ESKOM: hearing on deviations and expansions for Quarter 1 & 2 2021/22

Public Accounts (SCOPA)

01 March 2022
Chairperson: Mr M Hlengwa (IFP)
Share this page:

Meeting Summary

Watch


The Standing Committee on Public Accounts (SCOPA) met on a virtual platform for a hearing on Eskom’s expansions and deviations for Quarter One and Quarter Two of 2021/22.

Eskom submitted 11 deviations and 28 expansions for approval for the first two quarters of 2021/2022 totaling R879 million and R1.9 million respectively. Of this amount, National Treasury rejected three requested deviations and four expansions while the rest were approved or conditionally approved.

The Committee had already read through Eskom’s presentation before the meeting. In the meeting itself, the Committee presented a set of questions on specific transactions where expansions and deviations were requested, and members of the Eskom delegation responded to those questions.

The Committees’ questions on expansions included the following topics: that Eskom was amongst the top 20 to submit applications for expansion in Quarter One of 2021/22, with the highest number of applications. Eskom had submitted 28 expansions for approval, totaling R1.9 billion. National Treasury rejected four expansions, while the rest were approved or conditionally approved. There were five applications with a value of R1.3 billion for noting. In the analysis, in quarter two, Eskom made six applications for expansions. There were four applications totaling R859.5 million. Those were conditionally supported by Treasury. The two applications totaling R6 million were not supported. Eskom’s contract extension, purchase and collection of fly ash from its supplier Arnosh Ash (Pty) Ltd were not supported. However, in the presentation submitted to the Committee, it was stated that the application was supported by Treasury on 25 November 2021, with the contract being extended from five to ten years. In that, the Committee needed more explanation. On 26 July, a company by the name of Metrofile, which provided document storage, was not supported by Treasury. It was declared irregular by auditors, and Eskom was required to take action against the responsible officials. It was declared irregular by the Auditor-General of South Africa (AGSA).

There was a list of four transactions that were conditionally supported. These were Kaefer Thermal Contracting Services (Pty) Ltd, Southey Contracting (Pty) Ltd, and TMS Group Industrial Services (Pty) Ltd. The roles of the companies were supplying transportation, erection and dismantling of scaffolding and insulation material. That transaction was conditionally supported by Treasury, where one of the approval conditions was an extension of three months, ending on 31 October 2021. Another conditionally approved transaction was for Thero Services, described as the provision of a heritage specialist for exhumation and rescue of heritage resources at Manogeng Substation. National Treasury supported the extension due to the nature of service and on condition that the modification costs are independently assessed, and evidence of the independent assessment was submitted to National Treasury for review. The Committee said that it wanted to hear from Eskom whether that was done.

On 5 August 2021, the project description was an expansion request for the Medupi Consolidated Building Management System (CBMS) by a company named Honeywell Automation and Control Solutions. An extension of that contract for six months was approved, from October 2021 until March 2022. The Committee noted that the contract was declared irregular by auditors. Eskom was requested to take disciplinary action against officials responsible. In its submission to the Committee, Eskom indicated that the responsible employees had resigned. With regards to Thero Services, Eskom explained that the expansion was supported on condition that the costs were independently assessed, and the evidence of that assessment be submitted to Treasury. The Committee responded by saying that it wanted to hear from Eskom whether that did in fact happen.

On 16 August 2021, a request was made to review the current task of the law firm ENS Africa to include an application brought by Eskom against Econ Oil. This was conditionally supported – the Treasury supported the extension only for this scope of work and on condition that it was cost-effective for Eskom to use the same service provider to render this service than any other service provider and on condition that rates per hour/per resource are market-related. The Committee wanted to hear more on whether it was indeed cost-effective.

The Committee also asked questions about expansions which included the following topics:

Whether Eskom institution had its own policy, which sought to create credibility on procuring goods and services;
Whether such a policy was in line with the Public Finance Management Act; and
The transaction with Honeywell Automation and Control Solutions.

With the latter, the Committee asked if there were any payments made. The Committee noted that there was a bid that was reviewed and set aside on Econ Oil. Had there been any consequence management process undertaken, and what was the status now of Econ Oil as a supplier of Eskom? Was Econ Oil allowed to trade with Eskom or not? If not, why? The Committee said that it needed to be informed if there was any legal basis for such restrictions.

Regarding deviations not supported by Treasury, the Committee asked Eskom preferred the services of Trans-Africa Projects (Pty) Ltd, and not test the market and on what basis did the Eskom official Dr Stephen Meyers approve that deviation. On deviations conditionally supported by Treasury, specifically Bentley Systems International Ltd Eskom stated that the Request for Proposal (RFP) to the open market was being finalised, and would be issued during quarter two for the year 2021/22, at the end of March 2022.

The motivation provided by Eskom for the deviation was that the Minister and a United Nations Climate Change Conference (COP26) delegation visit to Komati was deemed an emergency. Treasury’s response was received after the work was completed. That application was not approved by Treasury due to poor planning. Treasury told the Committee that it mostly approves the requests to avoid hampering the utility’s ability to supply electricity. Government entities and departments are permitted to submit requests for deviation from or expansion of procurement legislation, which requires an open bidding process. Expansions allow entities to use existing contracts without requesting new bids from suppliers.

Treasury did not have much room to deny Eskom’s requests for deviations and expansions. Denying a request may sometimes compromise the continuation of Eskom’s projects. The Chairperson said that many requests for deviations may indicate that the procurement practices of an entity are poor, not being adhered to or that the entity, such as Eskom, was using the procurement provision by Treasury to circumvent normal procurement practices. To reduce the number of deviation and expansion requests, the Eskom Chief Financial Officer (CFO) said that Eskom was cautious about the quality of requests. Eskom needed to also take into account the continuity of certain transactions that required skill to expand so that it did not find itself in a situation where contracts expire, because that should not be a reason for requesting expansions, according to the CFO.

Treasury also requires that motivations be provided for deviations during procurement as opposed to testing the market for new service providers. Treasury’s Chief Procurement Office told the Committee that the deviation requests submitted by Eskom in some instances put Treasury in a position where it had to approve it in the interests of service delivery. For example, if a power station had a unit that was down and Eskom required specific equipment to bring that unit back, Treasury approves the deviation request so that it may be able to ease the strain of having outages.  Treasury cautioned Eskom because it did not want to infringe on Eskom’s technical ability to make such a decision. Treasury’s responsibility was to make sure that a procurement process was followed.

Meeting report

The Standing Committee on Public Accounts (SCOPA) met for a continuation hearing on deviations and expansions for Quarters One and Two of 2021/22, which would be presented by two Committee Members, Ms N Tolashe (ANC) and Ms B Swarts (ANC). The Chairperson, Mr M Hlengwa (IFP), had received a list of delegates that morning, which consisted of the Department of Public Enterprises (DPE) and Eskom. The Minister was at the President’s social compact meeting, which was taking place at the same time as the meeting. The DPE delegation would be led by the Deputy Minister, the Director-General (DG) and the Deputy Director-General (DDG). The Eskom delegation consisted of the Chairperson of the Board, three other Board Members, as well as the Executives.

The meeting was a continuation of the hearing on the expansions and deviations for quarters one and two of 2021/22. In quarter one, the expansions were R879 million, and in quarter two R1.9 billion. The deviations had a similar scenario of escalating numbers. There was also R11.6 billion in irregular expenditure.

He thanked Ms Swarts for stepping in, as there was an urgent matter that Ms V Mente (EFF) had to deal with.

Mr Lebohang Tekane, Parliamentary Liaison Officer, Department of Public Enterprises (DPE) apologised to the Committee, as the Deputy Minister was not in the meeting at that time.

Prof Malegapuru Makgoba, Chairperson of the Board, Eskom, made introductory remarks. He wished the Committee a good year and hoped that the year would bring good progress and good news to all. He noted that Mr André de Ruyter, Group Chief Executive (GCE; hereafter referred to as the Chief Executive Officer [CEO]), Eskom, was abroad on business, so he would not be attending the meeting. In his place, Mr Calib Cassim, Chief Financial Officer (CFO), Eskom would lead the presentation. He felt that Eskom had started the year on a good note, and things were looking good at the entity. It was looking forward to the state capture report that would be coming out that day. It had been preparing itself to tackle it, but the business of the day was to deal with the deviations and expansions that had been outstanding since 2021.

Mr Cassim asked for direction on how to proceed.

The Chairperson found it difficult that the Minister and the CEO were not there and that those things were always sprung on the Committee at the last minute. He did not know what else one was expected to say to Eskom. Perhaps he was being “pedantic”; he was not sure.

Ms Tolashe raised the same concerns as the Chairperson. First, it was unacceptable that the Committee was being informed of the CEO’s absence on the day of the meeting. Secondly, Prof Makgoba mentioned that matters the Committee would be dealing with that day, were the matters it was dealing with last year. The Committee and Eskom parted ways because there were answers that were not satisfactory. Thirdly the CFO, the actual person who had implemented all that the Committee was going to deal with was supposed to give the Committee answers. She did not think that was fair. Why was Eskom “full of drama”? Why was there “drama” every time the Committee had to deal with Eskom? The Committee was expected to deal with the work before it, when Billions had been misdirected. When it was to engage with that, there were “stories” once again. Eskom “liked to play the victim”, so that it “ran away” from accounting, because it would be seen as “the one who was not being liked in the family”. She did not think that was acceptable. Had the Chairperson received an apology, to say that the CEO was not going to be at the meeting, he would have arranged the meeting for a different date and time.

Ms Tolashe said that she did not see a reason why the Committee should listen to the CFO, as he was the same person who made the situation the Committee was dealing with. She had a strong feeling that the Committee was not being taken seriously by Eskom. The Committee was seriously being disrespected. The meeting was known about last year already. If proper communication could have come before the meeting, to the Chairperson’s office, then he could have rearranged the meeting, because what the Committee was dealing with was Billions in taxpayers’ money that was not properly accounted for. She asked that the Committee deal with the matter of the CEO not being in the meeting before the presentation. It is careless for Eskom to underestimate its responsibility to the taxpayer, concerning the amount of money that was being used in an inappropriate way. The Committee also needed to deal with the matter that it did not seem that the Chairperson had received an apology from the CEO before the meeting. From where she was sitting, the Committee could have rearranged the meeting, because the Committee needed the CEO, and the Accounting Officer, to come and account. The CEO needed to account before the Committee and the taxpayers. She asked that the Committee deal with the matter that the CEO was not there in a meeting that he was informed of long ago, and deal with the matters that needed the Accounting Officer in particular.

