Eskom Quarter 3 & 4 deviations and expansions: hearing

Public Accounts (SCOPA)

22 August 2018
Chairperson: Mr T Godi (APC)
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Meeting Summary

The Standing Committee on Public Accounts (Scopa) held a hearing with Eskom on deviations and expansions in the fourth quarter of 2017/18, but was was disappointed by the entity’s failure to respond to questions on deviations and expansions.

Engagement with the Committee began with Eskom explaining to the Committee about the complaint lodged by a certain company concerning a manipulated tender. The first delay arose when the chief executive officer (CEO) could not recall the document, and it was discovered that he was not the one who had signed it, but an acting CEO at the time. The process of escalation of complaints and problems to procurement and beyond to higher management, was the main area of discussion, and the Committee just wanted to have a sense of whether Eskom was working on the issue. It was agreed that Eskom would report back about the complaint and its resolution by the end of September.

The second issue of engagement was deviations, but when the Committee attempted to ask questions about a number of deviations stated in the presentation submitted to it, Eskom continuously delayed providing answers. The Committee emphasised that Eskom had to demonstrate which deviations and expansions were justified and which were not, through detailed explanations that included the name of the company involved, the original value of the contract, the number of deviations done on a contract with the company involved, and why the deviations had been applied for -- all of which Eskom could not provide during the meeting.

The Committee expressed its disappointment in Eskom for failing to respond to questions based on the presentations that Eskom itself had provided to the Committee. It said that it was a direct reflection on the management of Eskom as a company, and indicated that Eskom officials did not take Parliament very seriously. What had happened at the meeting inspired no confidence in Eskom and it should never happen again. If Eskom appeared unprepared again, the officials themselves would have to cover transportation and accommodation costs.

The Committee was forced to suspend the hearing, and rescheduled it for Eskom to reappear the  following Tuesday, 28 August, at 6 pm. In addition, the Committee asked for detailed information concerning Tegeta on expansions and deviations. The National Treasury had briefed the Committee a few months ago on deviations and expansions, and had ranked Eskom number one on deviations among all entities and departments. That was why it was important for SCOPA to understand the issues around the deviations and expansions.

Meeting report

The Chairperson said that due to the centrality of Eskom, the Committee would always like to see Eskom on the right track and not involved in any irregularities. The meeting should have taken place sometime ago, but Eskom had had some industrial challenges and the Committee had given Eskom space to deal with them.

He said the engagement with Eskom would be divided into three parts – deviations, expansions and the complaint about a manipulated tender, to which theCEO of Eskom had sent the Committee a three page response.

He asked if Eskom could first begin the engagement by explaining to the Committee about the complaint lodged by a certain company concerning a manipulated tender.

Ms Nelisiwe Magubane, Non-Executive Member: Eskom Board, asked if Eskom could begin by introducing the presentation the entity had prepared. However, the Chairperson insisted that the discussion should rather begin with the complaint about the tender.

Complaint about manipulated tender

Mr Phakamani Hadebe, Group Chief Executive: Eskom, said he was unsure of which tender the Committee was asking about, and asked if it could clarify that by giving him a copy.

The Chairperson pointed out to Mr Hadebe that he had signed the document off on 18 August. After a long silence from Eskom, he asked whether they were giving a fake presentation.

After a another long silence, Mr Hadebe finally said the document had been signed on his behalf while he was away, and that it was not a fake presentation.

Mr M Hlengwa (IFP) asked the CEO to repeat his statement. He was worried about the statement, as the CEO’s signature appeared on the document.

Mr Hadebe repeated his statement, adding that the acting CEO had signed on his behalf while he was away.

Mr Jan Oberholzer, Chief Operating Officer: Eskom, and Acting CEO at the time, agreed that he had signed the document while the CEO was away, and said the feedback would be given by the acting Chief Procurement Officer, Mr Segomoco Scheppers.

Mr Scheppers said the specific complaint had been received by Eskom and it was investigated by Eskom’s Assurance and Forensic Department to give independence from the Procurement Department, to which the complaint was related to He ran briefly through the nature of the complaint.

