National Treasury fires salvo at Eskom heavyweights as Gupta coal scandal escalates. STORY UPDATED

The battle between South Africa’s Minister of Finance Pravin Gordhan and National Treasury officials on one hand and the Gupta family – close associates of President Jacob Zuma – intensified as the National Treasury took aim at Eskom bosses. The National Treasury says Eskom CEO Brian Molefe and its chairman Ben Ngubane have obstructed its investigation into payments to Tegeta, a company part-owned by the Gupta family. Eskom reportedly paid Tegeta about R130m for coal it couldn’t even use. And, in an unusual move, Eskom paid Tegeta in advance for the coal. Tegeta, meanwhile, threatened a court interdict to prevent the National Treasury from releasing a report into the matter. The gloves are coming off, it seems, with the National Treasury taking the step to highlight that Eskom’s leaders are not cooperating with its investigators. Gordhan’s name has been brought into the mix. He has made contact directly with Ngubane, looking for some answers, says National Treasury. In another twist to this saga, Eskom’s Molefe has been identified as a possible replacement for Gordhan as finance minister. Gordhan has been thrust into the centre of an investigation by a controversial squad, the Hawks, in what appears to be a move to push him to the political sidelines. There are fears Zuma is planning to switch Gordhan as finance minister, with currency volatility expected if this happens. Gordhan has been very vocal in his commitment to ensuring that state funds are used as they should be – in the national interest. Gordhan said, shortly after his re-appointment as finance minister: “It’s time that individuals stop playing with SOEs [state owned enterprises] as if it’s a personal toy when you want to extract money when you feel like it.” Read the full National Treasury statement on Tegeta, and Eskom’s response, below. – Jackie Cameron

By Paul Burkhardt

South Africa’s National Treasury said Eskom Holdings SOC Ltd., the national power utility, wrongly stated that coal supply contracts between itself and Tegeta Exploration & Resources Ltd. had been audited by the finance ministry and has ignored queries regarding the company.

Tegeta is part owned by the Gupta family, who are friends with President Jacob Zuma and in business with his son. Treasury is reviewing Eskom’s coal contracts.

An Eskom sign stands outside the headquarters for Eskom Holdings SOC Ltd., South Africa’s state-owned electricity utility at Megawatt Park in Sandton, near Johannesburg, South Africa, on Wednesday, Nov. 11, 2015. A plan to reform state-owned power company Eskom Holdings SOC Ltd. and bring South Africa and its economy out of the dark is starting to show results, according to Chief Executive Officer Brian Molefe. Photographer: Waldo Swiegers/Bloomberg
An Eskom sign stands outside the headquarters for Eskom Holdings SOC Ltd., South Africa’s state-owned electricity utility at Megawatt Park in Sandton, near Johannesburg, South Africa. Photographer: Waldo Swiegers/Bloomberg

“To date not only has Eskom failed to honor its undertaking to submit comments to Treasury’s report but it has chosen to ignore correspondence and put all form of hindrances,” Treasury said in a statement distributed by Twitter. “It is Treasury’s view that a company or entity that is doing business with government and has nothing to hide should be transparent and should welcome reviews of its dealings with the state.”

Source: Bloomberg

National Treasury statement: Tegeta

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 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.

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.

Read also: Development State in full cry – Eskom to demand “assets” from coal miners

The chapter 13 of the Constitution further mandates the National Treasury to ensure transparency, accountability and sound financial controls in the management of public finances. In line with section 6 of the Public Finance Management Act, the treasury is empowered to prescribe uniform treasury norms and standards and monitor the implementation of the Act, including any prescribed norms and standards.

It is Treasury’s view that a company or entity that is doing business with government and has nothing to hide should be transparent and welcome reviews of its dealings with the state. Members of the public also deserve to know how public finances are spent. It should therefore, concern all South Africans that there are efforts to block and undermine the reviews.

In the spirit of intergovernmental relations, National Treasury calls upon all state entities to practise and respect the principles contained in the chapter of the Constitution on co-operative governance.

Eskom statement: 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. Eskom is in the process of compiling a response in this regard in line with our media statements already issued on this topic.

It is also true that the National Treasury has requested all contracts related to Tegeta (as noted above) and that these contracts were subject to an investigation by National Treasury. We therefore see no reason to retract the statement to the effect that National Treasury has investigated Tegeta contracts extensively.

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