The Chairperson said that he received a list of attendees via email at 09:24 on the morning of the meeting, which was six minutes before the meeting was scheduled to start. It indicated an apology from the Minister, but he had not received an apology from the CEO. He noted that slides would not be presented in the meeting; the Members would go straight to questions because they had read the presentation.

Ms Tolashe thanked the Chairperson for the explanation. It raised serious questions that he received a list of attendees close to 09:30 when the meeting was about to start. The Chairperson of the Board also needed to take responsibility for that, as the overall overseer of Eskom. She knew and accepted the fact that the Committee was under serious pressure in dealing with those matters. The Committee took longer to deal with those matters than anticipated. It needed to be registered that Eskom did not take Parliament seriously. She did not know if the Chairperson of the Board could know that morning, four minutes before the starting time of the meeting, that the most important people were not attending the meeting. How would the Chairperson of the Board take the fact that when a meeting had been pre-arranged, and apologies came four minutes before the actual meeting? As much as the Committee was in a hurry to conclude those matters, the Committee needed to note the disrespect that was being demonstrated. Eskom seemed to disrespect everybody. Maybe with time, the Committee would get to know the reasons. If the Committee could not get the reasons, it needed to find a way to make sure that the Minister came to tell the Committee whether it was still the right team to deal with Eskom. The taxpayers had given the Committee that responsibility. Eskom seemed to disrespect everybody; that was how she felt about what the Committee had just been informed on. She felt that she must register the Committee’s dissatisfaction with what Eskom was “always doing” to the Committee. Eskom liked to “play the victim”. It was now the norm so that everybody saw Eskom as a victim. At the same time, Eskom got away with accounting processes, which is its sole responsibility, in light of the laws that governed the country. She did not think the current situation was acceptable. She asked that the Chairperson forgive her for expressing herself that way, but she felt she was taking the correct position as part of the Committee.

The Chairperson replied that Ms Tolashe did not need to apologise.

Mr S Somyo (ANC) thought that Ms Tolashe’s words covered the Committee’s disappointment. At least it would have been fair to the Committee if it would have found a way to postpone the meeting if the accounting officer had difficulties with being part of the meeting. With the fact that no apology from that office reached the office of the Chairperson, it remained that there was no apology. The Committee must not take that lightly without denigrating the actual attendance to the matters which were primarily aligned to Eskom. What had caused this kind of dealing and failure of communication? It was an angle that one would want to take. In anticipation thereof, one would have to deal with the fact that the Committee had a planned oversight visit to Eskom. The Committee would be dealing with critical matters in the absence of the accounting officer. It would become problematic, and the Committee might want to link that kind of session (i.e. the hearing) with the visit it would pay to Eskom sometime this quarter to finalise those matters.

Ms B Van Minnen (DA) was confused - the Chairperson said that the Committee had the presentation and that it was noted as read. She wanted to note for the record that in fact, at 08:01 on Friday 25 February, she received an email addressed to all of the Members which had the attached Eskom presentation. That message came from an email received on Thursday evening at 18:23, which had the presentation from Eskom, and a letter from Eskom noting that Mr de Ruyter would not be in attendance, etc. due to international travel and engagements. The fact was that the entire Committee was informed on Friday morning of that. She did not know why Members were now saying that they did not know about it. She was also concerned that, if she looked at the last two times Eskom appeared in front of SCOPA, there had been certain Members of the Committee who had essentially tried to disrupt meetings, and not allowed the Committee to continue with some of its oversight. She was concerned that, that was becoming a pattern, and she was appealing to the Chairperson to please deal with that matter.

Mr Tekane wrote in the chat box: Chair, our submission to SCOPA had both the presentation and correspondence from the Board Chair and Minister, about the GCE’s unavailability to today's meeting.

The Chairperson noted what Ms Van Minnen raised, and added he had not received any correspondence about the apology of the CEO. Any other correspondence that Eskom wrote between its employees was between themselves. He always took the professional courtesy to send formal letters to all entities and departments, persons of authority, and persons of office. Seemingly, it was fine for people to think that they could respond with WhatsApp messages or SMSes. Responding to Ms Van Minnen, the Chairperson said that he felt that there had to be an improvement in how Eskom and the DPE communicated with the Committee. He did not have a letter from Eskom telling the Committee that the CEO would not be in the meeting. At 09:24 that morning, he received a list of attendees. It was an “age-old problem” of the communication protocols between the Committee and Eskom. The presentation was taken as read. The board was in the meeting, which was the accounting authority of Eskom. He noted Mr Tekane’s message in the chatbox, and would respond to it.

The Committee was going to Eskom at the end of the month, as soon as it got approval from the presiding officers. He made an appeal that since the board was in the meeting – the CFO and Chief Operating Officer (COO) were present, that the Committee proceed. If there were matters on which the Committee did not receive satisfactory responses, it would flag those and continue with those matters when it met with Eskom at the end of the month. The request was made reluctantly because there seems to be a pattern that there always had to be a “trailer” of sorts; a dramatic preamble to the Committee’s meetings with Eskom. It was not acceptable to not do things the right way. If he took the common professional courtesy to write to someone (in this case Eskom or the DPE) on a formal Parliamentary letterhead, and append his signature at the end, it was equally common professional courtesy to respond in the same way. It needed to be understood that SCOPA was a Committee of Parliament. It was not a street committee somewhere, which just informally constituted itself as an ad hoc structure. The Committee represented the House, and it was an arm of the state. He did not think those elementaries were a discussion which the Committee should have been having with a corporate such as Eskom. It was basic professional courtesy. The bottom line was that Eskom and the DPE needed to do better.

Prof Makgoba apologised to the Committee, explaining that he had followed protocol in that matter which was to be honorable in dealing with the Committee and show respect. He wrote to the Minister of DPE, indicating the apology that had been “recorded somewhere”. The letter to that effect was on record. It was the usual communication problems, but it was not out of disrespect that Eskom was in that situation. The letter may not have reached the Committee and the Chairperson in time, but nevertheless the required actions had been done. The Eskom team that was in the meeting was properly constituted, except for the apology. He understood the sentiments of the Members. He did not think the board of Eskom did not respect the Committee as far as he could read from the situation. He agreed with the Chairperson that the parties involved should try and deal with all issues arising in the meeting, and whatever was not resolved would perhaps be handled during the visit that the Committee was planning. Hopefully, communication would be better going forward. To place it on the record, a letter had been sent to the Minister to record Mr de Ruyter’s apology, long before the meeting. How that letter had not gotten back to the Committee was something that he could not account for at that moment.

The Chairperson said when Prof Makgoba and the Committee met on the oversight visit, the two parties could iron out the communication headache because the Committee had been saddled with it for a long time. He reiterated that one thing he would not compromise on was protecting the collective integrity and seriousness of the Committee. The Committee would flag the matter of communication on its oversight visit to Eskom. The Committee had been down that road before where there was a conveyor belt of sorts, or a “tollgate”, as far as getting communication went.

The Chairperson noted that for the sake of time management, the Eskom delegation would not be presenting the presentation, but instead at every material point of a question, Eskom would take the Committee to the relevant slide, so that the Committee managed its time because there was a House was sitting at 14:00. 

Eskom Expansions for quarters one and two of 2021/22

Ms Tolashe thanked the Chairperson for his clarification. She explained that the Chairperson mentioned that he did not receive a letter, and that was where Members were coming from. She then proceeded to present.

Ms Tolashe recalled that Eskom was amongst the top 20 applications for expansion in quarter one of 2021/22, with the highest number of applications. Eskom had submitted 28 expansions for approval, totaling R1.9 billion. The rand value of four of Eskom’s applications was R6.7 million. Applications with a value of R11.6 million were conditionally supported. National Treasury rejected four expansions, while the rest were approved or conditionally approved. There were five applications with a value of R1.3 billion for noting. In the analysis, in quarter two, Eskom made six applications for expansions. The total value of those six applications was approximately [inaudible]. There were four applications totaling R859.5 million. Those were conditionally supported by Treasury. The two applications totaling R6 million were not supported. Eskom’s contract extension, purchase and collection of fly ash from the supplier Arnot Ash (Pty) Ltd was not supported. However, in the presentation submitted to the Committee, it said that the application was supported by Treasury on 25 November 2021, with the contract being extended from five to 10 years. Regarding that, the Committee needed further explanation. On 26 July, the use of Metrofile, which provided document storage was not supported by Treasury. Further, it was declared irregular by the Auditor-General of South Africa (AGSA), and Eskom was required to take action against the responsible officials.

There was a list of four transactions that were conditionally supported. These were:
Kaefer Thermal Contracting Services (Pty) Ltd,
Southey Contracting (Pty) Ltd, and
TMS Group Industrial Services (Pty) Ltd.
Thero Services

The roles of these companies were supplying transportation, erection and dismantling of scaffolding and insulation material. That transaction was conditionally supported by the Treasury, where one of the approval conditions was an extension of three months, ending on 31 October 2021. Another conditionally approved transaction was for Thero Services, described as the provision of a heritage specialist for exhumation and rescue of heritage resources at Manogeng Substation. The National Treasury supported the extension due to the nature of service and on condition that the modification costs are independently assessed, and evidence of the independent assessment was submitted to the National Treasury for review. Ms Tolashe added that the Committee wanted to hear from Eskom whether that was done.

On 5 August 2021, with a company named Honeywell Automation and Control Solutions, the project description was an expansion request for the Medupi Consolidated Building Management System (CBMS). An extension of that contract for six months was approved, from October 2021 until March 2022. The Committee wanted to hear whether that was the case.