Firstly, there was an allegation in the complaint that the Forensic Department itself had not provided feedback, and in the content Eskom had demonstrated that there was in fact communication and correspondence between the forensic department and the complainant.

There was also a question around the Project Manager failing to address the concerns raised in the letter of objection by the complainant around April 2018, and whether the concerns had been adequately addressed.

He said it was not correct that Eskom’s department of Assurance and Forensics had not given feedback. The actual complaint had been lodged, a reference number had been provided, and there was correspondence between Eskom’s Forensics Department and the complainant.

Secondly the complainant had also said the Project Manager had not addressed their concerns. What the entity had discovered was that the complainant had not discussed the issue with the Project Manager, but had actually discussed it with the Procurement Manager. There was a degree of confusion as to how the complainant viewed the issue. It was also not true that the concerns were not dealt with by the Procurement Manager, as there had been engagement between the Procurement Manager and the complainant.

When the Procurement Manager responded, it had been about 23 April, and the complainant had raised the matter with the Forensics Department on 30 May.

Mr Segomoco read the closing statement, that although the complainant was not very specific and precise around the issue, the Forensic Department was digging into this further because Eskom was trying to establish the root cause of the complaint being raised in the organisation, and even ultimately reaching this level of the Committee.

The Chairperson said the Committee just wanted have a sense of whether Eskom was working on the issue. When the Forensic Unit was done and the report was complete, the Committee would be happy to see it so that it could have a sense of the finality of the matter.

Mr E Kekana (ANC) asked if Eskom could give a sense of when the investigation would be concluded, as he worried about the length of time investigations usually went on without being concluded.

Mr Segomoco said it was not a complex issue, so Eskom could provide a response before the end of September.

Ms N Khunou (ANC) said the end of September may be too long, since it was a simple matter of finding out what had happened with the tender, why it had happened and how was it going to be resolved. She asked why it would take four to five weeks for Eskom to come and conclude on the issue, and shared the same sentiment as Mr Kekana about investigations dragging on too long.

She raised her hand in the first place because of an allegation that was being made, that in order for one to get a tender, one must have a connection from the inside of any government entity. She said this tender in question was not the only tender where problems had arisen – there had been a number of tenders. Tenders seemed to be given to the same entities, and certain entities continued to be rejected though they applied more than once. Was there any other body within Eskom that could deal with complaints? It did not make sense to take the complaints back to those who had rejected the tender in the first place.

The Chairperson said the question was of a more general nature, and he suggested that Committee deal with specifics first.

Ms Khunou clarified her statement, using the example of a person A applying for a tender and the application was received by person B, but person B rejected the tender. The complaint lodged by person A was then sent again to person B, who rejected the application. She said in this process, obviously person B would give the same answer given to the complainant when the complainant tried to apply. Thus, was there a body within Eskom that was independent of those adjudicating the tenders?

Mr Hadebe responded there was an independent body which dealt with issues like the one at hand. Eskom would try to make sure that the complaint in question would get priority within four weeks, as currently there were about 1 200 ongoing cases. It would be perhaps possible to conclude the matter in two weeks, but the latest would be four weeks.

Mr C Ross (DA) asked about the process. It seemed the complaint had been lodged with the Procurement Manager, and he had then escalated the problem to the Project Manager. The Project Manager had then escalated it to the Forensic Manager. Did the contract not stipulate the procedure in case of any form of unhappiness? He suggested that the problem should be escalated to the Procurement Manager, and then bring in some checks and balances that ensured that once the problem was taken to the Procurement Manager, it should also be taken to the Project Manager and the Project Manager should immediately escalate it to the investigative agency. He emphasised that checks and balances should be in place so that there was no centralised power vested in the Procurement Manager, but a clear and transparent process communicated to all parties who could be of help and that would be affected. He concluded by saying that if the suggested process was followed, it may avert legal mishaps.

Mr Hadebe said the process Eskom had been following was easier, as the problem still went to the forensic team. The forensic team did high level assessments to see if there was a case, and then it gets reported to the CEO, goes to the Executive Committee (Exco), then to the Eskom board and finally to the Portfolio Committee. The forensic team was independent of procurement. The biggest problem in the past had been the collapse of the forensic team and the ability of procurement to take decisions that they should not have taken.

