Thuli Madonsela’s State of Capture report in 2016.

More of Zapiro’s magic available at

National Treasury’s Procurement Office presented the draft report to Parliament’s standing committee on public accounts (Scopa) on Wednesday. The report also contains Eskom’s comments on the findings.

PwC’s findings include that:

  • The contract with Tegeta appears to have been put together hastily. (Eskom replied that it was in the process of developing revised standard conditions of the contract, which could be the reason for inconsistencies.)
  • There were discrepancies in the dates of the environment and legal report, indicating that the reports could have been backdated, as the “number 4 was written over the 5 on the year 2015”. (Eskom said all reports had been signed in 2014).
  • The contract was poorly formulated, contained irrelevant information and had ambiguities. (Eskom responded that the contract was compiled with input from its corporate legal team.)
  • The Coal Management Procedure required in the contract is in draft format, incomplete and not yet agreed upon, or implemented. (Eskom said the Coal Management Procedure was not signed, as the mine did not have an automatic sampler as required.)
  • The report said it could not find evidence of compliance to financial evaluation. (Eskom said a comprehensive financial discussion took place, including financial models.)

Eskom flouted own policy – PwC

In the report PwC also noted that Eskom’s procurement policy prohibits the single adjudication of contracts. Despite this, Eskom continued signing contracts in excess of R3bn. There was no evidence that tender committees were consulted in the contract with Tegeta.

PwC recommended that a technical and legal review of the contract with Tegeta is urgently required “to inform Eskom’s actions relating to the further implementation and management of the relationship with the supplier”.

National Treasury has been at loggerheads with Eskom over the Tegeta deal ever since it started investigating contracts worth over R10m with the power utility.

In an article by amaBhungane, it was revealed that Eskom last year signed three deals to extend coal contracts totalling R10.7bn. The power utility allegedly did not follow correct procurement procedures.

One of the contracts, amounting R7bn, would see Tegeta supplying coal to Komati power station. Komati is one of five power stations which have been identified for closure, which raised questions about how Eskom would cover the cost of the contract.

In April, a leaked draft report by Treasury revealed irregularities in the coal contract between Eskom and Tegeta. BusinessLive reported that Treasury wants the R659m prepayment to Tegeta to be converted to a loan with interest.

At the time, Eskom spokesperson Khulu Phasiwe told Fin24 that the report has not been finalised, and anything being said about it is speculation. – Fin24


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