18 Jun 2020
04 Mar 2020
Eskom presented the Committee with an update on various contracts that had allegedly been over-paid, providing details of the investigations that were taking place and its cooperation with various law enforcement agencies – notably the Special Investigative Unit (SIU) and the Directorate for Priority Crime Investigation (DPCI).
Committee Members expressed their concern at the lack of consequence management that had taken place, and asserted that the matters being discussed had occurred in a “vacuum of accountability.” They vented their frustration at the extent of the corruption that had been identified, and the lack of information provided by Eskom on the on-going investigations. Much of the discussion was focused on trying to establish who had been responsible for acts of malfeasance dating back several years, as there had been so many changes in both the government and Eskom leadership positions during this period. Investigations were also hampered by implicated officials resigning before they could be held accountable or prosecuted.
The Chairperson suggested that the Committee reserve investigation-related questions for its scheduled meeting next week with the various law enforcement agencies.
Due to technical difficulties with the virtual meeting platform, the proceedings were suspended early.
For this reason, an overview of the cost-benefit analysis of the “take-or-pay” contracts, and details of the report on lifestyle audits for 2018/2019, were not presented by Eskom.
Mr Pravin Gordhan, Minister of Public Enterprises, told the Committee that he was present as a back-up, and would make interventions if they were required.
Prof Malegapuru William Makgoba, Interim Chairperson, Eskom Board, thanked the Committee and the Minister for the opportunity to present. He said that he and his team had been preparing for this meeting for a long time. He said Mr Andre de Ruyter, Group Chief Executive, would direct the Eskom team’s presentation.
The Chairperson handed over to Ms B van Minnen (DA), a SCOPA Member, to deal with the issues of irregular expenditure. She said that after the presentation by the Special Investigating Unit (SIU), she would like to see Eskom’s presentation.
Eskom on irregular expenditure
Mr De Ruyter started the presentation by focusing on the Black and Veatch and Aveng Africa contracts. Black and Veatch was initially contracted for an amount of R75 million, but this had since been expanded upon on several occasions – including “significant” irregular expenditure – to the sum of R12.5 million. The Aveng contract was initially contracted for R422 million, that had expanded since to R1.7 billion
Mr Bob Sookrajh, Acting Head: Bob has a accountAudit and Forensics (A&F), Eskom, said that A&F were requested to investigate the approval of the modifications. The inflation of these contracts had been done by using delegation of consent forms (DCF). These forms give the consent to spend a percentage of the contract, generally between 5% and 10%, and get approved by the approving body. There was 10% of the contract value that could be spent on contingencies that arise as the contract goes along.
The contract had originated from a panel. The modifications listed on slide 8 were done by using DCFs. The way that this should have been done was by properly documenting the modification to the contract with supporting documents, and submitting it to the adjudicating committee. However, this process failed, and the relevant committees were unaware that this was happening. The panel was originally set up by a certain adjudicating committee. Mr Sookrajh said, “You don’t increase an individual panel member’s amount -- you first have to approve the amount and time via the adjudicating amount for the entire panel. Once this has been increased, you go back to the committee and ask for allocation per panel member.” This also had not happened.
The result was the R1.7 billion which, in the A&F’s view, was unauthorised and irregular. From a management perspective, this needed to be investigated, taken forward via the processes and reported accordingly. There was a meeting scheduled for the Monday following the meeting with the forensic investigators of Eskom, the SIU and a service provider. This matter had also been escalated from an investigative perspective. A&F had tried and failed to obtain the minutes to prove that these modifications had been done in accordance with due process. There was no evidence to show that these modifications were presented to the correct adjudicating bodies.
In investigating some of the modifications that were irregularly approved, it had been found that the amounts of the modifications were just line items of R20 million to R40 million, and described as “extension of work for standing time.” There was insufficient information provided to substantiate the modifications. The matter was still under investigation by the other bodies involved. In summary, investigation had already revealed that the modification was incorrectly approved and going forward, the matter had been escalated to the SIU.
Ms Van Minnen expressed concern that the contract had been modified six times since 2005, and was dismayed that Eskom had failed to provide the investigators with minutes, and at the general poor state of contract management. She struggled to understand how this had happened in a “so-called vacuum.” Why were there no minutes, and whose responsibility was it to take these modifications properly through the system? What were the consequences for this failure of contract management? She was aware of the tendency for officials to resign and leave the organisation. She asked who the CEO was at the time, and who was on the board. She could not accept the “gulf in the information.”