The Chairperson said the Committee would await feedback.

Mr Hadebe assured the Committee that Eskom would try to come again as soon as possible to give feedback to the Committee.

Deviations

Mr Hlengwa addressed the issue of deviations. There was a deviation from Steinmüller Babcock Environment GmbH that was rejected by the Department of Treasury. It was a sole supplier, so on the basis of the rejection by Treasury, what did Eskom then do? To what extent was the market tested to back-up the claim that it was a sole supplier?

Mr Hadebe said his delegation was under the impression that Eskom would first introduce the presentation and give a brief overview to the Committee. He asked if the entity may do so, as that would allow a better flow of the engagement between the Committee and Eskom.

Mr Kekana said that unfortunately the Committee did not operate that way. The Committee had read the presentation. The Committee would be asking Eskom questions of clarity, because it had already read the presentation and had done further research -- even with the National Treasury, which had given the Committee further information than what was stated in the presentation. That was the normal process SCOPA followed: an entity submits a presentation, the Committee engages with it beforehand and where necessary confirms all given information with relevant government departments to confirm whether the information given by the entity coincides with the information the department has. Mr Kekana suggested that the Committee zoom into the specific issues, as the Members had already engaged with the presentation beforehand.

Mr M Hlengwa (IFP) commented on the fact that Eskom provided the Committee with presentation 1.2 last week. However, on the day of the meeting, it had provided a new revised presentation 1.3. He expressed his discontent with Eskom doing last minute work and disregarding the fact that Committee Members prepared beforehand for a meeting.

The Chairperson suggested that the Committee continue with the meeting. He mentioned that last time Eskom had been allowed to give a presentation, but within a completely different context. He agreed it was wrong of Eskom to give an updated version of the presentation on the very morning of the meeting, as the Committee had spent the night preparing for the meeting on the basis of the document that had been first submitted. Next time, Eskom had to get their facts on time because the Committee could not deal with any new information on the morning of a meeting.

Mr Hlengwa asked what happened in the case of National Treasury not agreeing to a request for a deviation, particularly one where the reason cited was that it was the sole supplier. He suggested there should be a thorough test of the market. Of 59 applications, 15 had been deviations and there had been a number of rejections.

Mr Scheppers attempted to answer the question in two parts. On the question concerning Steinmuller Babcock, Eskom had applied to National Treasury for an expansion of a number of contracts that dealt with the maintenance and repairs of high pressure pipe work.

The Chairperson interrupted, seeking clarity as to whether he was referring to an expansion or a deviation.

Mr Hlengwa said this particular case was on the fence, so he was referring to both a deviation and expansion. The principle was on the basis of a rejection due to being a sole supplier, and what happened after the rejection.

Mr Scheppers said in that case, it had been classified as not approved. To illustrate, he explained that they may have asked for permission to continue and increase the scope with this service provider for another three years for various reasons. National Treasury had said no, Eskom would be allowed only 12 months because the entity must go to the market. That was how it had been classified in this specific case. National Treasury had not given Eskom what it had asked for, but had given it less time and asked it to go to the market.

On the general principle, if National Treasury declined, Eskom had to stop. In the report, Eskom was reflecting that there were three instances where National Treasury had said stop, and Eskom had not stopped. This finding had been unexpected, because the operating model was that if Treasury said stop, then the request must be adhered to.

Mr Scheppers apologised for updating the presentation at short notice

The Chairperson confirmed that Eskom’s principal response was that If National Treasury told Eskom to stop, the entity must stop. However, there had been instances where the entity had stopped and instances where it had not stopped.

Mr Hlengwa asked which the three instances were, where Eskom had not stopped. What had been the reasons, and the consequences for not stopping? He asked the entity to go into great detail. He again asked what happened in the case where the entity applied as sole supplier, and National Treasury said no.

The Chairperson repeated the question Mr Hlengwa had asked.

Mr Scheppers addressed the Chairperson, and said the Committee had asked a difficult question.