On 16 August 2021, the project description was a request to review the current task of ENS law firm to include an application brought by Eskom against Econ Oil. The Treasury conditionally supported the extension only for this scope of work and on condition that it was cost-effective for Eskom to use the same service provider to render this service than any other service provider and on condition that rates per hour/per resource are market-related. Ms Tolashe explained that the Committee wanted to hear more on whether it was indeed cost-effective.

On all the transactions that Ms Tolashe made mention of, the Committee wanted to hear Eskom’s response, especially on Metrofile because that contract was declared irregular by the Auditors. Eskom was requested to take disciplinary action against responsible officials. In its submission to the Committee, Eskom indicated that the responsible employees had resigned. When did these employees resign, and what other actions did Eskom intend to take? Eskom also needed to set a tone for other employees. Even if employees resigned, and there were allegations of wrongdoing then Eskom would follow up on the case until the eventual loss was recovered. She wanted to emphasise that.

Regarding Thero Services, the expansion was supported on condition that the costs were independently assessed, and the evidence of that assessment be submitted to the Treasury. The Committee wanted to hear from Eskom whether that did in fact happen.

Eskom’s response

Mr Bheki Nxumalo, Group Executive: Group Capital, Eskom, responded to the points raised on the Honeywell transaction (see slide 47 of the presentation) and the expansion that was not supported. On 30 September 2021, Treasury responded that it supported that transaction with certain conditions. On 9 November 2021, Eskom submitted the documents related to the contract, which Treasury had requested. Mr Nxumalo explained that Eskom was dealing with what Treasury requested. The week before the Committee Meeting Mr Nxumalo was on site, and he had met with the Senior Management of Honeywell and it was indeed finalising that work for the end of March 2022. Everything was in place as per the approval that Eskom had received.

Dr Stephen Meyers, Acting Chief Executive Officer, Eskom Rotek Industries (ERI) SOC Ltd, responded to the Arnot Ash transaction (see slide 39). Regarding the fly ash contract, the contract was placed for a five-year period. There was a request from the contractor that in order to get a return on the capital invested into the plant, the contract would need to be extended to ten years. The application was made on 21 August 2021 for that extension, and it was supported on 25 November 2021. Ms Tolashe commented that it had been supported, and Eskom considered the matter closed.

Mr Phillip Dukashe, Group Executive: Generation, Eskom, said that the Southey Contracting (Pty) Ltd, Kaefer Thermal Contracting Services (Pty) Ltd and TMS Group Industrial Services (Pty) Ltd transactions (see slide 41) were conditionally supported by the Treasury and those conditions were fully met. The contract came to an end at the end of December, and Eskom subsequently placed a new contract which commenced on 1 January 2022. The Treasury had some conditions that were stipulated and those conditions were met.

Dr Meyers spoke on the Metrofile transaction (see slide 50). He said that due to the fact that that issue went back to 2017, to get the correct corporate memory, he would ask Stanley Tshakuma, Head of Procurement, Eskom, to take the Committee through that transaction.

The Chairperson said that that was precisely why Eskom hearings were frustrating. He did not know how many people had spoken on that point. He implored Eskom that moving forward, the leader of the delegation must be au fait with all the issues. The Committee was “to-ing and fro-ing” between too many people; it made for incoherent hearings, and this had been raised before.

Mr Thembokuhle Bhengu, Senior Manager: Procurement and Supply Chain Management, Eskom, spoke to the issue of the expansion on the Metrofile transaction. The condonation that Eskom submitted in July was not supported. The main reason was that the condonation itself did not indicate consequence management thereof. Since then, Eskom had put together a determination report to indicate the people who were party to that transaction. Two people had since resigned. One person had passed on. Eskom was in the process of putting together a new submission for the Committee indicating the status because that emanated from the condonation being submitted as a sole source (see slide three for a definition) instead of it being a single source.

Ms Tolashe said that she could not hear the previous speaker’s explanation. She last heard him saying that one person passed on. She wanted to hear the part about consequence management.

Mr Bhengu said that the reason why the Eskom submission was not approved around July was that the Committee pointed out that on the condonation itself, there was no indication of consequence management. What Eskom had done since then was to do its determination report internally, and in that determination report, it had the number of people who participated in that transaction. Two people out of the people who were party to that transaction resigned. One person resigned in 2020, and the other person resigned in 2017. One person who was party to the transaction had passed on. Following that determination report, Eskom was putting together a submission that would talk to all of those issues that Eskom had just indicated. That submission would be coming to the Committee in the next few weeks.

The Chairperson said the slide on the Metrofile transaction (slide 50) did not say that. Treasury’s recommendation was: “Eskom is requested to commence with the condonation process for this contract as it was declared irregular”. The issue of consequence management was secondary, but the contract was declared irregular.

Mr Bhengu replied that that was correct. The condonation report was the one that was already submitted in July. But because it did not clearly indicate the issue of consequence management, the team went back to do a determination report, which was an internal report. Since then, Eskom had identified the people who participated in that transaction. The slide indicated that Eskom was putting together a new condonation report that it would be submitting to the Committee, following the determination report that it had done internally.

The Chairperson asked if the contract would have been regular if there had been contract management.

Mr Bhengu asked him to repeat the question.

The Chairperson stated that Eskom made an application on an irregular contract. That was the nub of the issue. He was failing to find the nexus between consequence management and the regularity of the contract. Why was the contract irregular? He thought that Eskom needed to think through that explanation very carefully. He noted that the contract was declared irregular, so he failed to find the nexus between consequence management and the regularity of the contract. Substantively, what made the contract irregular?

Mr Bhengu replied that the contract was irregular because it was started as a sole source instead of being a single source. Hence, Eskom had to come to the Committee to indicate it as such, as part of the condonation process.

The Chairperson thought that Eskom should have said that because it went to contract management, not consequence management. Speaking of consequence management was a “cop-out”. It was secondary, because ultimately, why were applications being made on the wrong basis? That was the issue. He cautioned Eskom not to hide behind convenient statements. He wanted to flag that and to put it on record that saying it was because there was no consequence management was incorrect. The contract was irregular. Consequence management did not regularise contracts.

Commenting on ENS Africa (slide 21) Mr Cassim explained that, Eskom was requested to demonstrate the cost-effectiveness of the appointment of ENS Africa for the Econ Oil litigation process. Eskom had gone through its internal legal panel process where it was a mini tender. With the mini tender, rates were submitted. Based on those rates submitted Eskom then appointed ENS Africa for that transaction. It was understood from a legal perspective that as the transactions continued through the legal process in the court cases, it was important to retain the same legal team regarding Econ Oil.

Mr Cassim returned to the issue of the heritage specialist. He said that the matter was being discussed with the Limpopo Provincial Heritage Resources Authority (LIHRA), the complainants, and the Department of Sports Arts and Culture for a resolution. The audit report would be available once the audit was concluded after the reburials and the auditor was satisfied with the completion of the project and report.

Discussion

Ms Tolashe said that even though the Chairperson had pursued the matter of the contract, she could not get an exact answer from the officials. The Chairperson explained that to an extent the definition was not the one that Eskom had. She wanted to know what the Eskom officials’ response was in that regard.

Mr Somyo observed how the Chairperson drove the issue for Eskom to understand the causal factors of those expansions and deviations. Considering all the areas which were of reference for the meeting, it would make sense to make a plea for a policy drive from Eskom, which would be informed by the fact that Eskom “always” went for such applications to the Treasury. The amounts were large, either caused by the fact that a contract fell by the wayside because of time, or it was incorrectly awarded. Therefore, Eskom would feel a bit “strangled” by the fact that those processes required observation of the Public Finance Management Act (PFMA). The question which could be lost there was on whether that institution had its own policy, which sought to create credibility on procuring goods and services. There was also the question of whether such a policy was in line with the PFMA. Therefore, those things would fly on a factor of application after application denial, and restrictions in terms of such applications being caused by a lack of observation of such a policy, which informed procuring by a body such as Eskom. His main concern was looking into such instances where Eskom would apply, Treasury would have a condition, and after that condition had been laid, Eskom would go back to rework its plans. Why was it like that? A problem for Eskom in the first instance is its procurement line which was “a bit blurred”, and did not necessarily assist Eskoms functionality going forward. That flowed away from the legal prescripts as they covered those areas of procurement. Eskom needed to look into the issues mentioned above. It could not have expansions and deviations which went to Billions of Rands, where contracts were given extensions going forward. Such contracts were from 2013, and others from 2017. That was a causal factor that got into evergreen contracts by default.

Ms Tolashe said that the Metrofile transaction happened in 2017. The report was saying that Eskom was preparing for another determination report. How long would it take to make sure that, whoever was alleged to be involved in consequence management, it would in fact be implemented? It was related to the questions Mr Somyo raised.

Mr Cassim replied to Mr Somyo’s question – Eskom did have a procurement policy, which was aligned with National Treasury regulations. What had been positive in the last year was that Eskom was having weekly meetings with Treasury and the DPE, where procurement transactions were discussed. In particular, when it came to the expansions and deviations, Eskom had follow-up sessions with the Treasury to explain the reasoning behind the expansions and deviations. For 2022, Eskom had put in those deviations, but it did respect how deviations were an exception to the rule. In the current financial year, it concluded over 1 600 new contracts, of which the deviations that Eskom applied to Treasury for were 23 deviations. In relation to deviations, it had taken, especially around sole source and single source, a more cautionary approach in requesting those deviations. One would see that coming through. As Dr Meyers explained earlier, Eskom went back to a single source. He believed that those engagements, direction and guidance Eskom was receiving from Treasury was helping to improve the quality of the applications, and the results thereof, but it did acknowledge that deviations were an exception to the rule. Eskom was now reporting deviations and expansions on a monthly basis to the Executive Committee (Exco), as well as the Board Investment and Finance Committee, with a report going to the full board. That was what Eskom had put in place in terms of the deviations and expansions, and it was getting the necessary attention. Eskom also agreed that that focus had now cascaded across the divisions, where divisions had their own heads of procurement, and through the respective group executives that were looking at that.