Mr Sookrajh said that the report relating to the matters raised had been submitted to the Central Procurement Office (CPO) and the CPO was busy with the action.
The Chairperson called for an age analysis of this matter, and asked on whose watch this had taken place.
Mr De Ruyter said that these events had preceded the tenure of the current board and the current senior management team, and had coincided with the period of state capture.
Minister Gordhan read from a historical booklet about Eskom, which stated that in May 2009, Ms Barbara Hogan had been appointed as Minister of Public Enterprises. In November 2009, Mr Jacob Maroga had resigned as Chief Executive Officer (CEO). Mr Brian Dames was appointed CEO in July 2010, and in September 2010 all Eskom procurement was centralised in what was called “Group Commercial.” In November 2010, Ms Hogan was dismissed by then President Jacob Zuma and replaced by Mr Malusi Gigaba. Mr Zola Tsotsi was appointed board chairperson of Eskom in June 2011. The Board Tender Committee was headed by Mr Collin Matjila in August 2013. In March 2014, Mr Dames stepped down as CEO and in April 2014, Mr Matjila was appointed acting CEO by Mr Tsotsi. In May 2014, after the national elections, Ms Lynne Brown was appointed Minister of Public Enterprises. Mr Matshela Koko was made head of Group Technology and Commercial. In October 2014, Mr Tsheiso Matona was appointed CEO and in December 2014, then-Minister Brown appointed six new members to the Eskom board – all of whom seemed to be connected to the Gupta family. Three experienced executive members then stepped down.
In March 2015, Mr Tsotsi suspended four of Eskom’s top officials before he himself was pressured to resign. Dr Ben Ngubane was made Chairperson, and Minister Brown seconded Mr Brian Molefe from Transnet to take over as Eskom CEO. In August 2015, Mr Anoj Singh was seconded from Transnet to take over as Eskom Chief Financial Officer (CFO). In September 2015, Mr Mosebenzi Zwane was appointed by Mr Zuma as Minister of Mineral Resources. In December 2015, Mr Nene was dismissed by President Zuma and Mr Gordhan took his place as Minister of Finance.
Minister Gordhan suggested that the Eskom colleagues should provide the Committee with who the relevant CEO was, who was in charge of the construction process, who was the chair, and who the board members were, based on the dates listed on the table in slide 8.
Ms Van Minnen described the situation facing the Committee as “a complete scrambled egg” of what had happened in those years, which would make accountability extremely difficult. The Committee needed to attempt to overlay the information provided by the SIU with what was presented by Eskom. The main concern was consequence management. There were many different players and a complicated timeline, so she requested that Eskom submit the timeline in writing for the Committee to see what exactly was going on. She understood that there was a SIU investigation, but asked at what stage it was, and if charges were being pursued both civilly and criminally. Could Eskom could tell the Committee at this point against whom charges were being pursued, and what consequences awaited all those responsible for this complete “mess of a contract?”
Mr De Ruyter responded that Eskom was in the process of unscrambling the mess. He described it as being a task of significant proportion, as the Black and Veatch contract was not the only contract where these issues and irregularities had been identified. Eskom was cooperating closely with the SIU to establish each of the parties that could be pursued. Eskom did not have the power to pursue criminal charges – it could only lay charges, which it had done. In several cases, progress had been slow, but it had initiated several civil claims against both companies as well as individuals, including former executives. Eskom was in the process of developing further cases against those individuals. Depending on the outcome of the investigation into the Black and Veatch contract, this was a case that was very suitable for both civil and criminal prosecution.
Eskom was engaging with the SIU on the Black and Veatch contract, and it was one of several cases it was pursuing. Once this had been done, Eskom would be in a position to report progress. He cautioned that these were complex matters and that in many instances, there had been deliberate obfuscation of documents and procedures. Eskom wished to proceed with the civil and criminal prosecutions and hoped for a high probability of success.
Mr Bartlett Hewu, Acting Group Executive: Legal and Compliance, Eskom, said that as at 30 June 2020, Eskom had recommended 80 instances of criminal prosecutions. 59 of these were with the South African Police Service (SAPS), and the remaining 21 were currently in the process of being registered. Mr Sookrajh would give an update on the status of the remaining 21 cases.