The Chairperson said it was just a practical question, and repeated it: In the case where the entity applied on the basis of a sole supplier and National Treasury declined, what happened in those instances? After stopping, what happened?

Mr Scheppers answered that the entity then had to go to the market. The difficulty lay in the terminology -- the sole supplier and the single source. In the instance of the three cases for boiler maintenance, it was a single source. The firm was on site, and Eskom believed it should continue with the firm for three years and also test the market. National Treasury had then declined and had not approved the three years Eskom had applied for, but had shortened the time to 12 months in order to accelerate getting into the market.

Mr Hlengwa said National Treasury probably found it practical for the process to be completed within a year, so why then did Eskom think three years was good? He made an example, using the case of South African Airways (SAA). SAA had said it would take five years to complete an entire inventory register in order to account for everything that was at SAA Technical -- from the screws to the engine parts. The workers, on their own initiative, had then completed it within two months. He wanted to emphasise the fact that deviations had become a norm as opposed to an exception. He wanted to understand what the planning process was and at what point Eskom even began to make applications -- whether before expiry, or after expiry.

Mr Hadebe said what caused a deviation tended to differ from transaction to transaction.

The Chairperson said the essence of Mr Hlengwa’s question was to find out at what point Eskom decides to look at contracts and separate them into those going out to tender, and those where deviations were needed in order to continue.

Mr Hadebe responded that in principle, Eskom was supposed to be proactive in terms of expiries. He admitted that it was a weakness in Eskom’s systems, and that was an issue that needed to be addressed. The Board had expressed that it was completely unacceptable that Eskom often escalated problems to internal governance at a very late stage, as it gave decision makers very little time to make the right choices. Thus, Eskom was trying to strengthen its governance and planning processes as the Board had requested. A submission had already been made through the Executive Committee and it was on its way to the Board to confirm the changes that have been made.

Mr Hlengwa said deviations mainly arose because of poor planning, so it spoke to the state of the functionality of contract management. He asked how functional Eskom’s contract management was, and whether it was effective and efficient. He expressed his dislike for expansions and deviations due to the fact that the deviations were engineered to suit certain people to a certain end -- they were never honest. It was important to know who was responsible for effecting the process of renewal without using deviations, because deviations and expansions were an emergency measure.

Mr Hadebe said that was the point he was trying to answer. Deviations should be avoided by all means. Eskom was one of the big institutions which had turned to deviations excessively, and the Board members had highlighted the measures that had been taken to deal with the issue. He emphasised that different types of deviations that took place should be separated. He made an example that in the case of an unplanned event or surprise discovery, deviations had to occur.

The Chairperson assured the CEO that the Committee understood the different challenges Eskom could face which would force them to apply for deviations. However, what Eskom needed to do was to show specific cases where deviations were needed. The Committee wanted to know what systems were in place to take corrective measures. Eskom must demonstrate which deviations and expansions were justified, and which deviations and expansions were not justified.

Mr Hlengwa came back to the issue of contract management. He spoke about the limestone handling at Kusile Power Station to the value of R75 million. When National Treasury had declined, what had Eskom done after that? He referred to number 49 in the presentation, under the title ‘Eskom Deviations not supported by National Treasury’.

Mr Scheppers said in terms of number 49, Eskom needed to go out into the market as directed by the National Treasury. At the moment, it was finalising the request for quotation (RFQ) and would go out into the market as directed.

Mr Hlengwa asked how Eskom had arrived at wanting to request a deviation.

Mr Scheppers said Eskom was in the process of constructing Medupi Power Station. One of the materials required for construction was limestone. As it stood, the limestone was delivered to Vereeniging, where it was offloaded and trucked to Kusile Power Station. Eskom was seeking to reduce the volume of the materials transported on the road, and also to use rail. Close to Kusile Power Station there were rail sidings owned and operated by Transnet, and some suppliers had rights to use some of those sidings. Therefore, the proposal Eskom had made was that tenders should be made only to the suppliers that had rights to the sidings near Kusile Power Station in order to cut transportation costs.