On expansions: What also needed to be taken into account was the continuity of certain transactions that required Eskom to expand. A Member had asked about expiry – Eskom did monitor that as well to ensure that going forward, it did not find itself in a situation where contracts expired. That should not be a reason for requesting expansions. Eskom needed to do proper planning timeously, which it was focusing on.
Mr Cassim noted that Eskom could follow up responses with more detailed written responses. 

The Chairperson asked about the Honeywell expansion. Were there any payments made? Item four on the approval conditions stated that “Any payment made to the contractors will be independently verified before it is made”. Was that done? Item five stated that “Any expenses incurred before this approval is classified as irregular as it was not supported by National Treasury”. Were any expenses incurred in that regard? In the status section, it said that “Eskom has established a panel contract of consultants from which one will be selected to provide an independent verification of payments that will be made to the CBMS Contractor for the approved period of 01 October 2021 to 31 March 2022”. What was the status of that contract?

Mr Nxumalo confirmed that any payment made needed to be independently verified – that was being done. Eskom had an independent Quantity Surveyor (QS) that verified the project manager’s submissions for the claims of what the contractor was also submitting. On the status of the contract: Mr Nxumalo had met last week with the senior leadership of the contractor with the project team on site. Eskom was on track to meet the date of completion, and the contractor was doing the final work on that contract, after which the contract would cease by the end of March. He had received that confirmation on site the previous week when he was doing site review.

The Chairperson asked if expenses were incurred before the approval.

Mr Nxumalo said that there was no payment done before the approval as the contractor was “put off” during that period when Eskom was waiting for the Treasury’s approval.

The Chairperson asked if the contract had been expanded before.

Mr Nxumalo replied that it had been extended previously. This was the contract that was dealing with the control from different plants once they were finished. There were delays on the civil side: One of the civil contractors went on business rescue, therefore that contractor could not finalise its scope of work. There were additional delays, which Eskom penalised through the contract-allowed delay damages. Eskom had maximised the allowed delay damages on that contract. There were delays from the contractor itself and then from other civil contractors. Eskom had dealt with that, and the contractor that went on business rescue. Eskom was dealing with some payments. The contractor had still continued to finalise, although not at “full speed”. The reasons given above were the main reasons for the extensions of that contract.

The Chairperson asked how many extensions there had been on that contract.

Mr Nxumalo replied that the most recent extension was the fourth extension, which Eskom did in November.

The Chairperson confirmed that the contract had been expanded four times.

Mr Nxumalo confirmed that that was correct.

Ms O Maotwe (ANC) wanted to disagree with the CFO when he said that those contracts were expanded, and Eskom made sure that the contracts did not lapse before being expanded. It looked like “Eskom had created its own separate legal framework that regulated its procurement”, and that was “outside the National Treasury”. The last speaker before the Chairperson said that the contract had been expanded four times already; there were four extensions. That was wrong. Why did Eskom keep extending that contract? It meant that Eskom was not following proper project management principles. Now, it was consistently expanding on that project. Eskom was setting the wrong precedent. It could not have its own rules which were outside National Treasury.

There was a bid that was reviewed and set aside on Econ Oil. Had there been any consequence management process undertaken, and what was the status now of Econ Oil as a supplier of Eskom? Was Econ Oil allowed to trade with Eskom or not? If not, why? The Committee needed to be informed if there was any legal basis for such restrictions. How would the CEO defend his defamation case instituted by Econ Oil for his conduct? What were the cost implications to Eskom for such litigation? Was the bill going to be footed by Eskom, or was it going to be paid directly by the CEO?

Mr Cassim responded to Ms Maotwe’s questions. He did not say that contracts did not expire. Eskom was now tracking the expiry date going forward to ensure that contracts did not expire, and it would minimise expansions going forward. That was the control in place; it was getting the focus at the executive level and the respective Group Executives (GEs). Eskom had enhanced that control. However, there were certain circumstances under which Eskom would apply for expansions. It had to motivate that with Treasury. It had been seen that the engagements, guidance, and turnaround time between Eskom and Treasury had improved significantly. That was helping with the operational requirements. He acknowledged that there were areas that Eskom needed to improve on internally, and it was giving that the necessary attention. The deviation reports were submitted to the board on a quarterly basis, and the Exco on a monthly basis.

Ms Mel Govender, Group Executive: Legal and Compliance, Eskom, responded to the Econ Oil questions. Eskom was currently in various forms of litigation with Econ Oil. The one referred to in the meeting related to the contract which had been declared invalid. The latest development with that one was that Econ Oil had taken the matter to the Supreme Court of Appeal on appeal initially, which was dismissed, and subsequently for reconsideration which was also dismissed. That was something that happened in the last month. On the status of Econ Oil as a supplier at Eskom: Econ Oil had been suspended following Eskom’s supply review process. The suspension itself had not been communicated yet to the Treasury. There was no application to blacklist Econ Oil at that point. It was something that Eskom had in the pipeline, and was currently considering. At that moment, the position Eskom had taken was that due to the various forms of irregular conduct, fraud, corruption, etc. that had been identified against Econ Oil, Eskom was not currently trading with Econ Oil. As a business, it was a decision that Eskom had taken.

On the defamation case against the CEO of Eskom: That matter had been silent for a while. Eskom had not heard from Econ Oil in terms of the cost allocation as to how the legal fees would be paid. Ms Govender said that she did not have a mandate to speak on that.

The Chairperson asked if there were further questions. Ms Tolashe said that she was fine with the responses from Eskom.

The Chairperson then asked Eskom to go to one of the quarter one expansions, specifically item number 46, which was conditionally supported (see slide 16). Had that contract been expanded before?

Mr Dukashe said the contract had been expanded before.

The Chairperson asked how many times the contract had been expanded.

Mr Dukashe replied that it had been expanded ten times.

The Chairperson responded that that was ultimately the issue – Eskom set up those contracts, and then it entrenched them as evergreen contracts through expansions. He said that was a case of evergreen contracts “through the back door”. Why was the contract being expanded ten times?

Mr Dukashe noted that with the previous contract there was litigation against Eskom by one of the suppliers. That delayed the process of getting a new contract in place. That was why the contract had to be expanded that many times.

The Chairperson asked when the litigation took place.

Mr Dukashe replied that the litigation started in 2015. He then added that it ended in 2018. That was when Eskom was able to start a new process.

The Chairperson noted that the litigation ended in 2018. How many times had the contract been expanded since then?

Mr Dukashe said that Eskom would check the exact details of that; he was not sure.

The Chairperson wanted to confirm if there was an expansion post-litigation.

Mr Dukashe replied: “Yes”.

The Chairperson interjected to say that then the litigation argument “falls out the window”, because Eskom seemed to make it the caveat of the expansion, but that had already happened. From 2018 to 2021, Eskom was expanding the same contract.

Mr Dukashe replied that after the litigation, Eskom started a new procurement process. He thought that path that was indicated showed some of the complications that Eskom had that resulted in further extensions. That procurement process was started, and it ended with Eskom awarding on 1 January. Since the litigation ended, a new process was started immediately, and any extensions were due to the delays in the process of getting that new contract in place.

The Chairperson said that ultimately, the contracts became entrenched as evergreen contracts because of shortcomings within Eskom’s system. Eskom could not prop up the issue of litigation as the reason, because that ended in 2018, and it was now 2022. Eskom was granted an extension by the Treasury for three months. Eskom’s contract management was found wanting. What was not right on Eskom’s part was to try and find convenient responses to the complex realities. If the contract had been expanded ten times, how many times was it expanded after the litigation?

Mr Dukashe said that Eskom would confirm that; he did not have the exact number of times after the litigation.

The Chairperson said that Eskom must not come to the Committee unprepared with “half-baked responses”. He had said that on numerous occasions. [IsiXhosa 01:24:45-01:24:47] Eskom was “on its own thing”. [IsiXhosa 01:24:58-01:25:00]

There was an expansion in quarter one on generation. This item did not have a number; it was “TBC”, and was about the fuel oil modification (see slide 17). What was the progress on that?  The existing contracts expired on 30 November and 31 December 2021 respectively. What was the status on that, because it was now March 2022?

Mr Dukashe said that the contracts did not expire; they were due to expire on those dates. Eskom did get approval from Treasury to extend. Approval expired at the end of March, which was when Eskom aimed to get a new contract in place.

The Chairperson stated that that was not what the slide said. Eskom’s own slides said that the existing contracts expired on 30 November and 31 December 2021 respectively. It was now March 2022. So which was which?

Mr Dukashe replied that the contracts did not expire; they were due to expire then, before Eskom got the approval from Treasury.

The Chairperson confirmed that he was speaking to Mr Dukashe, who confirmed that. He asked Mr Dukashe to read the bullet point that was second from the bottom on that slide.

The bullet read, “The existing contracts expired on 30 November and 31 December 2021 respectively.” Mr Dukashe said that that was an error on the slide. It was supposed to read that “the contracts were due to expire on 30 November and 31 December 2021 respectively”.

The Chairperson wondered if there were any other changes that Eskom wanted to make to the presentation.

Mr Cassim said, “apologies, no, nothing from the Eskom team”.

The Chairperson asked Eskom to flight the slide on the boiler feed pump maintenance expansion request (see slide 18). Part of the approval conditions read: “National Treasury supports the extension for six months (6) months only ending 31 December 2021 [...]”. What was the status of that now?

Mr Dukashe replied that that was extended further. The evaluation was in progress, so it was extended until the end of March 2022. The contract would be in place from 1 April 2022.

The Chairperson asked if Eskom had expanded on top of the expansion.

Mr Dukashe replied yes; in quarter two there was another approval.

The Chairperson asked how many expansions had taken place on that particular contract.

Mr Dukashe replied that it was only those two. The first one was to December, and the next one was to March.

The Chairperson noted that it was the last month of the contract – was Eskom on track to meet its deadlines?

Mr Dukashe said yes, Eskom was on track.

The Chairperson hoped that the Chairperson of the Board saw the pattern that he was painting. He hoped that it was noted. He then asked the Treasury delegates to respond to questions. The Committee would then be taken through the deviations.