He presented the Committee with a list of completed criminal cases on slide 24, the first of which the Committee had already been briefed on during their last session with Eskom in March. This case had been provisionally withdrawn and the second case had been declined by the National Prosecuting Authority (NPA) on the basis that there was no prospect of a successful prosecution. The third and fourth cases were similar cases, and both were in Volksrust. The third had been finalised and had resulted in the former employee being convicted of fraud and sentenced to two years’ imprisonment.
Mr De Ruyter said a case involving an amount R4 272.40 was the only case where there had been a successful conviction. The other two the cases that had made it to the courts were either withdrawn, or there had been a nolle prosequi by the NPA.
Ms Van Minnen commented that due to the constraints of the national lockdown, there could not be expected to be any progress in the instances of criminal prosecution recommended by Eskom. However, Eskom was requested to give an update on the civil proceedings.
Mr Hewu answered that Eskom was busy with the SIU, which was about to approach the Special Tribunal on various cases. Eskom needed to set aside the contracts and to recoup the values of the contracts against the suppliers who were involved in malfeasance, fraud and corruption. Eskom had instituted a civil process on 3 August against Tegeta, the Gupta brothers and their associates, former Eskom employees and former Eskom executives. It was claiming a sum of R3.8 billion related to the acquisition of the Optimum coal mine. There was also a former minister who was a part of this court process. Eskom had pursued Deloitte and was finalising its court papers to pursue PriceWaterhouse Coopers (PWC).
Eskom was finalising a discussion with one of its suppliers, together with SIU. The supplier was a multi-national corporation which it hopes would come to the party and return its ill-gotten gains. In May 2020, Eskom had received a R171 million payment from Deloitte as a consequence of efforts that had been undertaken by Eskom. As it recovers these contracts, it instructs counsel to recoup gains, and where it collaborates with SIU, it makes efforts so that there are collaborative gains. Eskom was a co-applicant on the matter brought on 3 August against Tegeta.
Mr M Dirks (ANC) asked Eskom to be more specific on the cross-referencing on the Black and Veatch contract. What needed to be established was whether there were any former or current Eskom executives who had served as directors or who had done any work with Black and Veatch before moving to Eskom. Was there any link between former Eskom executives and that company? He said Eskom should be in possession of minutes of meetings and documentation. It needed to be established who the officials were who had served on the adjudicating bodies that had signed off on the increases of the contract amounts. He emphasised the need to establish a link between Black and Veatch, Eskom officials and politicians. Minister Gordhan’s input had confused the matter more, because he did not know whether Mr Zwane’s appointment as Minister of Mineral Resources fitted into the whole situation. He claimed that corruption at Eskom had occurred prior to 1994, and that officials and politicians “want to hide behind the Guptas.” He said that state capture should not be reduced to just the Guptas, and claimed that the state had been captured “many years ago.”
Minister Gordhan responded to Mr Dirks’ comments, saying that he had been reading from a booklet called “ The Eskom Inquiry,” produced in 2017. He had given the timeline of the events at Eskom as the booklet contained it, and though that the Committee would find it useful. Whether they liked it or not, it had now been fully established through various mechanisms, including the Commission of Inquiry chaired by the Deputy Chief Justice, that the Guptas were central to the process of state capture. That there might have been stealing before, but that was a separate matter. His office could make the booklet available to the Committee, because it began to answer the questions posed by Ms Van Minnen and the Chairperson as to who the CEO was, who was on the board and what factors were at play in the last 10 years in relation to some of the things that were under the Committee’s review.
Ms C Mkhonto (EFF) said that from what has been presented, it seems that only small amounts had been successfully prosecuted. She asked whether Eskom would pursue the cases that had been withdrawn due to lack of evidence. She noted the large amount of money that had been lost
The Chairperson reminded the Committee that 59 cases had been reported to SAPS. The Committee required an update from SAPS and other law enforcement agencies.
Mr De Ruyter said that, as per Mr Dirk’s request, Eskom would look at cross referencing the Eskom officials involved and try to establish whether any of them had any linkage to Black and Veatch prior to the award of the contract, or prior to joining Eskom. Eskom would investigate the minutes and the individuals who had presided over the meetings where the relevant decisions were made.
Replying to Ms Mkhonto’s question, he said that Eskom would not give up trying to pursue both criminal and civil cases. However, Eskom was not able to direct the prosecution authorities as to which cases they should pursue or not pursue. It could only, with the assistance of legal counsel and its own forensic capabilities, assemble as much evidence as it could and give this to SAPS. He stressed the fact that Eskom had improved its civil recoveries because it was a channel -- in conjunction with the SIU – that was open to Eskom. As mentioned by Mr Hewu, the endeavour to reclaim R3.8 billion from former Eskom employees, as well as the Guptas, was going to be an important step in the right direction.
Ms Van Minnen asked for an update on the Aveng contracts matter, and the other contracts that had been overpaid by R4 billion.
Mr De Ruyter asked Mr Hewu to give the Committee an update on the Aveng matter, and said that there had recently been a court verdict in the dispute with Aveng.
Mr Hewu said that the matter between Eskom and Aveng had been heard in the Johannesburg High Court on 8 June, with a judgment delivered on 11 September. The court had ruled that Eskom pay Aveng the R42 million which had been in dispute. It had culminated from a response provided by the State Capture Commission of Inquiry, which had directed Eskom on 21 August 2019 not to proceed with payment to Aveng, and secondly, had instructed Eskom to conduct its own investigation before effecting that payment. Before Eskom could commence with the investigation, Aveng had brought a court action. Eskom’s board had decided to abide by the High Court’s decision, and from the advice received from senior counsel, Advocate Cassiem, it would not serve Eskom to appeal the court’s verdict.
Ms Van Minnen referred to about the overpaid contracts involving ABB and Tenova, and said that what stood out was that what immediately investigations happened, officials resign. There had been recommendations for criminal proceedings and the Committee had heard from the SIU. Although the issue of state capture was understood, she was still battling to understand how these matters took place in a vacuum of accountability. Who was responsible, and what control had there actually been over these contracts? She requested an update on what was happening with the other overpaid contracts, as they seemed to be open-ended.
Mr De Ruyter said that there had been a closed procurement tender strategy in assigning the contract to ABB, and that for several reasons -- despite ABB’s price being higher -- various adjustments had been made during the process. It was suspected that the tender evaluation was being manipulated in order to ensure that the contract would be awarded to the company. A forensic investigation into the contract was still ongoing.
He provided the Committee with what he called “a flavour of the complexity of the volume of work involved in these investigations.” He said that there were many files of claims, contracts and documents that had to be studied and unpacked. It was an enormous task to unpack these claims, some of which were inflated. What had been established was that there were four major variation orders for which there was no proper substantiation. These four variation orders formed the basis of Eskom’s contention that the claims paid were grossly inflated. Eskom was in close cooperation with the SIU on this matter, as well as, through the SIU’s offices, law enforcement in the United States of America, Switzerland and Germany. Eskom was in negotiations with ABB with a view to settle this claim. Further discussions were on-going. The former Eskom employee’s involved in these issues were under investigation by the SIU. He commented that as these employees were no longer at Eskom, it was at the mercy of the legal system to ensure the appropriate consequences. Eskom had good reason to be confident that it would be able to settle this matter, and was in the process of engaging the assistance of senior counsel as well as the SIU, with the view to settling the matter and getting it out of the system.
Mr De Ruyter said that there had been a variety of significant claims against Tenova that had been overstated, and that Eskom was currently investigating the potential overpayment. The criminal cases had been referred to the NPA. Eskom was in discussions with Tenova, which had informed Eskom at the end of July that according their own investigation, there was no evidence of an overpayment. Eskom would have to pursue this matter in a more adversarial matter to ensure that it could recover the money due.
He noted the resignation of the contract managers involved in these matters, and said there was a certain sense of “moral hazard” that was created, with the reality that one could engage in unlawful behaviour and when confronted by one’s employer, one could resign to escape any disciplinary action. In these cases, Eskom had to rely on the offices of law enforcement agencies and the SIU.
Eskom is in the process of pursuing the claim against Tubular Construction Projects, and was of the view that there had been significant inflation of money paid, amounting to R400 million. The result of these actions was that, again, employees had resigned. The SIU was looking at instituting civil claims, and Eskom was currently requesting the appointment of experts to assist it in the quantification of losses. National Treasury needed to approve the appointment of experts.