Mr Hlengwa said he understood the technical nuances, but he did not understand the logic. Eskom had chosen who must receive the tenders and had decided it would deviate in this particular case. How did Eskom come to that decision? Was it because it was an emergency to negotiate cheaper rail solutions? How did Eskom come to the conclusion that it was cheaper if it had not tested other any other player?

Mr Scheppers explained the process Eskom usually takes. Normally, at an early stage of the process, it does its own market research to find solutions. It was found that generally for bulk materials, rail was cheaper. Thereafter, Eskom checked on the available options in rail to deliver the materials to where they were needed.

The Chairperson interjected, saying research was not a tender process.

Mr Scheppers responded that was when Eskom made a request for a single source approach, but National Treasury had declined and suggested that Eskom go into the market and test road and rail and come to a determination. That was what Eskom was doing.

Mr Hlengwa said Eskom had just engaged in a “feel good exercise”. He asked if the research had been on the basis of any law. How much did it cost Eskom to do the research? What informed that decision to go and do research? R75 million was a lot of money and the amount had probably escalated because of the research done. What informed this kind of intervention? He emphasised that deviations were being abused. Treasury would probably not have rejected the application if it was for a sound reason. It seemed there was an abuse of the process.

The next question then was, who were the officials involved in the process and was there a relationship between them and those who would be at the receiving end of the R75 million?

Mr Vuyisile Ncube, Acting General Manager: Primary Energy, said Eskom had first looked at rail then contacted Transnet about transporting the limestone from the Northern Cape right through to Kusile power station. Eskom had looked for an end to end solution from Transnet. Unfortunately there was no rail that went right through to Kusile power station, so Transnet had suggested an interim location, which was Vereeniging. Eskom then told Transnet that in the long run, however, a rail that went straight to Kusile would be more convenient. After doing research, Transnet had suggested the Highveld complex, because there were a number of operators there who operated various sidings. Thus, the idea of turning to the operators in the Highveld complex had been initiated by Transnet.

Mr Hlengwa sought clarity on whether Eskom just took the suggestion of Transnet as the final say. Eskom could have done further research and asked for further advice from other entities.

Mr Ncube answered that Transnet had done a study looking at all the rail sidings that could possibly be used for the limestone. Eskom’s belief in Transnet was owing to the fact that Transnet owned most of the sidings around the area. The main cost was the operational cost at the siding. If the siding was far away from Kusile power station, it would cost more to transport the limestone to the power station, so Eskom wanted to cut these costs.

Mr Hlengwa pointed out that the research was not actually done by Eskom.

Mr Ncube admitted that it was largely conducted by Transnet, but it had been together with Eskom information that had been provided to Transnet.

Mr Hlengwa asked if Eskom had commissioned the research.

Mr Ncube responded that Eskom had commissioned it in the sense that it had asked Transnet for an end to end solution that would make delivery of limestone to Kusile power station cheaper.

Mr Hlengwa narrowed the issue down to the sidings, and asked if the particular evaluations and assessments made in that area were a Transnet exercise, and not an Eskom exercise? Thus, it was not Eskom’s information.

Mr Ncube answered yes, the information came mainly from Transnet. Eskom already had information, as it transported coal and also had contracted sidings as well.

Mr Hlengwa emphasised the fact that even though Eskom had its own information; the submission in question had been done on the basis of the information that Transnet had given Eskom.

Mr Ncube agreed.

Mr Hlengwa said the process Eskom had followed was flawed, as it had excluded all the other people. Treasury had had every reason to decline. Now that it was in the process of entering the market, was there an existing contract or was this all new?

Mr Ncube replied that there was an existing contract. He added that there was an interim solution that was 24 months long.

Mr Hlengwa asked who was handling that interim solution, and how that person had been appointed.

Mr Ncube replied that it was handled on the basis of a tender. Eskom had gone on tender for the supply and delivery of limestone.

Mr Hlengwa confirmed whether Eskom had had experience on tendering for this particular operation. National Treasury had said Eskom had to go to tenderi on this particular operation, so who was handling that?

Mr Ncube answered that this was a new service that Eskom was requiring. Initially Eskom had bought limestone from a supplier on the basis of delivery. The supplier would deliver the limestone directly to Kusile power station.