Ms Basani Duiker, Chief Director, Office of the Chief Procurement Officer (OCPO), National Treasury, began with the contract modifications that were raised and discussed earlier on. The challenge on Treasury’s side was that some of those contract modifications, especially those that came over and over again, tended to be established through deviations (either single-source deviations or sole source deviations). The biggest challenge with establishing a contract in that manner was that right from the beginning, it did not follow a fair process, and it did not follow a transparent process. But most importantly, it did not follow a competitive process. When Treasury saw OCPO saw the contract modification coming to Treasury for consideration, Treasury found itself in no other position but to support those contract modifications, simply because of continuity and the fact that the projects had to continue. It also had to support the contract modifications because of the impact that failure of those contracts to continue would have on Eskom’s ability to deliver on electricity. That was the first hard position. The second hard position was: how cost effective were those processes when contracts kept on being modified in perpetuity? When Treasury supported, it had to support with the condition that those financial implications had to be assessed. From Treasury’s perspective, it believed that Eskom was supposed to assess those cost implications prior to approaching Treasury for modification. As part of contract management, Eskom should monitor the financial implications of the project. But one would see that with the conditions that Treasury then put when it supported contract modification because of the nature of the services or the products that were being required, Treasury then said that Eskom had to independently assess those implications and give Treasury feedback. Additionally, the costs had to be reasonable. A number of times, Treasury found itself in the position where it went back and said the costs looked a bit exorbitant. There were a number of projects; the Committee would have seen some of the letters where  Treasury said that it would take its own time to go out to the market and find service providers that could help it to come back and assess some of those contracts and projects itself, independently. It would do that to bring some sort of assurance or comfort that there was some level of cost effectiveness in how some of those contracts had been modified.

There was another challenge for  Treasury. Ms Duiker gave the example of a contract where the time was extended. She thought that it was the contract that had been extended for five years, where the extension was mostly for time. The reason why the extension was mostly for time was that the contract was being funded by a contingency fund. A contingency fund was a provision that had been assigned to deal with unforeseen circumstances. When one used a contingency fund, there had to be a clear assessment that the fund had been used for its intended purposes and that it was not used for a failure to perform. There also had to be an assessment that the fund was not used for failure to manage the contract properly, and as a result, one incurred unnecessary costs.

Something that Treasury particularly had a problem with in the Honeywell application was that there were significant elements of fruitless and wasteful expenditure. That was why the assessment was critical for Treasury. The identification of the fruitless and wasteful expenditure that potentially existed in the modification of that contract became very important. Fruitless and wasteful expenditure had a framework that had to be followed; if the monies had to be recovered, the monies had to be recovered. That process was critical for the Treasury to continue up until the contract’s conclusion.

On the extension of the fuel oil tender: The contract had been extended. The status that was on the presentation was not the most up-to-date status, because as at the dates that were presented on the presentation, actions that were supposed to be taken (meaning the conclusion of the tender process) were not yet done. That talked to the issues that the Treasury’s colleague from Eskom was referring to around the battles with Econ Oil, and whether Econ Oil had been restricted from doing business with the state, or from doing business with Eskom. What  Treasury knew was that Eskom made a submission to Treasury, to extend the contract further until the end of May in a bid to conclude the evaluation of that tender. But the challenges in the conclusion of the evaluation of the tender depended on the question of whether Econ Oil had been restricted from doing business with Eskom. The colleague from Eskom had indicated that at least from the Treasury’s perspective, it had not yet received a request from Eskom to restrict Econ Oil from doing business with the state.

Mr Somyo asked a question directed at Treasury: Did it anticipate tracking all those matters that related to expansions and deviations of contracts, which came to Treasury in thick files from time to time? Would Treasury have had some form of engagement with Eskom to waiver the application of procurement requirements as per Treasury’s regulations, as well as per the defined prescripts of the PFMA?

Ms Duiker did not understand Mr Somyo’s question. She asked if he could please rephrase it.

Mr Somyo rephrased his question. Looking into the track and trail of the applications for deviations and the conditions from Treasury may be a cause for frustration for Eskom. Did Treasury anticipate, or had it ever had engagements with Eskom that might result in Treasury creating a special dispensation for Eskom on matters of procurement, because of the nature of those matters which came to Treasury for approvals as far as expansions and deviations were concerned?

Ms Duiker said that Treasury had had engagements. There were requests from Eskom that alluded to the challenges it was experiencing when it came to procurement, especially when Treasury would like to effect issues of deviations. These challenges were mostly because of the turnaround time that it sometimes took Treasury to respond, because of the board decision that had been taken that certain procurements should be done through single source deviations by approaching original equipment manufacturers (OEMs), for cost-effectiveness. Treasury had numerous engagements where it had to outline the different challenges that Eskom was facing as far as compliance was concerned.  Treasury continued to engage with Eskom.

On if the dispensation had been granted: There had not been any dispensation granted to Eskom so far. There had been engagements, and there had been a request for such a dispensation to be granted to Eskom.

Eskom Deviations for quarters one and two of 2021/22

Ms B Swarts (ANC) presented.

On deviations not supported by Treasury: With Trans-Africa Projects (Pty) Ltd (see slide 13), why did Eskom prefer the services of Trans-Africa Projects (Pty) Ltd, and not test the market? On what basis did the Eskom official Dr Stephen Meyers approve that deviation. On what basis was Trans-Africa Projects (Pty) Ltd preferred? Was there any investigation conducted by Eskom to ensure that none of its employees had financial interest in Trans-Africa Projects (Pty) Ltd, or any of the companies, especially those that were applications for deviation?

Dr Meyers noted that Trans-Africa Projects (Pty) Ltd was a partially-owned subsidiary of Eskom. For many years in the past, Trans-Africa Projects had an internal supplier status. Hence, where Eskom wanted to increase its performance capabilities by bringing in specialised resources on the training academy, and specialised resources to do some of the projects because it had used Trans-Africa Projects in the past for so many years, that was why it was approached by Eskom. However, when the internal supplier status was withdrawn (around February or March 2021), Eskom made an application to see if it could get a single source, which was rejected. It had gone into the open market to get those resources.

On any conflicts of interest: He believed that any declaration of conflicts of interest was fully up-to-date. As far as he knew there was no shared interest or shareholding amongst employees at Eskom Rotek Industries (ERI) and Trans-Africa Projects.

On OMNI Africa (Pty) Ltd: Did Eskom take the necessary actions to ensure that OMNI Africa was the OEM? Did Eskom obtain the necessary certification and supporting documentation to confirm that? Was that information submitted toTreasury?

Dr Meyers replied that Trans-Africa Projects was more of a consulting-based company which had subject matter experts rather than OEM. It did not produce turnkey solutions or propriety-type equipment. Rather, Trans-Africa Projects had a grouping of subject matter experts, which could add value to Eskom’s projects.

Ms Swarts said that was not what she asked. She was asking about OMNI Africa (Pty) Ltd, not Trans-Africa Projects.

Dr Meyers apologised.

Ms Swarts had asked: Did Eskom take the necessary actions to ensure that OMNI Africa was the OEM? Did Eskom obtain the necessary certification and supporting documentation to confirm that? Was that information submitted to the Treasury?

Ms Faith Burn, General Manager: Information Technology, Eskom addressed the OMNI Africa question. Eskom got a letter from the OEM, and it did indicate that in the letter to the Treasury.

On deviations conditionally supported by Treasury, specifically Bentley Systems International Ltd (see slide ten): In the presentation, Eskom stated that the request for proposal (RFP) to the open market was being finalised, and would be issued during quarter for the year 2021/22, at the end of March 2022. Was Eskom still on track with that? Would that tender be issued on time to avoid further applications for deviations, and to ensure business continuity of Eskom operations?

Ms Burn said yes, Eskom was still confident that it would be able to issue that tender before the end of March. It would endeavour to do this so that it did not compromise the deadlines in the business.

On White & Case: Why did Eskom apply for a deviation from the provision of legal services from White & Case? Why was that company preferred? What were Treasury’s conditions for that contract? Had all those conditions been met? The details for that deviation were not provided by Eskom on its submission. Was it on Treasury’s submission to SCOPA?

Mr Cassim said that the White & Case question related to quarter three. But on a high level, with White & Case, Eskom made a  request for deviation and to continue with it; that company had looked at all of Eskom’s loan conditions and developed a tool that at any point in time could see whether a certain clause in a transaction on Eskom’s loans results in breaches. The request to Treasury was to continue with those services as it embarked on the unbundling process, and it would need such services for lender consent. Eskom could provide a detailed response in writing. It was not on Eskom’s records for quarter one and quarter two. His recollection was that it was rejected by Treasury. Eskom had to go and test the market again.

Ms Swarts asked that when Eskom made its written response, would it also be able to tell the Committee that the R42 382 720 was not paid to White & Case in that instance when it requested that deviation.

Mr Cassim replied that Eskom would answer that question in its written response.

Ms Swarts agreed to that.

On Law Trusted Third Party Services (Pty) Ltd: The motivation for that deviation was that the system went live in April 2020 instead of February 2019 due to challenges in getting Eskom policy signed off by all the relevant forums. Who was responsible for that delay?

Ms Burn replied that she did not have specific names of who was responsible, but she could give the reasons for the delay. The reasons for the delay were around the fact that the architecture was initially for a cloud solution, and at that point in time, cloud services were not approved for Eskom. The second reason had to do with the policy that needed to be adapted for it to be implemented.

Ms Swarts acknowledged Ms Burn’s response on the reasons for the delay, but Ms Burn did not know who was responsible for the delay. Surely Ms Burn should know who worked on that particular contract, or who was responsible for that? She did not understand why Ms Burn would say that she did not know who was responsible for the delay, but she had the reasons why there was a delay. Ms Swarts thought that the Committee should be told who was responsible for that. Even if it was not that day, the Committee should know. Ms Swarts could not say that she did not know who was responsible but equally, had reasons why there was a delay. The Committee was talking about implementation in April 2020 instead of implementation in 2019. She did not believe that Eskom would not know who was responsible for the delay.