He said that there had been another significant over-payment to the Stefanutti Stocks Basil Read joint venture, estimated at R1 billion. Eskom had indicated in its report the sequence of events that had led to this. The contracts were under investigation, and Eskom had submitted evidence in support of criminal charges against 11 people to the NPA in June. As these matters were further unpacked, there could be further action taken against Eskom staff, former Eskom employees and the contractors in question. He emphasised the need for expert assistance in understanding what had occurred. This was in the hands of the procurement process, to enable Eskom to understand and ventilate these matters before it proceeded.
There was an amount of R1.8 million in corporate social investment over-payments which Eskom was in the process of recovering. It was “belatedly trying to shut the stable door” by improving its preventative control measures, and was significantly tightening its project control and procurement oversight mechanisms to reduce any further malfeasance.
Mr Dirks said that the last time the Committee was briefed, it had been told that Deloitte had agreed to pay back some of the money. He had raised his concern over this payment, and had insisted that criminal charges should be laid against Deloitte, saying one could not return money “when you get caught out.” A video of the Minister’s response, “that not all corruption matters were criminal,” had been circulating on social media. He had a serious problem with the Minister’s response, as “wrongdoing is wrongdoing.” He commented that everything at Eskom had been corrupted, even its auditors. He asked whether Eskom was pursuing Deloitte on criminal charges, or to recover the funds.
Mr De Ruyter responded that the conduct that Eskom had pursued against Deloitte was related to a contract that had been concluded for certain consulting services. It had been determined by analysis that the contract leading up to these services had been provided in an unlawful manner. He offered the distinction between “unlawful” behaviour and “illegal” behaviour. Unlawful behaviour gave rise to civil liability, and illegal behaviour gave rise to criminal liability. In this instance, in accordance with Eskom’s assessment, based on a legal overview of the contract, the conduct attributed to Deloitte was unlawful. A civil claim had been instituted, based on this unlawful conduct. To save time, Eskom had agreed with Deloitte to settle the civil matter with an amount of R171 million, which had been received by Eskom. However, in the event that there could have been criminal matters, the Directorate of Priority Criminal Investigation (DPCI) was also looking into the matter and was serving before the State Capture Commission of Inquiry. There were other law enforcement agencies also looking into this, and Eskom was pleased to cooperate and support these investigations where it was required. The civil matter had now been settled.
Ms B Swarts (ANC) noted that the report focused mainly on cases referred to SAPS and the NPA. She asked for an update of the status of the internal investigations at Eskom. In February, it had said that a supplier review committee would be established which should expose suppliers involved in wrongdoing. She asked whether this committee had been selected, how many companies had been identified, and who these companies were.
Mr De Ruyter replied that the supplier review committee had been established.
Mr Solomon Tshitangano, General Manager: Procurement, Eskom, answered that the supplier review committee had been established and had dealt with over 100 cases, and a list of what sanctions had been imposed would be provided to the Committee. The major cases that were being handled by the SIU had not been finalised, and had not been referred to the supplier review committee for consideration.
Mr De Ruyter asked Mr Sookrajh to update the Committee on the internal inquiries into Eskom employees.
Mr Sookrajh said that Eskom had facilities where employees could report cases, which were recorded. These were ongoing investigations. The progress made in these investigations was reported on a quarterly basis to the Audit and Risk Committee, and the actions were tracked. These internal investigations were happening, and there was a section in the detailed report about the statistics of how many cases had come in, how many had been completed, and how many were on-going.
The Chairperson asked for the specific details to be shown in the presentation.
Mr Sookrajh responded that they were not in the presentation, but in the report which Eskom had sent to the Committee.
The Chairperson thanked Advocate Andy Mothibi, Head of the SIU, for being present, and asked the SIU to speak on the cases that were before them and to react to the issues that had been raised.
Cases before the SIU
Adv Andy Mothibi, Head of the SIU, said that there are a few cases before the SIU and asked his colleague, Ms Claudia O’Brien, Programme Manager, SIU, to update the Committee.
Chairperson asked Ms O’Brien to provide a broad overview and emphasise certain areas, as the Committee had been briefed earlier in the week.
Ms O’Brien said that SIU had highlighted the same matters in the current presentation that had been referred to in the SIU’s meeting with the Committee earlier in the week. It was important to note that the cases were currently at different levels of completion in terms of the investigations. In certain areas, the SUI had sufficient information which had been referred to the NPA, and it was working with them on an ongoing basis. These were complex matters. At this point, the civil proceedings that SIU wanted to institute required it to quantify what the damages were, and this was not the type of quantification that the SIU could do on its own. It therefore needed the expertise of engineers, quantity surveyors and other experts. In all of these instances, despite having estimated over-payments, the SIU was working on getting to a figure that could be confirmed and that would stand up in court.
Adv Mothibi said that the SIU had 39 NPA referrals, which varied from various investigations and different matters. There were 32 asset forfeiture unit referrals. Some of the matters were not within the scope of the proclamation, and then Eskom did its forensic investigation, picked up these matters and registered these cases on its own. He said that this accounted for the difference in the number of criminal cases that had been referred. The SIU had been in continuous engagement with Eskom to ensure that the numbers were aligned, and knew what caused the differences. As Mr Hewu had indicated, the SIU was considering approaching the Special Tribunal on some of the matters, specifically the ABB contract. SIU’s approach, which was shared by Eskom, was that the settlements it reached should be made an order of the Special Tribunal or of the court, to ensure legal certainty. There was an alignment around the civil matter presented by Eskom, and no material difference that required an explanation.
The Chairperson asked Eskom to return to the question of internal matters.
Mr De Ruyter responded that in Eskom’s quarterly report which it had submitted to the Committee on 30 September, it had provided an overview of criminal charges placed against its former employees on page 20. The Directorate for Priority Crime Investigation (DPCI) was currently investigating Mr Brian Molefe’s pension payout, Mr Matshela Koko, Impulse International and Mr Anoj Singh. The SIU was conducting investigations, and so was the State Capture Commission of Inquiry. Eskom had referred nine new matters to the SIU, on which it was currently awaiting feedback. In the report, it had a long list of employees who had resigned instead of facing potential disciplinary action. The name of these individuals and their retirement dates were contained on pages 22 and 23 of the report. The report includes a comprehensive list of all the matters that had been referred to the law enforcement agencies.
Mr Dirks said that currently the government was being accused of selective prosecutions by both politicians and business people. The CEO’s statement on the difference between unlawful behaviour and illegal behaviour was unfortunate, because unlawful behaviour was illegal behaviour, and he could guarantee Mr De Ruyter’s comments would trend all over social media. He said the CEO should not have responded to his questions at all. He again emphasised his dismay at the Minister’s remarks that not all corruption matters were criminal, and said that the Committee must always be seen to be acting fairly, treating everyone equally and investigating all cases.
Ms Swarts said that the CEO should not keep referring to the report submitted on 30 September because he was with his team, who should be responding to questions.” She asked about the status on several cases, including those involving Deloitte, Impulse International, cases under the Broad –based Black Economic Empowerment (BBEE) Commission involving DongFang, Murray and Roberts, and General Electric. She criticised the status in the reports for being shown as merely a percentage and referring to attached lists. The documents submitted by Eskom showed there are 80 instances of criminal prosecutions – 59 registered with SAPS, and 21 in the process of being registered, but only four had been completed. She asked for the reasons for the NPA’s withdrawal of the case where they had cited the unlikelihood of a successful prosecution. She asked which Eskom senior official had registered this case that did not warrant registration, and said this was an abuse of power and a waste of resources. She asked how Eskom would address this and ensure that this waste would not occur in the future.
Mr Hewu said the Trillian matter would be brought before a retired judge on 11 November to conduct a section 417 of the Company’s Act inquiry to look into the affairs of Trillian shareholders and directors. This would allow for the liquidation process that Eskom had started in January, and could trace those assets in collaboration with the South African Revenue Service (SARS).
The Impulse International matter was before the High Court, and Eskom was working closely with the SIU in this matter, where Mr Koko was involved. The strategy of SIU and Eskom was to set aside and recover the value of the contract that was legally awarded to Impulse, which was just over R1 billion.
The Deloitte settlement had since been finalised with the payment of R171 million and the DPCI was investigating the criminal side of this matter.
Attention is being paid to the Murray & Roberts matter. Discussions were taking place and the DPCI was investigating. The contract between Dongfang and Eskom had been set aside in June by the High Court. This contract had been terminated through the office of the Chief Operating Officer, Mr Jan Oberholzer, and again the DPCI was investigating the criminal side of this matter. He handed over to Mr Sookrajh to discuss the registration of criminal matters.