Mr Hlengwa asked what had necessitated the change, and also the tender splitting.

Mr Ncube answered because it had become too expensive. Eskom wanted to reduce the cost. The supplier delivered it to Vereeniging.

Mr Hlengwa then asked if that contract had expired.

Mr Ncube replied that the contract had not expired.

Mr Hlengwa asked how long this new process was going to take, and if it coincided with the expiry of this new contract.

Mr Ncube answered that Eskom had a ten-year contract for the supplier of limestone from the Northern Cape to Kusile power station. When Eskom realised that transportation would be too expensive, it had given the supplier two years of delivering to Kusile through a contract with Transnet that delivered to Vereeniging by rail, and then to Kusile. However, this process had been expensive, so Eskom had allocated only two years in the contract for this arrangement. The solution sought by Eskom had then been to ask Transnet for an end to end solution that would ensure the limestone was transported from the dispatch point by rail right up to Kusile. The aforementioned service was new and did not exist at the moment. There was no existing contract for siding operations at the moment.

Mr Hlengwa clarified the statement made by Eskom. Everything done had been based on a contract. The supplier would supply the limestone and deliver it for two years, and a cheaper solution would be employed for the rest of the eight years. His point was that Eskom could not say this activity was new, as it was already based on a contract. Lastly, he asked whether those two years that Eskom had set in the contract had expired.

Mr Ncube replied that that part of the contract had not expired.

Mr Hlengwa then wanted to know why Eskom had sought a deviation, based on the advice of Transnet within the two year contract period.

The Chairperson identified the problem as the failure to follow due process. Even though Eskom wanted to do the right thing, by not following due process it opened doors for irregularities. That was why irregular expenditure was not supported, even though goods were delivered in the end. He referred to a study done by National Treasury, which showed that where officials were allowed to make decisions on procurement, they normally did not follow the correct procurement process and that led to problems.

Mr Hlengwa pointed out that he saw no need for deviations, especially when Eskom had had two years. He found it to be an abuse of process -- it was an easy way out, or a short cut.

Mr Abram Masango, Group Executive (Group Capital): Eskom added a statement of clarity. He referred to the location of Kusile Power Station in relation to three specific sidings in the discussion. The one in Pretoria was 100km to Kusile, the one in Delmas was 60km from Kusile, and the one in Highveld was 30km away. At the time of analysis, Highveld was still operating but was unavailable as it was in full use. There was also a process under way of Eskom building its own rail that would join the rail between Pretoria and Witbank which would take the limestone straight to Witbank. In conclusion, the point was that the nearest rail to Kusile power station was the one in Highveld.

The Chairperson pointed out that the Committee did not have an issue with cost reduction, but the issue was whether Eskom was following due process while trying to cut costs. Due process must never be seen as an irritation.

Mr Hlengwa referred to number 40 in the presentation under the title ‘Deviations supported by National Treasury’. The project description was ‘Generator services Workshop,’ and the deviation value was R8.3 million. Eskom had stated the reason for the deviation as ‘delays in the design phase.’ What was the nature of these delays and how had they arisen?

There was a long delay in answering the question.

The Chairperson then posed the question again to Eskom; who had caused the delay and why was there a delay? He asked for a response from Eskom, and even directed them to the page number of the stated deviation, as the Eskom delegation was paging through to find it.

Mr Hlengwa commented on the inability of the Eskom delegation to answer. It was taking long to answer, yet there were 15 deviations to deal with, as well as expansions. Such information should be at the fingertips of the Eskom delegation.

Ms Mosedi Skosana, General Manager: Procurement said that this particular case was a single source request for work that had already started. The problem involved contract administration and project close out.

Mr Hlengwa asked what the duration of that particular contract was.

Ms Skosana replied that the document had values, but the delegation was struggling to find the dates.

The Chairperson addressed the CEO, and explained that the reason the Committee asked for the presentation beforehand was so that it could engage with it beforehand, and not for the delegation to just read it to them on the meeting day, but to explain and expand on what was in the presentation.

Ms Skosana replied that the actual construction period was 28 months. However, after that she could not state from which month exactly and from which year the construction had begun.