Ms Burn replied that she would have to get the exact name of the person responsible and share that in a closed format. The delays were within the project team and the project manager. That would be within the information technology (IT) division.

Ms Swarts thanked Ms Burn for her response, but Ms Burn had said that she did not know who was responsible for the delay. When Ms Swarts “interrogated” Ms Burn further, she was saying that there was an IT manager, but Ms Burn would still look for the name. Those were the problems that the Committee had when Eskom was responding to it. Surely it could not be that Eskom came there, and then all of a sudden there was “amnesia” on who was the IT manager? Surely there was a project team leader, if Ms Burn was mentioning a project team? She was raising that so that when Eskom came to the Committee, it must know who was responsible, and not only be able to give reasons for delays. It seemed like most of the time, when Eskom came to the Committee, it did not want to take the responsibility of naming who was in charge of what, when and how.

On ERI: The motivation provided by Eskom for the deviation was that the Minister and a United Nations Climate Change Conference (COP26) delegation’s visit to Komati was deemed an emergency. Treasury’s response was received after the work was completed. That application was not approved by Treasury due to poor planning. Why was the site only prepared when the Minister and the delegation visited the power station. Why did Eskom go ahead with the work without obtaining the necessary approval from the Treasury?

Ms Mandy Rambharos, General Manager: Just Energy Transition Office, Eskom, said that the planning for that project was in place, and Eskom had scheduled the construction according to its plan. However, Eskom received notification a few days before the planned visit that the Minister, the ministerial delegation, plus an international ministerial delegation were going to visit Komati “way ahead” of the schedule that Eskom had planned. Eskom had to move up its schedule and do emergency work over the weekend to prepare the site for the visit. That was the reason for the request. It was over Saturday and Sunday that Eskom made the request, so it could start the work. ERI was onsite; Eskom did have the necessary people onsite due to how ERI would be onsite in any case. That was when the work started so that Eskom could have it ready when the Ministers visited. That was the reason for moving the work up in the schedule.

Ms Swarts said that Eskom went ahead with such a huge project to visit a site and nobody had bothered to check whether Eskom had approval from Treasury or not. The reason why Treasury did not give approval was due to poor planning. But Eskom was saying in its response that Eskom had planned, but did its planning give it a go-ahead without it double-checking withTreasury. Eskom was equally saying that it was over a weekend. Was that an excuse to implement a project because Eskom was doing it over a weekend? Maybe because it was also citing that it had an international ministerial visit – so did it mean that when Eskom had an international ministerial visit, it then bypassed all of its policies in relation to Treasury giving Eskom the go-ahead? Or was Eskom trying to tell the Committee that if a Minister decided to visit a site tomorrow, Eskom would at all costs go along with its plans, because Eskom had planned, and not followed due process in what must be approved by Treasury? In that, Treasury did not approve Eskom’s application due to poor planning. But Eskom was saying to Ms Swarts that Eskom had planned, and because it was over a weekend, that gave it justification to have proceeded since there was a ministerial visit coupled with an international ministerial delegation.

Ms Rambharos clarified some of the context. Eskom did not implement the full project. The work it needed to get done that weekend was to bring material onsite, specifically to transport material to Komati, which Eskom normally used ERI for. It was tested by Eskom’s procurement team for a reasonable cost. It was not the full project that was implemented, it was transporting material to the site and doing some earthworks. Eskom then made the application on Monday toTreasury. By no means was Eskom was not flouting the governance process. The context was also that Eskom was asked to demonstrate its repowering and repurposing projects to the delegation because it was trying to obtain funding via COP26 for the full repowering and repurposing programme. All of those projects were planned to be implemented. Eskom had gone out to the market for the full project. The work that was done during that weekend was mainly to transport material to the site. By no means was Eskom saying that it would flout governance processes just for ministerial visits. In that case, Eskom was demonstrating that it was serious about repowering and repurposing its sites, and so a minimal amount of work was done that weekend. Eskom had gone out to the market for the full project to be implemented, so it was following that process with implementing the full project onsite.

The Chairperson asked about the action taken. Eskom was talking about R850 000 for preparation and pre-work to comply with a ministerial and intergovernmental delegation. He understood the weekend part, but how did it correlate to the initial work performed by the ERI for a period of three weeks, and part of the work that was taken through the condonation processes? The bulk of the scope of the work had been reissued to the market – he understood that part. But he got a sense that the request was sent to the Chief Procurement Officer (CPO) at Eskom and the response was received after the work had been done. Whether it was R1 or R2, or R850 000, due process was due process. He did not think that there was an appreciation for that in the response that he was hearing. It was not the full scope of the project. When did the processes of engaging Treasury actually start? Did the processes start for the process of the ministerial visit, or did it start prior to that? It had now “landed in the books” as R850 000 in irregular spending.

Ms Rambharos said that Eskom would follow a condonation process for the work that was not approved. The actual work to repurpose Komati was part of Eskom’s project plan. It was a project that was going to be implemented in September/October 2021. But when Eskom got notification of that visit by the ministerial delegation, it moved up that schedule, and that was when it engaged Treasury. Part of the original project plan included the engagements with Treasury, but Eskom was going to go out on the open market for that work. But because Eskom had to move up the schedule and demonstrate to the delegation that it was starting work at Komati power station. It had to engage Treasury at that point for that emergency work to be done.

Ms Swarts said that the question she had asked before the Chairperson asked his questions was her last question.

Discussion

Ms K Mkhonto (EFF) had been listening attentively to questions posed by fellow Members, and the responses given thereof. Another Member had asked about what would happen to those who deliberately inculcated their “unlawful culture” of deviations and expansions and ultimately decided to leave the entity. Could the Committee get a formal commitment? She did not hear what exactly would happen to those people. Could the Committee get a formal commitment from Eskom to say what it envisaged doing to take action against those who brought all that to the entity and then when they saw signs of being brought to book, decided to leave.

Prof Makgoba said that South Africa followed a law that when someone resigned from an organisation, one had no control or responsibility over that person, except if there were criminal activities that had been conducted, which one should report. Unless anybody who resigned was accompanied by some criminal activity, then there was very little that Eskom or any other organisation in the country could do around such a person. Eskom was preparing itself to deal with the State Capture Commission outcomes. Eskom would observe some of those principles. It could not commit itself to follow people who had already resigned.

The Chairperson said that there was a discussion the Committee had around people “globe-trotting” around the different government departments. It was a discussion that needed to go further.

Ms Tolashe asked Prof Makgoba about those people involved in criminal activities who had resigned. There was a “trend” that when the investigation started on anyone, that person would resign. She thought that Prof Makgoba would take the Committee through an explanation, under the same rules that governed the country, whether there would be that situation as Eskom, and the taxpayer would endure such a thing where people were alleged to have participated in corruption and then decided to resign before that matter had been completed. She was very worried because Prof Makgoba also mentioned that Eskom would be dealing with the Zondo report. Did that mean that insofar as Eskom was concerned, nobody would be liable for anything, especially when those people decided to resign? Since the Committee had been listening, with the cases of 2017, it was said what would happen. But in the end, people resigned, and Prof Makgoba said that there was nothing Eskom could do. Perhaps the Committee could deal with that in another meeting. She was very concerned with the statement from Prof Makgoba, especially noticing the trend in Eskom in particular.

The Chairperson followed on from Ms Tolashe’s question to ask if there had been any successful consequence management measures in place at Eskom, insofar as all the matters that the Committee was dealing with were concerned. Notwithstanding the modus operandi of people who leave, was there consequence management for people who had engaged in criminal activities?

Prof Makgoba said that the Chairperson was breaking up; he could not hear what he was saying. There was lots of consequence management that Eskom carried out. Perhaps Eskom should prepare a document that it could submit to the Committee in relation to that matter so that it did not speculate. He spoke about when he was at a university. There were academics who, when they would get into trouble and had to be disciplined, resigned. It was a general issue that the lawmakers needed to attend to because it did create a problem for all those who were supposed to be accountable and responsible for those organisations.

The Chairperson wanted to go back to the expansions. He returned to the project described as “Expansion request for P18 CBMS Medupi Mod.4” (slide 31), where the supplier was Honeywell Automation and Control Solutions. He asked if it was the same matter that the Committee was looking at earlier in the meeting.

Mr Nxumalo replied that it was the same one. The Treasury asked for additional information, which was concluded in the second quarter.

The Chairperson said that Treasury had said to Eskom in its approval conditions: “National Treasury does not support because this contract has not been properly managed, as it has been modified for a period of 54 months since inception (2013) and been operating on contingency funds and contingency value has been varied by 887% of the original contingency value from R22 058 767.82 to R217 725 822.48.” The Chairperson was not sure as to the explanation the Committee received. Suffice to say that earlier on when he posed the question on the contract being expanded, and then said that that information was not there; he went back to his printed notes, and he had written there in a red pen, “red flag” on that particular slide in preparation for that day’s meeting. The Chairperson asked him if he could speak to that. The reasons that had been advanced by Treasury were “quite scathing”, and painted a far grimmer picture than the euphemistic approach that anchored the response the Committee received on that particular issue.

Mr Nxumalo confirmed that the contract had not been fruitless and wasteful expenditure. The reason why the contingency was used was that the original scope of what that contractor was supposed to do did not change. It was mainly an issue of delays by other suppliers (among other reasons). The original scope in terms of the contract had not changed. The only thing that became unforeseen was the completion time. In hindsight, maybe it could have been managed differently. If one looked at the contract value itself, one would have noticed that it had to be reduced. The contingency was used because of the unknowns that were dealt with. When Treasury did not support the expansion initially, it was just to ask Eskom to give it more information on the contract on how it was going to be done. Eskom had done that and submitted it to Treasury, hence it then received approval on that.

