Minister on Risk Mitigation Independent Power Producers Procurement Programme

Meeting report

In his opening remarks, the Chairperson said the Committee was meeting to deal with the Risk Mitigation Independent Power Producers Procurement Programme (RMIPPPP). This followed allegations of undue influence and possible attempts to manipulate the process of appointing successful bidders to generate an additional 2 000 megawatts for the national energy grid. It had therefore been agreed that the matter should be tackled to get clarity regarding the purpose, cause and context of the project.

The general procedure was to get a briefing from the Executive Authority, based on his executive actions. Subsequently, the Committee would then start setting up the process on how to handle the matters, including the approach that it would like to take. The Committee was dealing with the initial phase of the inquiry, and would subsequently go into detail when it had clarified most of the issues with the Executive Authority.

It was on this basis that the Minister of the Department of Mineral Resources and Energy (DMRE) had been asked to brief the Committee on the context, origins, and bases of the allegations that were in the public domain.

He would allow Members to ask the Minister questions but cautioned that sometimes matters of this nature tended to have some degree of emotion. He appealed to Members that whatever they did had to be done in the confines of the jurisdiction of the Committee of Parliament, and with the ultimate intention to resolve matters.

Minister's briefing on RMIPPPP

Mr Gwede Mantashe, Minister of Mineral Resources and Energy, started by raising his concern about the Portfolio Committee's meetings being held on Wednesdays, which clashed with the Cabinet meetings. He said it puts pressure on him, as he has to choose between the two meetings. They had asked the Deputy President to speak to the Speaker of the National Assembly to coordinate the meetings to prevent that clash. He said there were seven days in the week, and if he was to be called on a weekend to the Portfolio Committee (PC), he would do so to avoid the clash on Wednesdays.

The Minister said the Risk Mitigated Independent Power Producers Procurement Programme (RMIPPPP) was quite a difficult issue. He explained that the decision to start the programme had been motivated by the Integrated Resource Plan's recognition of the supply-demand gap created by challenges with the Eskom generation plant, and calls for the urgent procurement of additional capacity, with the project lead time being critical. This meant that the programme was in response to the problem at Eskom.

The IRP 2019 had estimated the supply gap to be between 2 000 MW and 3 000 MW. This gap had since increased, due to the continued deterioration in plant performance. In other words, the plant availability factor had become worse. This programme therefore supplemented Eskom in that regard. In November 2019, the Department of Mineral Resources and Energy (DMRE) had issued a Request for Information (RFI) aimed at gathering information about the available capacity that could be urgently procured and brought online in less than 18 months from contracting. The RFI was quite a critical stage in procuring, in the sense that it was beginning to talk to the market and test it. It was a transparent process.  

The RFI had indicated the following:

• There was a limited capacity from existing projects that could be enabled through required short-term contracts.
• Some projects could come online in 12 to 18 months, but would require long term Power Purchase Agreements (PPAs), as they were greenfield projects. This meant that they were not brownfield projects, and were not available projects. They would be started from scratch.

For the available capacity that required short term PPAs, the following procurement programmes had been initiated:

• The Eskom short-term power purchase programme; and
• Procurement of available additional capacity from the existing renewable energy independent power producers (IPPs).

For capacity that required a long-term power purchase agreement, the RMIPPPP had been initiated. This, therefore, was the basis of the programme.

Minister Mantashe said he had brought Mr Bernard Magoro, Head of the IPP Office, to explain the technical aspects of the programme and show what happened in practical terms. This was would demystify the myth that had been created around the programme. When he had announced the preferred bidders on 18 March 2020, as per his responsibility, comments had emerged that he had made the announcement, and therefore he should provide the details. That was why the questions in the media about the Department's involvement in the programme had missed the point -- for instance, whether he, as the Minister, could extend the period for bidding. However, he was not running the process, so he could not do that. This had led to unnamed persons saying they had received information from anonymous sources that there was WhatsApp message in which his wife is said to have confirmed that there would be an extension. If this became an issue in the newspapers, it dented one's public image. However, this was the subject of a court process, not for the PC to determine, and the court process would be allowed.

The Minister handed over to Mr Magoro to present on the technical aspect.