Ms Magubane then asked for a break in order for the Eskom delegation to organise itself.

The Chairperson agreed to the break and asked for the Eskom delegation to order their documents and come back and report in detail, because what the Committee wanted was detail.

Mr Hlengwa returned to the deviation that cost R8.3 million. What had caused the delay? The question had not been answered.

Mr Pieter le Roux, General Manager: Strategy and Optimisation, gave an overview of what had transpired in the transaction. It was a transaction with a consulting engineering firm, whose mission was to do the design for the generator services workshop. The firm had duly done their work, but in the design portion delays had been caused by unforeseen site conditions, most likely related to the ground works, as this related to buildings. Unforeseen site conditions usually referred to different ground conditions to the ones shown in the geological study. The initial contract had been for 11.5 months. In addition, there had been a need to get the initial design engineers back on to the project to make sure there was oversight of the construction during that phase, and that had caused the modification amount. They had been brought back for 16.5 months, and two months had been a delay due to unforeseen site conditions.

The Chairperson asked Mr Le Roux to elaborate and explain the meaning of ‘unforeseen site conditions.’

Mr Le Roux explained the unforeseen site conditions were when the ground conditions were different from the test results the test holes gave when the contractors tested through drilling test holes. Therefore the engineers had needed to redesign the foundations in order to make sure the building was stable.

The Chairperson was not clear why the delay due to unforeseen site conditions had financial implications, rather than a time implication.

Mr Le Roux said it was not just a matter of time implications, but also financial implications. The amount of concrete that had to be used might have had to be more that what was initially budgeted for.

The Chairperson asked why then did Eskom have to say the reason for the deviation was a delay, because when one spoke of a ‘delay,’ it automatically alluded to a time factor. Other words such as ‘changes in site conditions’ could have been used.

Mr Le Roux confirmed that there was also a time delay, because construction was delayed for two months when the design engineers were called back, and they had had to hang around for two months.

Mr Hlengwa asked if ordinarily the design engineers should have hung around to begin with. Was that the operating procedure?

Mr Le Roux replied that it depended on the project. In this case, the design engineers were initially brought in just to design the project, and it had not been part of their scope initially to do construction oversight. It had been believed the team could do construction oversight on their own, but later it was discovered that someone else, specifically only the design engineers, needed to do the construction oversight to meet the professional requirements and indemnity.

Mr Hlengwa asked Mr Le Roux to break the R8.3 million down. What did it entail?

Mr Le Roux replied that Eskom did not have that particular information the moment, and would provide it to the Committee at a later stage.

Mr Hlengwa said he was surprised that Eskom had not brought the correct information to SCOPA, knowing that the entity had to appear and explain deviations. Why had the entity not broken the amounts down in detail? He found the response to be “sketchy,” in his own words.

The Chairperson agreed to the request, and asked that the meeting proceed.

Mr Hadebe asked the Chairperson for another time to present, now that Eskom was clear on what the Committee wanted. Eskom needed the opportunity to go back and prepare.

Mr Hlengwa said he would ordinarily agree, but this was a necessary exercise. The bottom line was that any entity which was going to apply for a deviation must have information for the justification at their fingertips. A deviation should not become a norm, as opposed to being an exception. There were costs involved for Eskom to fly back to Cape Town the following week. It was not a simple process to go and come back to Cape Town. He asked that the meeting should rather continue.

The Chairperson shared the same sentiment.

Mr Hlengwa was interested to know who had done the sampling of the site, and how much it had cost. He referred to number 44 under ‘Deviations supported by National Treasury,’ where the deviation value was R8.4 million. The reason given for the deviation was that the contractor could not complete the remaining work, as the resistors for the three sites had been delivered in February 2017.Why had the resisters not been delivered on time? He asked a broader but brief explanation on that deviation.

The Eskom delegation delayed in answering the question.

The Chairperson also asked why the resistors not delivered on time, but in February 2017. Due to the delay of the Eskom delegation to answer the question again, Mr Godi said he was inclined to agree with the suggestion given by Mr Hadebe to postpone the meeting to allow Eskom to prepare more. He emphasised again that when an entity was called in by SCOPA, it was not to get the information that was already in the presentation;. The information was just a starting point for a more detailed discussion that had to take place during the meeting time.

Mr Hlengwa expressed his disappointment at Eskom. In the four years of SCOPA, Eskom had shown the highest level of unpreparedness in comparison with other entities SCOPA had had to deal with. If an entity was to apply for a deviation, the entity had to be able to explain it in its fullness, from the breakdown of costs to the narratives explaining why it had to happen. The meeting may be suspended, but within the context of understanding that it was a huge disappointment. Before the Chairperson ruled, however, he had one more question for the delegation to answer and that was about the deviations that National Treasury had declined. Which of them had Eskom gone ahead with, despite the decline?

The Chairperson asked Mr Hlengwa if the meeting could rather be suspended, because Eskom would not be able to answer him anyway. He asked the Committee and the Eskom delegation to agree on a date when the Eskom delegation would reappear before the Committee.

Ms Khunou said that a message had to be sent out clearly. Eskom must understand how SCOPA operated by now. An entity could not come to a meeting with documents they were not sure of. The public entities were experiencing problems, and now it could be seen what the cause of the problems were, as indicated by Eskom, which had been in the media for wrong reasons. She suggested that Eskom should be engaged with on Tuesday the following week (28 August). She commented on the continuous use of the same limestone suppliers over the years, and said it stifled transformation. At times the suppliers did not need the tenders, and in terms of demographics there was an exclusion of black suppliers. Transformation by now should not be something that had to be drilled continuously into entities.

Mr Ross said that in terms of the broader presentation, only a small percentage was deviations and expansions; they amounted to one or two percent of the contracts, but problem was with the numeric value of those contracts -- the amounts were very big. The implications of possible corruption were severe. The details of those contracts were necessary to deal with corruption, and gave the example of supplying limestone. In agreement with Ms Khunou, he said there were various suppliers of limestone in the areas in the north -- it did not have to come from Northern Cape. If it came from the Northern Cape, then there should be proof to show that it was indeed cheaper to get it from there, and the National Treasury could advise the Committee. He also referred to the outsourcing to a state department -- Transnet -- as it had been stated in the presentation that the contract was with Transnet. First, the Committee must engage with Treasury. There must be accountability. The contract with Transnet, however, was being outsourced to privatised owners and that was an important issue that had been omitted in the presentation. He suggested the Committee should first approach National Treasury in depth before Eskom was seen, and then engage thoroughly on whether there should accountability on some of the issues.

Mr Kekana agreed to the meeting being suspended until 28 August. He said it was embarrassing that the Committee was prepared, but Eskom had not been prepared. He appealed to Eskom to take Parliament seriously.

Mr Hlengwa agreed with the proposal for the meeting to be held on Tuesday in the evening. He requested that the Committee be supplied with information where expansions and deviations on Tegeta were involved. Lastly, if Eskom was still not prepared next week when they appeared again before the Committee, every member that came had to reimburse Eskom for flight tickets and accommodation that would be provided.

The Chairperson addressed the suggestion from Mr Ross, and agreed that the Committee could engage National Treasury on particular matters. Secondly, in terms of what Mr Hlengwa had suggested about the reimbursement of flight tickets and accommodation, it was not erased, but the Committee should have confidence in Eskom to come prepared next week. The point was that Eskom must come prepared. Lastly, concerning the Tegeta contract, Eskom must provide the Committee with more information on it before the scheduled meeting.

Ms Khunou suggested more comprehensive and detailed notes

The Chairperson elaborated on Ms Khunou’s suggestion, saying that Eskom must include in its detailed notes the name of the company involved; the original value of the contracts and the number of deviations done on a contract with the company involved; why the deviations had been applied for and the status. Eskom must prove that there was nothing they had done wrong through detailed explanations.

Ms Magubane expressed deep embarrassment at what had happened. The duty of the Board was to exercise more oversight. She apologised profusely on behalf of the Board.

The Chairperson agreed that Board must be answering questions, but emphasised that the Committee wanted details more than anything. The meeting would officially be on Tuesday 28 August at 6pm.

The meeting was adjourned.

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