Eskom’s controversial R500 million security contract raises eyebrows: Allegations of mismanagement and overspending

Under the leadership of then-CEO André de Ruyter, Eskom awarded a controversial R500 million, three-month security contract to Fidelity Services Group, as reported by City Press. The contract, initiated by Eskom’s acting head of security, Karen Pillay, bypassed NSA Global, who had initially been approached for an emergency security solution. Documents suggest that the contract with Fidelity may have been significantly more expensive than alternatives. Pillay’s involvement has led to her suspension, and while Eskom and National Treasury deny any wrongdoing, questions about mismanagement and potential overspending loom over the deal.

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Eskom’s R500 million security contract could have cost R30 million — report

By Myles Illidge

Under then-CEO André de Ruyter, Eskom executives awarded the Fidelity Services Group a R500 million three-month security contract that could have cost R10 million a month, reports City Press.

According to the report, the power utility’s acting head of security, Karen Pillay, had approached NSA Global to develop an emergency security contract, which was then channelled to Fidelity.

Although Eskom said it only spent R250 million during the three-month contract with Fidelity, a similar model from NSA Global would have cost it only R30 million over the same period.

Read more: Eskom’s secret security deal: Fidelity Group paid R500 million for three-month contract

Eskom and NSA Global officials confirmed the existence of emails between them, in which NSA Global said it had been “blindsided” by Pillay’s decision to give the contract to Fidelity without its knowledge.

In December 2021, Pillay approached NSA Global and several other companies for a security solution to protect Eskom’s infrastructure from sabotage and social unrest.

An NSA Global official stated that Pillay asked the company to pitch a scaled-up model to Eskom, which it did.

“Hours were spent doing so. Our company’s intellectual property was [then] taken and given to Fidelity,” said the official.

He added that NSA Global was told the agreement with Fidelity was established outside of Pillay’s authority.

André de Ruyter, former Eskom CEO

In May 2023, it was alleged that Eskom had paid the Fidelity Services Group R500 million over three months to provide security and collect intelligence at its power stations.

The security company’s services were reportedly procured by De Ruyter and Pillay and concluded in October 2022.

Eskom spokesperson Daphne Mokwena confirmed that Eskom followed its emergency procurement procedure to appoint Fidelity.

Read more: How the world sees SA: Eskom’s “slow motion car crash” gets a global spotlight

According to the agreement, the service provider was to supply the state-owned power utility with 400 armed guards; aerial surveillance, response services, and support; and armoured surveillance and response vehicles.

Pillay said Fidelity was paid for its services without the knowledge of state security entities because Eskom did not trust South Africa’s law enforcement agencies.

She said threats to Eskom’s infrastructure also present a threat to national security. With law enforcement unable to mobilise at short notice, it was critical for Eskom to deploy additional security measures.

Karen Pillay, acting head of security at Eskom

Eskom also requested that it provide specialised security guards and technology deployment for intelligence-led protection of Eskom assets and infrastructure.

In June 2022, Eskom revealed that it had spent only half of the budgeted amount.

“A total of approximately R250 million, including VAT, was spent for the duration of the contract,” it said.

Eskom placed Pillay on precautionary suspension following allegations of her involvement in the security tender.

The power utility told MyBroadband that Pillay was suspended to allow space for the investigation into the allegations against her to go ahead unhindered.

It did not specify which allegations were being probed.

Read more: Eskom’s ludicrous expenditure: R238,000 for a mop – de Ruyter

“No further comments will be provided on this matter until the investigation is finalised,” it added.

Eskom has denied that there was anything untoward regarding its security contract with Fidelity Services.

National Treasury also told The Association of Private Security Owners of South Africa (Tapsosa) there was nothing wrong with the contract.

Tapsosa said it escalated the matter to Treasury after being met with silence after writing to De Ruyter and then-Eskom COO Jan Oberholzer.

According to Tapsosa, Treasury said the Public Finances Management Act outlines cases in which normal procurement processes can be ignored.

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This article was first published by My Broadband and is republished with permission