Technical aspects of procurement process

Mr Magoro said that he was overseeing the process of procuring the RMIPPPP on behalf of the Department. His entity receives an instruction from the Department once the determination has been concurred by the regulator, as explained by the Minister. The Independent Power Producers' Office (IPPO) then runs with the process until the evaluation has been completed, and returns to the Department for approval, and then the announcement of the preferred bidders is made.

Key issues

It was important to note that the requirements for the technical capability of the projects are specified by the Eskom System Operator, because they would be ensuring that the plant supplements whatever the shortfall on the grid would be. They specify what the system requires at the time.

The other important aspect was that there had been a lot of media writing about charging from the system. Eskom had made it clear in its requirements that it did not want any projects to have the capability to charge the batteries, in this case from the existing facilities. Each project must make its own arrangement when it came to charging its own facilities.

Emphasis was put on the fact that each project had a 20-year life span, and had to make provision to demolish the project and clear the site at the end of that 20-year term. Whether one was building a Photovoltaic (PV) plus battery or a gas plant, there was an implementation agreement to clear the sites. All of them were required to clear the sites at the end of the 20-year term.

On the Request for Proposal (RFP) development and bid evaluation, Mr Magoro said it was difficult to influence the process from the outside, as the different transaction advisors had a separate scope of work that they dealt with, and issued separate reports as they evaluated. Those were the reports that get presented to the Adjudication Committee for approval, and thereafter to the Director General for sign off.  

The DMR faced a legal challenge after one of the prospective bidders, GNG Holdings, had made allegations of undue influence. The Department was challenging this application and was delaying the hearing because it wanted the programme to be completed as early as the end of this month. There was an ongoing meeting between the judge and the legal representatives from all the respondents and applicants to discuss this application. The Department had made it clear that it was opposing the application. It was quite strange and opportunistic that it was receiving this application at this stage of the process.

Discussion

Mr K Mileham (DA) said there were still several questions that had been asked that had not been answered. Who were the individuals who served on the RFP Committee, the Transactions Advisors Committee, the Specification Committee and the Bid Adjudication Committee? Could a list of names for each of those committees be provided? He was concerned about how the authorisations or waivers that were granted by various bodies were evaluated. How, for example, was the Southern Africa Energy Programme (SAEP) evaluated? How were the Economic Development contributions evaluated, or were they just granted a blanket waiver and allowed to pass forward? How was each bidder scored at each stage of the process?  What score did they get for each element and each stage, and what were the final scores? Could the Committee get details on the grounds on which the others were disqualified?

He said the Department had indicated that people were disqualified if they failed to meet some of the technical requirements and some of the legal requirements, but some bidders did not have the necessary permits, authorisations, or waivers for environmental purposes, and had managed to proceed through the processes. How did someone who did not meet the requirements manage to proceed to the next stage and ultimately become a preferred bidder?

He also spoke about how the Minister had indicated that if the bidders failed to reach financial closure by the set date, they would not be awarded the contract. He had been very clear when he announced the programme that the hard deadline was going to be 30 July for financial closure. With the deadline extended, what had happened to those who were disqualified because they could not meet the 30 July deadline? Were they just changing the rules to suit their environment? Why were reserve bids not considered?  The Minister had indicated that some of these bidders might fall out if they did not meet financial closure by the end of September. What was the plan to fill that gap if they did not meet that financial closure date? What if one of the bidders did not get an Environmental Impact Assessment (EIA) approval, or did not get an Eskom approval? What was the plan to take that forward, especially considering that yesterday Eskom had said that they had not even begun to consider these projects?

He asked about the Floating Storage Regasification Units (FSRUs) that were used to support the various Karpowerships at the various ports, wanting to know if they were open-accessed.  If not, why not? Would the Liquified Natural Gas (LNG) initiatives be considered? How would they be considered? How many FSRUs were going to be at each port? What were the impacts of that on the operation of those ports?

Mr M Wolmarans (ANC) thanked the Minister for clarifying issues that had arisen in the previous presentation from the Department. He sought more clarity on a slide showing the chronology of events, where there was a date that dealt with when everything had started. He said the date did not relate well to the chronology of events. He also spoke on everything that the Committee had done to deal with the matter, including inviting the Minister to come and relate what had transpired, how it had transpired, and the technicalities involved. The Committee had already looked into a sort of committee or commission of inquiry on the issues of this matter. Apart from the EIAs that had been mentioned and what they have read in the newspapers and this presentation, were they not at that point where they could say the Committee had heard what the Department was saying?