Mr Sookrajh said that in the case where the NPA had declined to prosecute, Eskom was taking this matter up and was currently in the process of investigating what had happened in this case. He described it as being temporarily withdrawn -- it was not “off the table.”
Ms Swarts said that she was not satisfied with the answer provided by Eskom about the case being temporarily withdrawn. She asked Eskom to provide timeframes as to when the matter would be brought back, and to explain why such a case would be temporarily withdrawn. She asked who was investigating. Surely Eskom would know who the senior official was who had registered the case. Eskom documents showed that a number of cases had been registered with law enforcement agencies, but the police stations had not been confirmed. Some of these investigations had been conducted in 2014 and 2015 -- what were the reasons for the slow progress?
Mr Hewu said that all the registrations of cases at Eskom were done through the office of the Chief Audit Executive. Eskom received weekly interactions from DPCI and the Hawks, and interacted with the SIU. However, it was having difficulty in its interactions with SAPS, which accounted for the slow speed of response. All that Eskom could do was to report to the SAPS. Last year, it had requested that the DPCI have one case number for all matters relating to Eskom so that they were all centralised and investigated by the same team. There were four teams from DPCI that were looking at matters relating to Eskom, even those that were opened by politicians. There was now one case number for four teams consisting of three people per team. This shortage of human resources on the part of the DPCI teams working on the Eskom cases accounted for the slow progress.
The Chairperson suggested that as the Committee would be meeting with the law enforcement agencies, questions regarding the investigations should be reserved for them.
Ms Swarts said it was concerning that controls were weak and almost non-existent at Eskom.” If these weaknesses persisted, the corruption would continue. What was Eskom’s senior management doing to ensure that systems were strengthened and enforced? Section 51 of the Public Finance Management Act (PFMA) described the responsibilities of the accounting authority, and the board of Eskom had failed to discharge all those responsibilities. Was the Audit and Forensic Unit resourced adequately to deal with all the cases at Eskom?
Mr De Ruyter responded that Eskom had been active in strengthening its controls. For example, in Eskom’s Systems, Application and Product (SAP) system, there was a high incidence, varying between 72% and 93%, of free text procurement up until now. This allowed an individual entering into a contract request to write their own description of the commodity being purchased and in so doing, enable that individual to circumvent the contracts put in place to ensure that Eskom paid a market related price. Eskom had addressed this deficiency, and now had zero free text procurement taking place.
Under the leadership of the interim chairperson, the tone of management -- which was important in creating an appropriate governance culture -- had been strengthened. Eskom had also been paying more attention to the legislative prescripts that govern its operations, such as the PFMA.
In response to Ms Swarts’s question regarding whether Eskom’s A&F unit was resourced, he said that management was in the process of finalising the appointment of permanent heads of the Audit and Forensic unit and the forensic investigative teams. The latter had suffered from a lack of resources, so Eskom was in the process of filling vacancies in that team.
Ms Swarts asked why the two cases had been taken on review of evidence.
Mr Sookrajh said that a senior manager of the forensic department at the time had given the instruction to an employee to register the matter with the NPA. He requested that the Committee give him six weeks to compile all that Eskom could, and then it would be up to the NPA to take it forward. The six weeks was required to mitigate the unwanted risk to the health of employees under the lockdown.
Ms Swarts said that by now, Eskom should have put a programme and measures in place, and that the realities of COVID-19 were not going to change any time soon. The matters at hand were very crucial, and six weeks was too long. She asked the Chairperson to impose a sanction on this. It appeared that there was no urgency to put measures in place. Was it because the senior official had left, or because Eskom was still going to investigate that they still could not say who the official was who had instructed an employee to register the case? She asked for the names of the senior official and the employee who had instructed.
Mr Sookrajh replied that senior manager at the time was Thembeka Ndaba, and the employee’s name would be submitted to the Committee after more investigation had been done.
Chairperson proposed that the meeting’s proceedings be suspended due to fundamental difficulties with the virtual platform. He proposed finding a date in the future to pick up where it was leaving off in the current meeting.
Minister Gordhan agreed with the Chairperson’s proposal, and agreed for the law enforcement agencies to account for their own investigations. He thanked Eskom for their transparency. He said that these state institutions had been severely damaged, and this should be emphasised to understand the context of the issues being dealt.
Mr Makgoba agreed with the proposal.
The Chairperson adjourned the meeting.
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