The Chairperson said that was hardly the point. The indictment was in Eskom’s own response. When Eskom said that in hindsight, things should have been done differently; “no, things should have been done correctly”. The fundamental issue was that Treasury was saying to Eskom that that contract had not been managed properly, and it had been modified for a period of 54 months since inception. That was the crux of the matter – the establishment and creation of evergreen contacts through the backdoor of expansions and deviations. The Honeywell transaction was a “classic case” – the contingency values varied by 887%. There was no ownership of the improper management of that contract. The nub of the matter was in the reasons advanced by Treasury. Eskom had not managed that contract properly.

Mr Nxumalo replied that the contract that Eskom had signed with Honeywell had not expired. It was more an internal issue in terms of the contract, which was valid until the work was done from a contract perspective. With managing the contract, he had indicated that in the 10% where the contractor itself caused the delays, Eskom had levied delay damages, as allowed by the contract. Contractually, all that needed to be done was done. The contractor, where it did not cause the delays, was contractually entitled to the extension of time, which was in line with the contract that Eskom signed with the contractor. Eskom had that contract with the contractor until it got access to be able to do the job. In relation to managing the contract: The contract was still valid, but external controls had run out of time. That was the issue that Eskom was dealing with, but where the contractor caused delays, the delay damages were levied. Eskom also had to get a different QS to the one it was using to do the things necessary to satisfy Treasury that there was no fruitless and wasteful expenditure as a result of that supplier. It was because of the delays of the other contractors on the civil side that the contractor could not do its work.

Mr Somyo agreed with the Chairperson because what the Chairperson said covered the entirety of the matter that related to how Eskom dealt with contracts generally. It was not just the year 2020/21, or 2019/20; it looked like it was a trend that was normal practice. Something which was abnormal was viewed as a “normal practice” within Eskom. Then it got back into Treasury – it might be that Treasury had had acting chief procurement officers for a while. That was not Treasury’s problem. It was the problem of those who were somewhat in authority at Treasury level. But if the active CPO was part of the meeting, he wanted to hear the CPO’s comment on that trend. How was the CPO seeking to strengthen the areas that related to matters of those expansions and deviations? It might be something that could be looked into to find a way of strengthening it for that purpose, rather than creating loose ends. That kind of approach led to a huge risk of opening entities onto the line of corruption. Once one loosened things on contract management and those things arose, the gates were open. Thus, it got back to tightening the requirements stipulated in Instruction note 3.

Mr Molefe-Isaac Fani, Chief Director: Transversal Contracting, OCPO, National Treasury, responded.  Treasury was concerned that it was seeing those variations, expansions and deviations, or modifications of contracts. He recalled that it was Instruction note 3 of 2016/17 that gave Treasury the authority to request organs of state that before they expanded a contract or deviated from any procurement process, that they sought such permission from Treasury so that it could consider it. Treasury did not support all the expansions and deviations after applied due diligence. Ms Duikers had alluded to a number of concerns that Treasury had. In the interest of service delivery, specifically for Eskom, Treasury was in some instances “put in a corner” where it had to consider some of the deviations or expansions based on the risks it had assessed in Eskom’s ability to deliver electricity. For example, if a power station had a unit that was down and Eskom required specific spare parts or s specific service to bring that unit back,  Treasury would consider approving the deviation request so that Eskom may be able to ease the strain of having outages. There were a number of concerns that Treasury had, not necessarily just for Eskom; the concerns may be for organs of state in general. What it saw was that Eskom would request a single source of Sulzer for steam feed pumps, for example, for one station. Then down the line, Eskom would make the request for the same commodity for another power station. Again, Eskom would request for another, for Koeberg. What Treasury then started to question with such trends was then what happened with the demand plan. One was looking at critical and scarce commodities, that one was supposed to map and be in a position to say, “this is critical, this is scarce, this is OEM; how am I going to be able to manage procurement of such?” On a once-off basis, one could perhaps go out on tender and testing the market to establish the availability. What Treasury found in its analysis was that one power station may have a Sulzer pump, but that did not necessarily mean that the Sulzer pump was the only available pump that could perform a certain type of work. But because there were six units parallel to each other, and some were using Sulzer pumps, Eskom would want to standardise. Treasury would not, from a technical point of view, say that Eskom can have Sulzer and another pump made in place of the Sulzer pump. Treasury would then caution Eskom in such instances – Eskom was looking for a pump to do a certain type of work, and not necessarily a Sulzer pump – but it did not want to infringe on Eskom’s technical ability to make such a decision.  Treasury’s responsibility was to make sure that a procurement process was followed.

Issues of expansion were the biggest concern for Treasury because that was where corruption may evolve. People in the background may stifle the progress of the project, with the subsequent result that such an action resulted in project overrun, and the incurrence of additional costs.

A Member indicated that project management was the biggest concern. Indeed, if projects were not managed properly, there could be overrun in the projects, or “scope creep” in the projects resulting in contract modification. That was not the position Treasury wanted those projects to be in. It then jeopardised an opportunity for somebody else to tender for either the same type of scope if the project allowed, or it did not help in the fiscus as well. Then, much more was being spent than projected in the project plan. Treasury, as the one that managed the fiscus, would have a concern regarding project overruns. It meant that the unending injection of costs into Eskom then started to become a concern. Treasury’s concern ran across most of the organs of state.

There was another factor that was critically important in relation to Eskom. It seemed like in some instances, deviations or modifications were sent to the Treasury to “test” whether it would accept such a modification or not. Given the limitations, specifically, that Treasury was not technical in nature, its responsibility was to ensure that process was followed correctly. Mr Fani was the only person in the whole of the OCPO who was an engineer. The rest were qualified in other fields applicable in the supply chain management (SCM) space. That posed a huge risk regarding how true what had been submitted was based on the risks that were listed. From a process point of view, Treasury may not fault a process. But when one looked at the technical application in the submissions, that was where Treasury had concerns, because it kept on having “comebacks” with regard to projects not completed.

Mr Fani noted that Instruction note 3 of 2016/17 had given Treasury that leverage to be able to provide that support or non-support function as National Treasury. But it had taken over a huge responsibility that the accounting officers were supposed to play in making sure that procurement happened as enshrined in the Constitution, and as prescribed in the PFMA as well as the Preferential Procurement Policy Framework Act (PPPFA). Treasury was revising that Instruction note based on what it had seen in terms of the workload that it was receiving. The number of deviations and the number of contract modifications had increased over time, and that had resulted in Treasury being the arbiter in most of those deviations and expansions. Eskom had come out to the media and said that Treasury was creating bottlenecks in its process. That could be partially true because Treasury applied its mind thoroughly with regard to those deviations. But it'd since seeing that it needed to give the accounting officers and the accounting authorities their powers in terms of the PFMA that they must make a determination regarding if something warranted being modification or a deviation, and report to Treasury accordingly.  Such a revision was coming through, and organs of state would have it in the not-so-distant future regarding that Instruction note being revised.  Treasury would play an oversight responsibility and do monitoring and compliance, but accounting officers needed to take accountability for the decisions that they made regarding variations and modification of contracts.

Mr Somyo said when Treasury saw those kinds of action or inaction around matters of procurement, how did it grant the same to individuals or institutions who had shown failure on the line of meeting the prescripts. Treasury was “throwing it in the faces” of such individuals or institutions, and therefore it was saying that the country “must rely on those who break the law”, within the context of saying that such individuals or institutions sought to drive service delivery. If that was the nature of things that were being seen, “how on earth” was Treasury going to give that kind of work, that responsibility, to those who were currently failing the country. Treasury’s last point was what one harbored in fear once Treasury took a decision on such a loophole in such an area.

Mr Fani said that the challenge that Treasury was having at the moment was that Treasury became a bottleneck in the process, due to the number of requests that it received for deviations and for modification of contracts. Treasury only had a limited number of full-time equivalent officials, specifically the Governance, Monitoring and Compliance Unit, that was able to look at those matters. It was not only matters of deviations or modifications, but also matters of condonation processes, and clarification of processes to all organs of state that may require such things. It was also matters of reporting and making sure that  Treasury picked up trends that were unfavorable, or trends that enhanced government public procurement space. Treasury’s responsibility in the process was to support or not support a deviation or modification. The overall accountability was with the accounting officer regarding the delegation of authority in terms of the PFMA. Treasury had played that role since 2015 when the Instruction was drafted, and in 2016 when it was issued to the organs of state.  Treasury was currently looking at the trends before the Instruction and the trends during the Instruction, so that it would be able to manage the trends once the new Instruction note was put in place. The most important thing was that accounting officers must take accountability in terms of the PFMA, and also in terms of the budget that officers had been given. Accounting officers needed to make sure that the budget was spent in line with the approved prescripts that governed public procurement, and report to Treasury on a frequent basis so that it was able to pick up trends and engage with organs of state where unfavorable trends had been picked up. Committees such as SCOPA would then be in a position to have a fuller picture with regards to the trends as Treasury had recorded them, and managed to get responses from the accounting officers based on the [02:43:01] authority. He was pleased when it was a concern of the Committee when Treasury when it started, that the accounting officers be accountable for the final signature on those deviations; the final signature on those deviations rested with the accounting officer, not necessarily with Treasury.

The Chairperson asked Mr Somyo if he had further questions.

Mr Somyo said that the Committee was sitting with a list that was presented to the Committee, e.g. approvals, non-approvals, and conditional approvals. Those were coming from the desk of the accounting officer, which was an indication of what would happen if that kind of work was given over to the officers to deal with in terms of the actual loopholes in the operational standards of their own institutions. He was not saying Treasury should do the accounting officers’ or institutions’ work. But at least on the matters that led to the areas of foreseeing the actual expenditure that was in line with prescripts. There were areas which Treasury foresaw over time, that those kinds of prescriptions needed to be issued out in terms of Treasury notes. It might be that Treasury was getting closer into an area of dereliction insofar as such items were concerned. It even went further to say, “Why was National Treasury failing to appoint the permanent staff on these senior positions for decisions of that nature to be taken and respected quite well in attending to matters that relate to such expenditure?” He did not see that as a bottleneck. If it was a bottleneck, it was a bottleneck caused by such institutions. Institutions themselves were given law to attend to. If institutions failed to do so, they were in for it and therefore they must account appropriately around those matters. This was signed off by the accounting officer, and Treasury wanted to say, “Give it to them as it is, for them to follow the trail and track” while institutions were doing that kind of work, which was “really not palatable” in terms of how contract instances were managed. “We are going to see a situation in this institution of an unnecessarily prolonged term of contracts, creating a perpetual contractual engagement”. Such a thing was not supposed to be there. Treasury’s assessment should be informed by what it saw, not by what it thought, and he thought that Treasury would be “wrong” if it said that was how things should go in as far as the question that related to Treasury’s approvals of deviations, extensions, etc. Mr Somyo said that he was expressing his own view on what Treasury thought they ought to do in light of wanting to fight bottlenecks. It was not a bottleneck. If it was a bottleneck, it was caused by [02:47:08].