He said that as the Committee was busy with the terms of reference with regard to the inquiry, it should be ready for that type of inquiry according to what had been outlined, and it had the information to start asking questions at the level of an inquiry. He said the PC might start with the inquiry in the Committee today if it went on with specific questions that might be related to the matter.

He said it was of interest to note in the report that the people who had initiated the question of legalities at the court level were starting to send letters retracting some of the allegations. Had it been a matter of not being well informed, or being opportunistic in this matter?  The courts would have to decide on that. As far as inquiries were concerned, the information that was at the PC’s disposal gave it an indication on what to present and what to ask when the Commission of Inquiry was set up.

Mr J Lorimer (DA) directed his first question to Mr Magoro, who had given a strong defence of the procurement process and seemed shocked that anybody could even question that the procurement process might not be above board. He said Mr Magoro forgot that they were in South Africa, where they had had many examples of corrupt procurement, so he may not be starting in as good a position as he might think.

He said that when it came to exemptions, the DMR had put responsibility for exemptions on to the Department of Trade, Industry and Competition (DTIC).  The DTIC must have given Mr Magoro reasons for allowing exemptions, so what reasons had they given with regard to Karpowership? What other companies had been given exemptions by the DTIC?  What other applications for exemptions had been refused by the DTIC? He did not understand what had been said on the extension of bids. What rules were they following, and what made them decide to finally extent the bids? Going forward, was it still a possibility that Karpowership may have obtained unnecessary exemptions before the deadline and be confirmed as a contractor for this project?

He asked the Minister if he was happy that the procurement process had been conducted in a correct and above board way. Was he aware of the DG and the DDG meeting the prospective bidder either in a restaurant, or anywhere else? Was it customary for Department officials to meet prospective bidders in non-official meetings or informal meetings, as this one was? If the IPP office was running the process, why was it necessary for the DG and DDG to meet with bidders? There had been allegations that a Mr Makasi, a lawyer, had brokered that meeting between the Department officials, and he was alleged to be associated with the Minister. Had he ever been associated with this man?

Ms V Malinga (ANC) commented on the legal challenges and undue influence outlined in the presentation. Why would the applicant who had run to court to say the process had not gone accordingly, now retracted and said they would wait for the parliamentary process? What did the parliamentary process have to do with legal issues? Were they now overseeing judiciary thina (sluggishness) here? She was a bit lost, because there was so much noise about this -- as if the Department was in the wrong because of this person who went to court. This person now wanted the Members to be silent witnesses -- if ever there was anything like silent witnesses. Even the inquiry was mainly because there was noise. Did they still need this inquiry after the presentation that had been made by Mr Magoro?

Mr S Kula (ANC) expressed his appreciation of the fact that the Minister had come before the Portfolio Committee, even though there was an ongoing Cabinet meeting. He said the presentation had gone into deeper details to clarify the processes that had unfolded since the beginning until towards the culmination of the end of the programme.  There was a challenge where amateur critics, both in the media and this Committee, took for granted the kind of work that had been put in place to pull off a programme of this magnitude. After the presentation, one could not take for granted the work that had been put in by the Department, the Independent Power Producers Office, as well as other stakeholders to ensure that the programme would become a success.

He said the presentation also helped in clearing the misconceptions that were in the media and the Committee around the DMR’s handling of this programme. Part of the misconceptions was that the DMRE handled all aspects of the programme, but the presentation had revealed otherwise. It had been proved that the Department handled a minimum part of the programme, and that the bulk was handled by the IPPO. He said the IPPO had done a brilliant job, and the Committee should appreciate how the IPPO handled the programme of appointing companies, merging the established companies and the new ones. This spoke to the fact that they took transformation seriously.

On the correlation of the RFP, the work that had been done by the Bid Evaluation Committee and the Adjudication Committee, and until a recommendation was made to the Director-General for financial approval, had there been an element of undue influence, bias or impartiality? He believed that due diligence had been carried out with regard to all aspects of the programme, whether technical, legal, financial or economic development. Due diligence was done to ensure a credible process.  

He hoped that the court would finalise the legal challenge and allegation of undue influence, and that it would be able to expose wrongdoers in the programme, including those who not only hold ulterior motives, but who also had a sinister agenda.. He said an allegation of undue influence was not undue influence on its own. “An allegation was merely an allegation until it was tested and could be proven that it was true.” 

Mr Kula said the PC would never know what would have happened if DNG Power Holdings had been appointed to handle this massive project. He did not want to sound like a sore loser, but the PC would not have been entertaining this matter to the extent of even establishing a Committee inquiry if DNG Holdings had been appointed to handle this massive project. The PC should be cognisant of the involvement of various stakeholders in this whole project, and that it had not only been the DMR that had been handling this project. There had been the IPPO, Eskom, the National Treasury, and the DTIC, so it would be unfair to hold only the DMRE accountable for the whole programme when they had dealt with only certain aspects of the programme. Thus it was quite puzzling that a particular bidder would make an application that it would have to be appointed in place of another bidder. It was unfair that the very same bidder who wanted to cast doubts on the programme wanted to replace another bidder in the same programme. He was wondering if the Committee was not dealing with what many would term as sore losers -- that a certain bidder loses to another bidder, and now wants to throw the whole process into doubt.

The explanation given by the Minister and the IPPO was convincing, that due diligence had been done, and he was glad that Mr Magoro had said explicitly that there was no undue influence in the process. It was quite puzzling that some of the Members, without any basis, would want to cast aspersions on the standing of Mr Magoro to the extent of even calling him a stewardship of defence.  If wrong had not been done, then wrong had not been done.

The misconception out there that needed to be cleared up was that every time there was a big project that was out for tender, there were those who wanted to say that the process was corrupt, even when they did not have documented proof that the programme was corrupted. It was unfair that many in this Committee were asking for certain information, yet they had already convinced themselves before having that information in hand that there was a sinister motive and corruption in the programme.  Their assertions were unqualified at most, and the explanation given by Mr Magoro sufficed to show that due diligence had been done.  People must allow the programme to move forward without any hesitation.

The Chairperson said the Minister was allowed to bring in anyone whom he thought would assist the Committee to have a much broader understanding of the developments. Therefore, questions could go directly to the Minister, and the Minister would be able to relate them to the supportive person -- in this case, Mr Magoro. Mr Magoro was not briefing the Committee, but was there as a support system to the Minister. The Chairperson said he wanted to clarify that, so that tomorrow Members would not say they had been briefed by the Minister and Mr Magoro. The Committee had been briefed by the Minister, who had then decided that to help the Committee to understand the technical part, it would require a person with a little bit of expert opinion or global knowledge. When the Committee was done with the Minister, it would have a chance on its own to decide, based on the briefing and the fact that it had decided to take the inquiry route, what the basic approach to that inquiry would be. What would be the terms of reference? What type of information would be needed going forward?

He said Members should not ask a question as if some people were present -- for example, questions concerning the DTIC information -- because the Minister would not know how the DTIC would respond. The Minister was also briefing through Mr Magoro on the developments of the courts, and the Committee had not reached the stage where it had said that these were the people to be invited. For example, was the mere fact that there was a court case morally, ethically and otherwise correct for either of the parties? The Committee had not reached that stage.  There was a rule called audi alteram partem, which states that one must also give the other party's side of the story.

The Chairperson said the Committee had not identified the route of a formal inquiry, what the approach would be, and which witnesses it would need. He did not want the Members to predict the nature of the inquiry process. The Committee may, when it meets, say it still needs certain information to assist the Members. That was why it had decided to first dispense with the Minister so that the Members could focus on what had been presented to the Committee. When the Committee dealt with the issues of the meeting, it should be impartial and Members should deal with the actual facts.

The Chairperson said he was not answering on behalf of the Minister, but thought some of the issues may necessarily be those of the Committee to deal with and dispense with them. He did not mean to limit the Minister’s response on the issues that the Members had been raising. There were issues that were directly related to the Department, where the Minister was in a good position to respond. The Minister had the right to take on any matter that he felt required his response to the Committee.

Minister's response

The Minister responded to the question about the names of individuals who were in the Committee, saying that in the majority of the cases, institutions were used to fulfil specific responsibilities. The fact that names of institutions were given was sufficient, because it was an institutional responsibility that had been given to Ernest & Young, Ramuedzisi, Ledwaba Mazwai, and so forth. Those were institutions, so the Department could not break them down into names. The Department was giving the PC the names of the institutions and committees, so when it holds its inquiry, they would be called before the Committee. However, protection of witnesses was important for people who would be going through a legal process.

He asked Mr Magoro to respond to the question of scores for each bidder at each stage, and why some bidders were disqualified because, on the surface, it looked as if there was a process whereby bidders were evaluated, given scores, and others went through at various stages. He was not sure if Mr Magoro had the scores of everyone of the total number of bidders who had applied to share with the Members. However, if the Department was called to the inquiry, it would be able to provide that information. 

On changing rules to suit its environment, the Minister said that when one ran a process -- whether it was for this bid or another one -- one adapts as one goes in order to conclude the process properly. The primary intention was to ensure that people were given opportunities to state what they could do. If there was a request for an extension that was explained by the bidder, a month's extension was given. It could be explained why that extension was given, but it was not changing rules -- it was adapting to the situation as it happened.

On filling the gap if the bidders did not meet the financial closure date, the Minister said this was an emergency procurement that was not adding volume to the grid. Therefore, if there were bidders who were failing, Eskom would be expected to take energy from those bidders who had not been excluded. If the Department had to run another process to close the gap, that process would be run.

Minister Manatashe said he had been accused of protecting Karpowership SA, yet he did not know who they were.  He did not even know who the South African shareholders in that company were, because he had not run the bid. The reality of the matter was that if one had a process and there were eleven successful bidders, and they were given a similar contract for the same period, but one isolates one for bidding, something would be very questionable in that case. His view was that Karpowership SA had been selected as one of the bidders, but the Department of Forestry, Fisheries and the Environment (DFFE) had said it was not in the interests of environmental security, and people who were involved had appealed that decision, not the Department. So, if the DMR was expected to argue on behalf of Karpowership SA, it was not going to that. The Department could argue for the programme, or being in favour of the programme, but not for a particular bidder. Even if they appealed against the environmental issues, it was not the Department that would appeal, but the business people and business associations in the coastal area where the bid would be located. The Minister wanted to give that process space to unfold and come out with results. When processes were subjected to a particular legal process, the duty of the Department was to comply with the outcome. It was unfair that the Department was expected to debate and argue for Karpowership SA.  

On the chronology of the issues that had been raised, the Minister said the Members were referring to 18 March 2021, when the eleven bidders were announced, because the bid submissions had closed in December 2020. The procurement processes conducted by the IPP Office had been above board. He said it was quite dangerous to throw mud into the process that when one loses a bid. People should have gone to court to challenge the Department if they thought they had been unfairly treated, but should not cast doubt on the process. Casting doubt on the process was dangerous because it seemed to discredit the process. The IPPO had been running the process so far, and if they allowed mud to be thrown at the IPPO now, they would find it difficult as they moved forward to run any other process.

The new head of the IPPO, Mr Magoro, happened to be an African, and many people throughout the discussion and in media statements did not believe that one could have an African running that Office. He was confidently doing so, so they should not try to discredit him and question the process.

Mr Mileham interrupted on a point of order, accusing the Minister of racialising the issue, as no one had pointed a finger at Mr Magoro.

The Chairperson said that could be clarified later, but he had not heard the Minister say it was a race issue. There was nothing racial about referring to someone as an African. He would not allow the meeting to degenerate on a race matter that had not been raised.

The Minister said the point he was making was that Mr Magoro had given the PC a detailed framework of the process followed.  It was dangerous to target the man and not the process. one did not play the man, one played the ball.

He said the Department did not have to answer questions on the reasons for the exemptions by the DTIC. When the DTIC received a project and maybe an application, it would look into it and give its reasons.

In response to the issue of the DG and the DDG meeting somewhere, he said he was not aware of this. The Department had an office, and anybody who wanted to meet them was expected to come to the office. He was not aware of the meeting, and read about it only thereafter.

On the issue of the lawyer, Mr Makasi, his alleged associate, the Minister said he had never really had any dealings with him. The only deal he had with Mr Makasi was when he had found two letters in the office. One was his expulsion by his predecessor, and the other his letter of resignation. When he wrote to the Minister to clarify his expulsion, he had responded that he had a letter of resignation from him, and then the matter was closed. Beyond that, he never had any dealings with Mr Makasi, so he did not know what an "associate" was. If an associate was anybody one had spoken to, maybe he would understand, and then it would mean that everyone in the Committee was also his associate.  He had never had dealings with Mr Makasi, and had never had a meeting where he had been involved.

He responded to the applicant's retraction, saying when one wanted to scuttle a process one would use any rules that could delay the process. The reason why he wanted to wait for the Parliamentary process was that he was trying to delay and scuttle the process.

He said the presentation had been given openly, with all the details of what processes had occurred and in what chronological order. The PC could scrutinise it and call the Department back if it wanted to -- but hopefully, not on a Wednesday!

On the combination of companies used, the Minister said it was a deliberate move by the IPP Office to ensure that the entity was managing the questions regarding demography in many areas of competence. He did not want to talk to issues where people made statements and observations, but quite interesting for him was a court issue, where a bidder said "fire that bidder and appoint me!"

Mr Magoro said the names of the individuals who served in the different committees could be provided. He pointed out that an audit was carried out after this process by the Auditor General, so the process was also overlooked by the AG, and it would go through the same process to verify it. However, he was not aware if there had been a request for a list of names. They could make the names of those individuals from the technical advisory committee (TAC) and the bid adjudication committee (BAC) members available to the Committee. 

The Minister had already touched on the waivers by the DTIC. The DMR was not a party to that process. The DTIC makes its rulings based on its assessment of the market and decides whether or not to grant, or to even grant a partial exemption, if it deems fit. In this programme, it had granted several exemptions -- it was not just Karpowership SA. It had also granted partial exemptions on  solar PV models, because it had subsequently realised that there was not even manufacturing capacity in the country. When the DTIC grants exemptions, it is an entirely independent process that it undertakes on its own.  

Referring to economic development issues, the ED scorecards had a minimum threshold, as mentioned, of 49% ownership by South African entities, and BEE requirements of 30% minimum ownership by black people. Bidders were therefore incentivised to go beyond the minimum by getting more points in the competitive ranking process. If a bidder, for example, had more than 49% South African ownership, or more than 30% black ownership in their entity, they got more points, therefore they would have a better chance than the other bidders. There were seven elements of the ED scorecards that could be made available to the Members of the Committee as well, covering issues like local content and skills development. All of these were made clear upfront before the RFP went out. However, if the bidders realised that there was not enough manufacturing capacity, they were allowed to apply to the DTIC for an exemption, and if the application was successful, it was communicated to all the other bidders. That became a briefing note to the RFP, which meant it changed the original requirements that were in the RFP.

The information on how each bidder was scored was available. It was subject to confidentially, but it could be made available. It had been part of the papers that had been submitted to the court, and could be made available as well.

On disqualification, he said that for each of the bidders that had been disqualified, the entity had written to them and communicated exactly on which aspects of the RFP they had failed. They were all allowed to have an engagement meeting with the Department to explain further where they had failed. Besides the one bidder, all the other bidders had accepted the decision of the technical advisors and the bid evaluation committee.

Authorisation and permits were nothing new -- it was the same process that was followed every time. The National Energy Regulator of South Africa (NERSA) could issue a generation licence only after the preferred bidder stage and that process takes place immediately after the announcement of the preferred bidder. Similarly, Eskom issues the connection budget quotations only after that process. This was another permit they needed to come back to the Department, for the entity to then sign the contract agreements with them. Similarly, with the ports authority as well, they would have to come back to the Department with approvals before reaching financial closure.

Mr Magoro said there had been no reserve bidders in this case, which was a decision that was taken upfront -- that there would not be reserve bidders in this programme. If the entity wanted to have reserve bidders, it must again indicate in the original RFP that for this programme there would be reserve bidders, meaning that if bidders fall off, there were subsequent bidders in the ranks that would then come in. However, this was not provided for in this RFP, so whoever did not reach financial close would not proceed to sign the agreement document. The Minister had already responded to how the entity filled the gap if some of the preferred bidders did not reach financial close. At this point, the only option was either to go out for another programme, or fast-track to subsequent programmes.

On the floating storage regasification units, he could not comment on the current state, but there were engagements between different bidders who were using gas technologies, and the Transnet National Port Authority (TNPA). That process was still ongoing. He did not have the details of where they were and how many FSRUs would be allowed in the ports. The TNPA and the bidders themselves were in a better position to answer this themselves.  

He admitted to Mr Wolmarans that there had been an error in the slides -- it should have been 2021, and not 2020.

In response to Mr Lorimer’s question on exemptions, he said he did know why the DTIC had given the exemptions that they gave to all the applicants. That information was detailed in the letters that the DTIC had issued to the applicants, and those letters could be made available. He did not want to try and interpret what the reasons were, but the letters were available -- the entity had issued them as part of the briefing notes as well. It was not just the Karpowership SA that was given exemptions on inverters, and the PV models.

The reason for mentioning that there was a governance process in the exemption was that the RFP itself had indicated what the closing date for the bid submission was. This was a material change to the RFP -- the entity needed to make its recommendation to the BAC, and the BAC had to independently evaluate the reasons for asking for extensions. Only after they were satisfied that the extension was warranted would they then recommend to the accounting officer for approval. So the reasons were coming mainly from the bidders. The programme had been complex to structure from a technical design viewpoint, as well as the financial arrangements around the funding. It needed more time, and the entity had looked at the request and based on the justifications that were given and the fact that December was a dead month, it had decided to support the request. It had then gone to the governance process before it could be communicated to the market.

Unfortunately, the question on Karpowership and its environmental authorisation was a matter for the bidders themselves to answer.The entity could not respond because it was not a party to the licensing and the authorisations that the bidders needed to achieve before they could reach financial close. So was the confirmation of the funding with their lenders.

Mr Magoro said he was not sure why the applicant wanted to wait for the Parliamentary process to be concluded. It was quite strange that if there was a case from the beginning, the case should be able to stand on its own without relying on the outcome of other processes.  The Department was as confused by this recent application as the Members were.

In response to Mr Kula’s question on whether there was an element of undue influence in the process, he said the answer was no -- as had been shown in the presentation. It was not possible to influence the process. Not even he could influence the process, as there were so many checks and balances, and even the different technical advisers worked in isolation. They all brought the outcome of their process to one meeting, and everyone explained their findings.  If there was a failure point, they came and justified why they believed the particular bidder had failed. There was an interrogation until the Bid Evaluation Committee was satisfied that it was indeed a failure point. The question of undue influence was therefore very improbable in the programme because of the way the process had been structured.

The Minister cautioned Mr Magoro not to over-commit. There were processes that had been undertaken by the Committee, and if those processes involved asking for the information, it would be provided, and if it was leaked somebody must take responsibility.  The Department was not going to distribute names and other information willy-nilly. If a process of Parliament required the names, they would be provided through that process, so that somebody could be pinned down if it was leaked.

The Chairperson appealed to Members to focus on issues that could assist the Committee and the process, in the best interest of the country.

Follow-up questions  

Mr Lorimer said he was glad that the Minister had said he was not aware of the DG and DDG meeting with the prospective bidders. That had been a very important answer. Also, his response on Mr Makasi was important to have on record. One of the questions he had not answered was whether he was you happy in his own mind that this procurement process was conducted in a correct and above board manner. What were his feelings about that?  

He said when the Minister used the "straw man argument" about people criticising Mr Magoro for being African, that did one thing -- it made it look like he was introducing a red herring, and that there was more to this issue than an above board process. It would lead some people to think that he was hiding something.

The Minister had also launched an attack on people by saying they were picking on one company. He asked to refresh his memory as to why they were focusing on Karpowership SA. It was a massive long-term project for what was usually seen as an emergency short-term power supply source. There had also been an illegal environmental authorisation, there had also been an unexplained meeting with top officials, and there had also been allegations of corruption. This was why the Members were looking into it. It was called oversight.  

Mr Mileham said the PC's inquiry had nothing to do with any court action, and indeed at no point did any of the information the Committee had requested have anything to do with the court case or processes that were being undertaken in the courts. This inquiry was an independent inquiry of Parliament, which was part of the PC’s responsibility, as defined in the Constitution. It was part of the oversight role, and it therefore blew his mind when the Minister made a statement that his answer should be sufficient.  The minister did not get to decide what was sufficient for an answer -- he was accountable to Parliament, so if a question was asked, an answer was expected from him.

He went back to his question which he felt the Minister had tried to obscure earlier. Who were the people sitting in those committees? He had asked those questions because there were allegations of undue influence and corruption, and that people had connections. The Members were trying to determine what those connections were and who was involved, and that made it necessary for them to know who was sitting in those committees. It did not help for the Minister to say his answer was sufficient, or that he had given names of the companies that were involved and that was sufficient information. The Minister did not get to make that determination.

He also pointed out that no one had attacked Mr Magoro at all. Mr Magoro had been giving a presentation, and Members had gone after the issues raised in the presentation, not him as a person. No one had called him into question in any way whatsoever.

When the Minister announced the preferred bidders in March of this year, and about the hard financial close date of the end of July, how could he say this was a hard close date -- that this was the date in which everyone must have their ducks in a row, they must have all their documentation sorted, they must have all their financials, they must have all their authorisations? On what basis, could he then suddenly shift it to the end of September? Was it going to be shifted again, with it being 30 days away? Mr Magoro had just told them that only once the financial close was reached could other authorisations be issued. He had also mentioned the ports authorisation and Eskom, where he was probably referring to the power purchase agreement, but there were other authorisations, such as the grid connection authorisation. All of that would need to be in place before the financial close date. Were they going to see another extension, and on what basis could the Minister just say, "Oh well, I'm changing the rules?"  On what basis could he say he was changing it from 30 July to 30 September? Where did this come from?

Minister's response

Minister Mantashe said he had repeatedly stated that the process was correct, above board and transparent. That was why he had referred to the stages of the RFI, the material determination, the RFP -- all those processes had been transparent and open, and gave access to the public to interrogate the process. Therefore, as far as he was concerned, the process was correct and above board, and had all the checks and balances.

He became worried when people got nervous when race was spoken about, as if they were not in South Africa. Race was a factor in South Africa, and it would remain a factor for a very long time. If one became nervous when they talked about race, that was concerning more because race was not about what one did -- it was more complex than that. It was sometimes in the subconscious mind of people, and when people jumped up and down, that subconscious reaction came to the fore.

He said he was in the PC meeting because he had nothing to hide.

On focusing on one company, the Minister said he had not come across the information that the meeting was about the company, neither had he come across any long-term contracts. All of them had the same length of the contract. That was why he had said that when the focus was on one company, it communicated a very complicated message about their view, approach and attitude towards that company.  Long-term contracts were for all 11 preferred bidders. He did not know anything about the meeting, because he had not been in that meeting.

He agreed with Mr Mileham that the Committee process did not have anything to do with the court process.  He had not been told that he was coming to an inquiry today. He had been told that he was invited to the Portfolio Committee, so when he gave answers he could say had had given sufficient information, and added a rider -- which Mr Mileham had ignored -- that said when there was a parliamentary process that required the names, they would have to submit those names in that process. It was important to protect the individuals, because if the names were distributed and the next day one read it in all the newspapers, those people were exposed. He reiterated that the entity would provide the information to the parliamentary processes anytime they asked for that information, but it would not be available freely.

The shifting of the financial closure had been an essential exercise, not a political one, because Eskom -- which was the ultimate procurer -- had not been ready. The extension of that deadline was therefore in the interest of the procurer, which was readying itself to be part of the process and concluding it. On the possibility of another extension, there was no such proposal on the table at this point in time.

The Chairperson said the Committee welcomed the Minister’s commitment to make himself available in the event that it decided to invite him to the inquiry. However, it still needed to deal with issues around the timeline, the information needed and witnesses. It undertook to find a date soon to finalise the modalities of the formal inquiry into the allegations.

The Committee went through meeting minutes, which were adopted with no matters arising.

The Chairperson updated the Members and deliberated on the Committee programmes before going on recess.

The meeting was adjourned.