The Chairperson said that if it was a bottleneck, it was a necessary one. The Committee had raised the matter of the CPO and the staff in general at Treasury. The Committee needed to have interaction with the Minister on that matter so that it could tie it down.

On Eskom: When it applied for deviations, more often than not, Treasury said to go to the open market. Why must it take Treasury to tell Eskom to do that? While the “broken record” phrase of “expansions and deviations are the exception and not the norm” had been used, he thought that the flipside of that coin was that Eskom was using expansions and deviations as “a way to circumvent due process or a thorough process”. Why must it take Treasury to tell Eskom to go to the open market? An example: There was the deviation in quarter one of ERI, where it said that it was not supported by Treasury, and an open tender process would be followed.  Why must it take Treasury for Eskom to comply with the Constitution, amongst others, of competitive bidding processes? In effect, Eskom was wanting “an easy way out to circumvent due process”. Why?

Dr Meyers recalled that Trans-Africa Projects was an internal supplier. It had the status of internal supplier for many years. Eskom was in the process of looking at the training academy. At that stage, it was withdrawn. It was only on that basis that Eskom went to Treasury to see if Eskom could continue with the training academy through Trans-Africa Projects. All of Eskom’s other service providers, etc. had gone to the open market. Since the ruling, Eskom had gone to the open market on those Trans-Africa Projects issues.

The Chairperson did not get a response to his question. His question was on the reliance on expansions and deviations. Eskom was then getting responses along the lines of “go to the open market”. Why was Eskom not doing that of its own volition? He chose another example. In quarter two, for Group IT, the action taken was “A tender to the open market will be issued in [quarter four] of [the] 2021/22 [financial year]”. Those were not things that were not available in the market. He was making a general statement with conviction on that matter. Even if one looked at the conditions, it said that Eskom should have gone to the open market. That was the point he was making.

Mr Cassim said that with a number of deviations Eskom had applied for in that period were 23 up until December. Many of the circumstances where Eskom asked for deviations was where Eskom believed it was a transaction that was a sole source and a single source. As per the requirements, Eskom needed to get permission from Treasury to be allowed to deviate. If one looked at the overall number of contracts that were concluded for the year, Eskom had only requested 23 deviations. He agreed with the Committee that it should be an exceptional circumstance. Eskom would have to get alignment on the criteria of what was a sole source or single source supplier that would then very clearly give that direction to Eskom upfront to go to the market.

The Chairperson asked what the total value of Eskom’s financial relationship or invoice between Eskom and ENS Africa? ENS Africa seemed to be a very prominent feature on that.

On the Econ Oil matter: Was that matter in court? And yet Eskom was penalising Econ Oil. What happened if the court found adversely to Eskom?

On Eskom’s last slide and conclusion, it indicated that the reconciliation of Treasury registers and Eskom registers was ongoing. What was the timeline of that, and when did Eskom envisage completing that particular work?

Ms Govender confirmed the total contract value of the specific instruction as it related to ENS Africa; it was approximately R6 million. She said that she would get back to the Chairperson on that.

The Chairperson said that he was looking for the entirety of Eskom’s financial relationship to ENS Africa.

Ms Govender said that on Econ Oil, “we need to be careful”. There were various components of legal matters that were underway. The matters that were currently before the court and the matter that was currently in arbitration were all civil matters. Eskom had definitive findings of irregular conduct (she added “illegal conduct”) as related to Econ Oil. On that basis, Eskom had suspended Econ Oil from its supplier database. That was something that was separate to the current proceedings that were before court. It was important to make that distinction.

The Chairperson said that the caution was noted but substantively, the issue remained, and that had not been responded to.

Ms Jainthree Sankar, Acting Chief Procurement Officer (CPO), Eskom. She wanted to answer on the matter of reconciling registers. Perhaps it was incorrectly stated that the work was ongoing. What Eskom should be saying was that every quarter, Eskom reconciled its registers with Treasury, so that what was published by Treasury was actually what Eskom presented itself to SCOPA. It was ongoing in the sense that it did that every quarter, but it was not an action that was overdue.

The Chairperson said that in preparing presentations, Eskom needed to write what it meant, and mean what it said. It needed to use its words. “Do not leave things to speculation”.

That was the problem – the Minister, Deputy Minister, and the CEO were not in the meeting. It was as if the Committee was being petty when those things were raised. He did not think it created a healthy working relationship for Eskom and the DPE to position themselves on a “collision course” with the Committee in the manner in which things were being done. The Committee’s sense of understanding on the very complicated and complex matters at hand to the extent to which it understood that it may not always be “together” all the time was being “taken for a ride”. He did not think that was not acceptable, and it flew in the face of accountability, responsibility, and oversight. At best, it was a clear indication of institutions that were “hellbent on undermining Parliament”. The extent to which institutions wanted to take it and what they wanted to achieve were up to the institutions. Institutions were at liberty to do what they wanted to do. But what SCOPA was also at liberty to do was to drag institutions to the Committee through subpoenas if it had to. “Take yourselves as warned”. That situation was “untenable”. SCOPA already had to grapple with the difficulties of having to interact with Eskom virtually, which made the meetings “very, very difficult”. Even on that basis, there was no compliance, suffice to say a treatment of disdain. It was not the first time SCOPA had raised those issues. But it was as if it was “speaking to a wall”. It was not right. If Eskom saw SCOPA as an irritation, then it was a “necessary irritation” until Eskom got things right. The only way to get SCOPA off Eskom’s back was if Eskom did the correct things. In the absence of that, SCOPA was a “permanent feature” of Eskom’s daily lived reality. If Eskom (and other state organs) wanted SCOPA out of a job, then it needed to do the right things. Then there would be no findings, and there was no reason for SCOPA to meet. Until that point, it was embedded in Eskom’s operational DNA that from time to time it would have to come before Parliament and SCOPA. That was the last time that the Chairperson was issuing that caution. The Minister, Deputy Minister, and the CEO were not in the meeting.

Ms Maotwe said that the Chairperson covered what she wanted to say. The Committee was seized with officials who, when the Committee asked questions, were grappling with such questions. Sometimes she wondered if officials “were receiving SMSes to say, ‘Don’t answer that one’”. It was very complex when the accountable people that had been employed to be accountable were not there. It was wrong. She was glad that the Chairperson summed up the meeting on that note. She fully supported what the Chairperson just said. Institutions needed to present themselves to SCOPA as and when SCOPA required a meeting.

Prof Makgoba made concluding remarks. Eskom had listened, and there were a number of useful comments that had come out of the meeting. Eskom would take note of those comments and improve itself from lessons it had learned. He thought that Eskom and the Committee should try to be honest with each other. All should follow protocols and be professional in the way things were done. Sometimes “we follow these protocols and things get hidden in the tracks and so forth, and did not reach other”. He thought that as an oversight Committee, the lines of communication should be simplified, so that all could be accountable for the mistakes they made, rather than be accountable in an indirect manner. He tried to respect protocol, and the Committee obviously did its job as it was supposed to do. Eskom would adhere to that. However, he believed that there were problems in the communications sphere. As the Committee had heard from Treasury, Treasury was not completely fully staffed. Prof Makgoba suspected that that may have been happening in other departments that Eskom had to deal with. At the end of the day, Eskom took the consequences of that sort of thing. Be that as it may, he agreed that as long as Eskom did not do things the right way, the Committee would be on Eskom’s back. Hopefully, the Committee would not “break” Eskom’s back until it was able to carry the Committee and do things the correct way that it had requested. He was grateful that the Committee and Eskom had had that meeting. There were lots of lessons that had happened.

There were two issues that he also wanted to mention. The whole procurement system of South Africa, whether it was overseen by Treasury, by the state-owned enterprises (SOEs), he thought it required revamping in a manner that everyone would understand it. It seemed like everyone was free to do as they wished in terms of procurement. That had been the biggest problem he had observed, and that he was seeing all the time. Project management was another issue that had been mentioned in the meeting. Another issue was consequence management. One of the simplest ways to do consequence management was to tell somebody that one was going to discipline them. As soon as one did that, the person thought of an exit door, because the law allowed that. Be that as it may, he always valued the inputs that the Committee brought to the meeting. Sometimes the inputs were “painful and difficult”, but nevertheless, they were lessons that Eskom needed to learn as it developed and tried to transform, and to improve what happened at Eskom.

The Chairperson took Prof Makgoba’s point about communication. But he thought that he must hasten to say that that problem only arose when the Committee was dealing with the DPE and Eskom. That was what shone the spotlight on it. Otherwise, it did not have a problem with communication.

The Committee’s interaction with Eskom was a work in progress given the gravity of the situation. Until the Committee was satisfied that things had turned the corner, it would be present. He hoped that there would be improvement in the financial management, contract management and consequence management realties of Eskom so that it was functional. Not just functional in providing electricity, which was its core mandate, and which left very little to be desired at that point. Be that as it may, functionality and effectiveness at every management level, consistent with the law, was the Committee’s only expectation i.e. the right things being done. He hoped that that sufficed.

Announcements

On Wednesday 2 March there was the South African Broadcasting Corporation (SABC) hearing at 09:30. Members would be receiving correspondence later that day on the State Security Agency (SSA) matters for Members’ consideration.

There would be further communication on the Eskom visit matter.

The House was sitting that afternoon at 14:00.

The meeting was adjourned.







Documents

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: