SIU investigations conducted regarding Eskom

Meeting report

Briefing by SIU on Eskom investigations

The Committee was given an update by the Special Investigating Unit (SIU) on the status of its investigations at Eskom.

Conflict of interest, declaration of interest, red flags and whistle-blowers

There were several allegations in terms of the conflict of interest, declaration of interest, red flags and whistle-blowers. There were allegations of Eskom employees not complying with the declaration of interest policy by not completing the declaration forms. There were 5 464 employees identified, and all were referred to Eskom. Potentially, employees were linked to vendors, contractors or suppliers. Data analytics showed that 334 employees held interests in companies. Some referrals were made to Eskom, while others were made to the National Prosecuting Authority (NPA). There were allegations of senior employees being red-flagged through an external service provider. There were 11 matters were referred for disciplinary action, while 21 were closed and two were still under investigation. Insofar as whistle-blowers were concerned, ad hoc cases were received from various sources. There were 29 cases assessed, of which 11 matters were finalised and referred to Eskom for disciplinary action.

Coal supply agreements

There were also several allegations regarding coal supply agreements. It was alleged that senior executives colluded with the state capture actors and concluded an agreement with Tegeta Brakfontein for the supply of coal to Majuba Power Station, to the value of R3.7bn, based on the 2002 medium-term procurement mandate. The SIU found that the contract was unlawfully awarded because it was not consistent with the provisions of section 217 of the Constitution. The SIU and Eskom were contemplating pursuing business rescue practitioners for appropriate relief as a result of the damages Eskom suffered. The criminal matter was being dealt with by the NPA.

It was alleged that the senior executives colluded with the state capture actors and facilitated a prepayment agreement with Tegeta Optimum that allowed it to acquire Optimum Coal Mine from Glencore. The SIU found that the contract was unlawfully awarded because it was not consistent with section 217 of the Constitution. The contract was terminated, and Tegeta Optimum was placed under business rescue. Eskom had lodged claims to recover the contractual penalties which Eskom was unlikely to recover due to business rescue. The SIU and Eskom had instituted civil proceedings against the former employees, board members, executive authority and private individuals to recover the R3.8bn losses suffered. The matter had been placed on case management for a trial date to be set.

It was also alleged that senior executives colluded with the state capture actors and concluded an agreement with Tegeta Koornfontein for the supply of coal to Eskom. This was also found to be unlawfully awarded due to the inconsistency with section 217 of the Constitution. Eskom terminated the contract based on the SIU findings. The potential respondents/defendants had no assets and were placed under business rescue. Civil legal action was not considered, as it would not have realised the losses or the damages suffered by Eskom, as it would have resulted in a hollow, un-executable judgment.

There was an allegation that Mr Petros Mazibuko, an employee, had an undisclosed interest in a supplier, Commodity Logistix Managers. Mr Mazibuko had received money from the supplier through a network of other entities connected to him through family. During the disciplinary hearing, Mr Mazibuko was dismissed. Civil litigation proceedings were approached to freeze his bank account and disgorge the secret profits that were received. The SIU was successful on both parts. There was an application for leave to appeal the order, which was dismissed. However, in 2023, the Supreme Court of Appeal upheld the appeal and the SIU was opposing the matter.

Mr Thulani Zulu, an employee, had an undisclosed interest in a supplier, Commodity Logistix Managers. The investigation showed that he had received R2.8m. He resigned immediately after the SIU interviewed him. The SIU had embarked on civil litigation proceedings to disgorge the secret profits received in the form of kickbacks. He brought various interlocutory applications which were opposed by the SIU. The matter was heard in 2022, but the judgment was reserved.

Build projects

There were a number of contracts for Kusile, Medupe and Ingula. The value of the contracts was R200bn. There were disciplinary, NPA and civil ligation referrals.

There was an allegation that the ABB International contract was riddled with corruption. The SIU found that the contract was unlawfully awarded in that it was not consistent with the provisions of section 217 of the Constitution. The SIU also found that there was a generally corrupt relationship between ABB and Eskom executives. The contract was reviewed and set aside by the High Court. The NPA Investigating Directorate Against Corruption (IDAC) had reached an agreement with ABB to repay the R2.5bn in the form of punitive reparations as a result of the serious crimes committed against Eskom during the state capture period. The case had been challenged by Mr Koko. The matter was being defended by the SIU and Eskom. The matter was ongoing.

It was alleged that employees were receiving kickbacks from contractors. The SIU investigated the Stefanutti Stocks Izazi Consortium JV contract at Kusile Power Station for Site Finishing. The SIU found that there was a corrupt relationship between the JV and Eskom employees. Some of the employees had resigned before the investigation. One of the employees was dismissed. The SIU filed its summons and particulars of claim against the employees to disgorge profits they received from the JV. This matter was ongoing. There were referrals made to the NPA.

In a similar matter, the SIU investigated the Tamukelo contract at Kusile for the transportation of raw and potable water to the value of R341.2 million. The SIU found that an employee received financial benefits to the tune of R 24.6 million from Tamukelo through a network of entities and family members. Ms Moyo had received these payments in circumstances where she was responsible and/or involved in the appointment, managing, and approving of payments to Tamukelo. The SIU made a disciplinary referral against Ms Moyo, who was dismissed after a disciplinary process. The SIU obtained an interim order to freeze Ms Moyo’s pension. The SIU had made referrals to the NPA and Asset Forfeiture Unit (AFU). Eskom terminated the Tamukelo contract in October 2020 before any SIU findings were made. The SIU had assisted the AFU in confiscating and freezing various assets of Ms Moyo which she acquired with the proceeds of crime, as well as significant assets held by Tamukelo and its directors. On 20 March 2024, the High Court granted final forfeiture orders against the assets previously preserved by Ms Moyo and the directors of Tamukelo. https://www.npa.gov.za/asset-forfeiture-unit

Cloud computing and software

There was an allegation that the Eskom cloud computing and software licensing contract with SAP was riddled with corruption. There were two contracts investigated from 2016 for cloud computing and software licensing. The appointment of SAP was unlawful, irregular and inconsistent with the Constitution. The SIU embarked on civil litigation, and the matter was heard in the special tribunal. The two contracts were declared invalid and set aside. The SAP was ordered to repay Eskom R570m.

Engineering and project management consulting services

There was an allegation that Eskom employees were receiving kickbacks from Eskom contractors. Two contracts were investigated, and evidence indicated a corrupt relationship between Impulse International and Eskom officials and their family members. Impulse instituted civil action against Eskom, suing for damages in respect of the early termination of these contracts. Eskom was defending both matters and had lodged counter proceedings to have the contracts declared invalid. These proceedings were still pending, but were currently deadlocked. The SIU had entered into discussions with Eskom about the possibility for the SIU to join/intervene in such cases, to try to bolster Eskom’s case, but would do so only if its proposed intervention would add significant value to the litigation and if it was cost-effective and efficient to do so, and would not result in further undue delay.

Procurement irregularities

It was alleged that Eskom’s informal tendering process was being manipulated by its employees and Eskom vendors. The SIU identified three groupings of companies that were defrauding Eskom by utilising request-for-quote processes for services/products. The SIU had identified a direct link of money flowing from these companies through a network of entities to Eskom employees. To date, 35 Eskom employees have been identified as having received more than R180m from these vendors. There had been 45 Eskom vendors blocked. The SIU had adopted a multi-agency approach with inter-departmental task teams to coordinate efforts.

Emergency security contracts

There was an allegation that Eskom did not follow the correct emergency procedures when concluding security contracts during an emergency. Three security contracts were awarded in an emergency and had to be investigated together because they were inter-related. The investigation into two contracts had been finalised. There were Eskom employees who deliberately created emergencies. Companies that were appointed could not undertake the work and render the service, and had subcontracted 90% of the work to third parties. There was one matter still under investigation, but referrals had been made.

Fuel oil supply contracts

It was alleged that Econ Oil overcharged Eskom to the tune of R1.2bn. Eskom had taken Econ Oil to the Dispute Arbitration Board (DAB) to recover all monies overcharged. The matter was still ongoing. The SIU entered into discussions with Eskom about the possibility of the SIU assisting Eskom, to try to bolster Eskom’s case, but would do so only if its proposed intervention would add significant value to the dispute and if it was cost-effective and efficient to do so, and would not result in further undue delay. It was unlikely that the SIU would become involved in the matter, as it appears that the matter was quite advanced at the DAB and pleadings had closed.

Systemic recommendations

Thorough vetting of officials upon entering Eskom was not enough, Eskom should consider implementing contractual terms that allow for access to the personal information of the employee, such as bank accounts of the employee (and his/her spouse and children), e-mails and cellular phone communications. Continued monitoring of high-risk officials was required. Improved transparency concerning procurement processes was needed. A consistent and forensic approach should be applied to the assessment of claims for additional time and cost in strict adherence to the contract.

(Please see the presentation attached for further information)

Adv Andy Mothibi, Head: SIU, said that companies would declare a dispute with Eskom claiming millions of rands. Executives and senior management defending Eskom at the DAB were not doing so effectively. This was part of the scheme; monies were ruled to be paid to the companies, and there would be kickbacks because of this. The SIU had uncovered this scheme. It would be working with Eskom if that board was still functioning, and measures would have to be put in place to mitigate these vulnerabilities.

The procurement irregularities slides in the presentation focused on below R1m. Several employees were using the below R1m patterns to siphon money. Some of this was done after hours, showing that these employees were not committed to ensuring the work was done. Working after hours was done based on the modus operandi. The monies had been traced to those who had benefited. The multi-agency approach that was adopted had served a lot of purpose. The Financial Intelligence Centre (FIC) ensured banks were monitored. This process was still ongoing, and the SIU was pleased so far.

He spoke about the George Fivaz forensic investigation report. This report had made headlines. The report was given to the SIU and the Hawks. The former CEO kept on saying that syndicates were operating at Eskom. This part was being investigated by the Hawks to ensure that all the criminal syndicates were uncovered.

Chairperson's clarity-seeking questions

The Chairperson said that the Mr Thulani Zulu's judgment was reserved in 2022. What had since happened? It was a long time for a judgment to be reserved.

Mr Viven Govender, Forensic Investigation Specialist, SIU, said that the SIU had subsequently received guidance from the tribunal in that regard. As a result, the SIU amended its papers because the judge wanted clarity on a few issues. This had been done, but the matter was still before the tribunal.

The Chairperson asked whether he was correct in saying that the matter had been argued before the tribunal, the arguments were completed in 2022, and the judge had asked for further particulars post-argument.

Mr Govender said that this was his understanding.

The Chairperson asked whether the matter was still undecided.

Mr Govender said yes. Further clarity required the SIU to amend some of the papers based on the interlocutory application that was brought. This was now being placed before the tribunal.

The Chairperson asked whether the matter would go for argument again, or whether the submissions were considered sufficient.

Mr Govender said that the submissions were considered sufficient.

Adv Mothibi said that Adv Ntuthuzelo Vanara, Chief Legal Counsel, SIU, would be better suited to respond to this matter.

Adv Vanara said that the matter was heard and judgment was reserved. However, in consideration of the matter by the judge, the parties were referred to address further certain aspects that were not satisfactory during the oral hearing and in the heads of arguments. This had subsequently been submitted. The SIU was awaiting the judgment. The SIU had not yet been notified. He did not anticipate that the matter would be re-heard, but the SIU was just waiting on the judgment of the matter.

The Chairperson asked what "DAB" meant concerning the Econ Oil case.

Mr Govender said that DAB meant "dispute arbitration board."

The Chairperson asked for a further explanation on the purchase orders issued after working hours. There was something particular about a certain air power station. It was about being considered a risk in terms of overall management. What were the reasons for that? There seemed to be an anomaly that was not to the same extent as the other power stations.

Mr Govender said that a big percentage of these transactions were facilitated by one individual at the Kusile Power Station. The individual had been subjected to a disciplinary process. There was evidence that the individual had received financial gratification from the suppliers that had been identified. The SIU was able to draw a correlation between the actions and the purchase orders that were issued.

The Chairperson asked whether any measures were put in place to determine what the pattern looked like since the individual was no longer there.

Mr Govender said that it was an ongoing process, but the SIU was monitoring it. The pattern would change. However, the pattern now would not indicate that the issue had stopped, but would indicate the purchase orders issued for the specific groups of one and two. In the majority of groups one and two, the service providers had been blocked. This meant that the service providers would not be getting their purchase orders. The pattern would show that nothing was happening, but that might be due to a lack of false negatives in the sense that they were not getting work from Eskom. This was why there were no purchase orders issued after working hours. However, looking at everything holistically against all purchase orders, there might be a different picture. It required further monitoring and data analytics. The information was quite current -- it was up until the end of December 2024. It was therefore an ongoing process.

The Chairperson agreed that the information was recent. He noticed Adv Mothibi had raised his hand, and asked him to come in.

Adv Mothibi said that a valid point was made to work with the Eskom management going forward. The SIU had to go back to Eskom in all of these areas with the data analytics team to do assessments in terms of the exposures that the SIU had seen. The analysis had been done, and it was now going into the realm of prevention. The SIU would engage with Eskom on their views, including measures to be put in place in the vulnerable areas that had been such a pain to Eskom, to the extent of causing load-shedding. A comprehensive prevention plan had to be developed. In the future, the SIU should come with Eskom to the Committee to present a picture of everything that had happened over the years, prevention plans and the observation of trends.

The Chairperson thanked Adv Mothibi, and said that the Committee would ask Eskom to address that. He asked for a clarification on the urgency situation of 48 hours. If it went beyond 48 hours, was it still considered an emergency? What was 48 hours? Was it 48 hours for delivery? Was it 48 hours to issue a purchase order?

Mr Govender said that an emergency could be something that had happened or was imminently about to happen. If something was happening, it would require immediate reaction, like appointing someone immediately. If it was foreseeable, that it was imminently about to happen, that area of imminence should be within a period of 48 hours. If it was beyond a period of 48 hours, one could not invoke the provisions of declaring an emergency and appointing a service provider. However, one could make use of other confined processes, such as an urgent procurement process, that would still be competitive and meet all the other requirements as prescribed in section 217 of the Constitution. It just meant that the turnaround times would be much shorter in an urgent process versus an emergency process. An emergency process would be a complete departure from the procurement processes where someone was appointed to attend to a specific thing to avoid loss, significant financial losses, damage or environmental damages.

The Chairperson said that in an engineering environment, there were lead times. If something was needed for maintenance and fabricating the machines would take four days, how would the 48 hours work? The 48 hours appeared to be arbitrary. He said that for different types of situations, emergencies were defined differently. If stationery was needed, the 48 hours might be too long. If machinery was needed within five days because it was needed for maintenance and there was a delay, what then happens? Was there another mechanism? He wanted to have a conversation where it tries to prevent abuse and inadvertently creates another problem.

Mr Govender said that the Chairperson was making a valid point. These circumstances would satisfy the requirement for an emergency. There was a lead time in providing the engineered product by a specific date. There had to be four days to manufacture or fabricate. In his view, this would be motivated in a submission for declaring an emergency. It had to be on a case-by-case basis, where what was required was assessed. He agreed that stationery might be something different.

The Chairperson said that the Committee took the information the SIU and the Auditor-General (AG) provided at face value. It was important to get a proper understanding of what constitutes an emergency. The circumstances might be different. There could be something that had a lead time of six months that could have been procured in time. Somebody would then create an emergency that did not exist because that was how the system was abused. He recognised this, but also recognised the nature of an engineering environment, especially where maintenance was concerned. There could be a chain of components, and one of the four components needed did not fit. Now everything could be delayed for one month, or get it within seven days. There was a decision that had to be made.

Adv Mothibi said that one of the vulnerable areas was the abuse of emergency provisions. The team had looked at the Public Finance Management Act (PFMA) regarding the provisions of emergency, as well as the company’s policy. The team had looked at the PFMA on how to deviate from the normal procurement process and lower down in the nature of the industry, where the company had to draft its own policy in line with the PFMA. There was one case where the employees were planning on declaring an emergency seven days in advance. This was supported by evidence from the team. This demonstrated what the employees wanted to do. The SIU had looked at the various areas of vulnerability and the extent to which they could maximise the siphoning of money.

Mr Leonard Lekgetho, Chief Operations Officer, SIU, said that when emergencies were declared, prices went up. The SIU had observed that after the emergency was over, the prices continued. It was another form of raising the prices of the commodity that was being sourced out. In terms of coal, there was a procurement based on emergency prices, which were very high, but after the emergency was over, the prices continued to be very high.

The Chairperson said the Committee would pick this up with Eskom because it was an area for abuse. He had worked in the car manufacturing business and people used to get paid insane amounts of money for overtime. This was due to cars being taken offline and fixed on Saturdays and Sundays. There would be about 100 cars that needed to be fixed, usually small fixes, and people would get paid 1.5 times. He was not saying that there was no abuse in the engineering and industrial environments. People abused the system all the time, and there was no doubt that there was a lot of it at Eskom, where emergencies were used to stay under the radar.

The conflict of interest had a very high number. Could the SIU give the Committee a sense of what the levels at which the conflicts of interest were? Was it a case where someone was a director or a beneficial owner? Was it someone’s brother or an unaware relationship? He asked for clarity on this seriousness. The SIU might not have the numbers at hand but how much of that was a serious conflict of interest? How much of that was related to actual corruption, or a failure of others to follow procedures? The number was high, almost about 10% of Eskom’s workforce at its peak.

Adv Mothibi asked that the slides on the conflict of interest be shown. The area of conflict of interest covered various natures of conflict of interest. It could be that these individuals belonged to an old company, or they were directors in those companies that did business with Eskom. These individuals had failed to declare that, or did not complete the declaration of interest. He asked Mr Govender to indicate whether there was a breakdown or not.

The Chairperson said that if there was no breakdown, the information could be provided to the Committee at another time. The SIU did not need to reflect information that it did not have. The interest might be different. It might be a simple conflict of interest, where there was no direct interest. He made an example of a second cousin making a bid and the individual was not aware while being involved in the adjudication. He wanted a sense of what was considered a serious conflict of interest. He said that this information would be helpful.

Adv Mothibi said that the team would go back to the numbers and establish categories of the nature of conflict of interest for the Committee.

The Chairperson assured the SIU that it did not need to have everything at hand. He would appreciate the information before Eskom was briefing the Committee.

Due to time constraints, the Chairperson allowed two Members to ask questions at a time, while the SIU responded.

Discussion

Mr P Atkinson (DA) found the extent of theft taking place in plain sight at Eskom shocking. He thanked the SIU for all the work that had been done to uncover all of this and for ensuring that a lot of the cases were brought to court. One of the categories of people who were involved in illegal actions was ‘bargaining’. What was meant by bargaining? Was it a general employee? The SIU highlighted several areas of concern, such as informal procurement and dealings being done between 00h00 and 03h00. There was some sort of mitigation procedure to ensure that those things did not happen again. Was it possible to share this across all state-owned entities (SOEs), which would be a requirement of doing business and avoiding corruption? He asked for more details on the ABB case, which Mr Koko was defending.

Ms V Mente-Nkuna (EFF) noted that several employees had resigned -- about 25. How satisfied was the SIU? Once the SIU had highlighted a name, there was a reason that a name had been highlighted and referred to Eskom. This was informed by an extensive investigation. When Eskom says that the particular name was not guilty, how did the SIU go back and investigate how true that was? How did it get comfort that these people were not involved? The conflict of interest was also intertwined. The conflict of interest was highlighted by the Chairperson. This meant that the conflict of interest would have to be defined. What happens if the SIU highlights a conflict of interest as a direct conflict of a particular employee, but Eskom says no? Were the ones that had resigned during the investigation being followed in terms of the criminal cases? Was there an opportunity to recoup what had been lost, or to freeze pensions?

How far was the SIU in blacklisting the two companies (ABB and SAP)? There was criminal behaviour and activities taking place between these particular companies. This was not acceptable. It did not matter how much was paid back to the state. This level of thieving should never be allowed. A strong signal should be sent to anyone who wishes to come to South Africa, who thinks about doing that and getting away with it. People should not come here to say they were bringing the best service, but were coming to corrupt and steal from people.

The presentation highlighted on slide 30 the vendors that had been blocked. How successful was the process of blocking? What was the process of ensuring that the blocking was done immediately or as soon as possible so that these companies/vendors did not find themselves back in the system, or being given other work by Eskom? These were small companies that were involved in emergencies that were below R1m. She wanted to draw a correlation between smaller and bigger companies in the context of South Africa’s economy, and allowing black businesses to do business with the state. For the small vendors that had been blocked, had there been interviews with particular corrupt and identified officials? Was the SIU satisfied that they were involved in the nefarious acts, or were they just identified by those officials? There were corrupt officials in South Africa who used their positions to apply force to all of the small business people. This was prominent in municipalities, where small business people were trying to tender for state business, and were demanded to pay a certain portion to officials to get the business. The whistle-blowers became victims themselves, especially with the way crime was dealt with in South Africa.

She told Adv Mothibi that there was a much bigger picture that needed to be looked into. There had to be a deeper dive into the particular companies that had been blocked. These particular companies may have been blocked, but it could be that an official was paid 10%. They had been paying because they were poor businesses -- people were hungry and looking for jobs. What was happening with the process? How deep did it go into understanding how businesses were being crippled because of these officials? This should be blocked in the system. She agreed with blocking anyone who was corrupting the system. However, the system had to be cleared of the corrupt officials who were going to corrupt small businesses. These officials should never be allowed in the system again. How far was the follow-up on the resignations in the procurement space, including the conflict of interests?

Responses

Adv Mothibi addressed the procurement irregularities, specifically in the space of under R1m, commenting that this was where it starts, and the system had to be cleansed of those corrupt employees. Slide 30 showed that the findings had identified a direct link of money flowing from these companies through a network of entities to Eskom employees. There was clear collusion that these companies were involved in. To date, 35 Eskom employees have been identified as having received more than R180m from these vendors. This indicates a collusion scheme that was abusing the under R1m procurement processes. There was direct evidence to show that these employees were involved.

The blocking of vendors was almost equivalent to blacklisting. This was something that Eskom must do as part of its procurement processes. This was a measure to ensure that the same vendors did not do business with Eskom. However, as Ms Mente-Nkuna correctly said, this should apply to ABB and SAP. There were irregularities found, and the ABB had paid back some of the money. The special tribunal matter had been finalised, and the contract had been set aside. This was something that Eskom could address when it briefs the Committee. There was an agreement of some sort, and the National Treasury had given the green light. This meant that the ABB could continue to do business with Eskom. There was an agreement where Eskom had indicated that it still required the services of ABB. He did not have the latest information on whether ABB was continuing to work in the context of that arrangement. It became a very critical issue, as Ms Mente-Nkuna had indicated that the size of the company should not matter -- if the company had done wrong, it should be blacklisted. Only Eskom could explain whether ABB were the only ones doing the kind of business that Eskom needs, and it could not find anybody else.

There had been disciplinary hearings in matters where employees were either found guilty or not guilty. Some state institutions did not find any merit in instituting disciplinary hearings. The SIU would then call on the documentation and raise the question of whether the hearing was fair or not. The ultimate decision would be whether to review the findings of the chairperson of the hearing or not.

Adv Mothibi was still speaking when the audio cut out.

The Chairperson asked whether he was the only one who could no longer hear Adv Mothibi.

Members confirmed that they could no longer hear Adv Mothibi.

The Chairperson asked the SIU team to inform Adv Mothibi about the audio issues.

It seemed as if Adv Mothibi was no longer in the meeting.

The Chairperson asked if Mr Lekgetho was still on the platform, but there was no answer. He asked whether the SIU were in the same venue.

Mr Kaizer Kganyago, Chief Stakeholder Relations and Communications Officer, SIU, said that everyone was in the same venue, but he was using a different network line. He would check with the rest of the team, because the network might have collapsed.

The Chairperson asked Mr Kganyago to update the Committee on the issue.

Ms Mente-Nkuna said that they were no longer on the platform.

Adv Vanara said that Adv Mothibi indicated that he had been logged out and was trying to reconnect.

The Chairperson asked whether Adv Vanara knew if Adv Mothibi was winning at all.

Adv Vanara said that it appeared that Adv Mothibi was still struggling. Someone from the IT team had been sent to his office to assist.

The Chairperson suggested a five-minute break.

The Committee agreed.

Mr Kganyago took his device to Adv Mothibi, and now the SIU was back on the platform.

Adv Mothibi said that there had been a network issue and apologised.

The Chairperson indicated that the questions and answers should be concise, to account for the time that was lost. This would allow other Members the opportunity to raise their concerns.

Adv Mothibi said that the SIU did determine whether there was a basis to review the outcome of a disciplinary hearing. This was something that had not been done with Eskom yet. He asked Mr Lekgetho and Mr Govender to respond to this and the other questions.

Mr Govender said that getting feedback in respect of the disciplinary cases was something that had been implemented. It was a work in progress, where the SIU had to get feedback on historic matters. This project had been running since 2018. There was quite a bit of historic work that the SIU had to go back to. However, there were reasons for the current matters, where decisions were made, and feedback was given immediately. There was a system where the SIU got a quarterly update from Eskom on the status of the disciplinary hearings. This was how it got real-time feedback. This was something that the SIU was working on, and hopefully, there would be an opportunity to respond to that fully.

He said that bargaining units were typically people within the salary band where they were represented by union members. If an individual was outside of a bargaining unit, they would be considered as management unless there was a third-party contractor, such as consultants. There was an observation of informal tenders for buying commodities on a very regular basis. However, some of these commodities should best be bought from original equipment manufacturers (OEMs). The SIU’s advice was to rather place a formal contract with an approved supplier or OEM for specific items. In these instances, the SIU found that these formal contracts were placed with entities that were originally involved in the informal tender manipulation process.

The issuing of purchase orders after working hours was not always done with good intentions. There was evidence that pointed to collusion between contractors and Eskom employees. There was a flow of money, and gratification was received.

He said that Adv Mothibi had addressed the concerns about the outcomes in respect of conflict, specifically the not guilty matters. This was something that the SIU would get feedback on fully from Eskom. There had been referrals to the NPA, and it was for the NPA to pursue them criminally.

Regarding the freezing of pensions, Eskom employees would resign before the disciplinary hearing. So, during the interview stage, these employees probably had a sense of what the outcome of the investigation would be, and then decided to resign. Unfortunately, at that stage, there was no mechanism to keep them within Eskom. However, there was now a contractual obligation to serve a notice period and the SIU would then hope to conclude a disciplinary process within that notice period. This was not always possible, but the SIU tried to persevere.

The SIU had made a referral to Eskom regarding the ABB and the SAP for supplier reconsideration, which was a blacklisting process. This was an administrative process that Eskom must comply with, to ensure that they were legally sound when that decision was made. He disagreed that there were small vendors involved when it came to blacklisting. He acknowledged that these small companies may be participating in low-value tenders, but the values associated with these tenders were around R1.8bn from 2022 to 2024, so by no means were these small companies. These companies had found a mechanism to participate in that small space. One could see that it was much larger companies that were participating in that space. It would be more profitable for them.

The SIU had an agreement with Eskom that when ongoing investigations reached a certain stage, it would be preferable for it not to place any new contracts with this company, pending the outcome and final formal recommendation by the SIU. The SIU made a referral to Eskom to consider suspending these companies until a formal process unfolds and is undertaken. This has since been done. Eskom was now embarking on an administrative process to formally suspend these suppliers. Eskom had to put these suppliers in a status of suspension, pending the outcome of that administrative process. A decision would then be made to formally blacklist these companies or not.

The resignation and procurement investigations were very new. The 17 employees had resigned long before the SIU commenced its investigation. There was a term called "throwing the javelin," where someone would facilitate the process while still being employed at Eskom. As soon as they got outside of Eskom, they would catch the javelin and keep the benefits from these contracts. This was what the SIU had found with the 17 employees. These matters were being pursued criminally. There was nothing much that Eskom could do, other than put them on a database of red flagged employees so they did not re-enter the system.

The Chairperson asked that the discussion on the blacklisting be parked until the Committee had a sit-down with the Minister of Finance. Eskom had sent a detailed submission to the Committee last year, explaining that some of these companies were systematically important. In the oversight visit, Eskom had said that the ABB generator was one thing, but there was an electronic system that fed it, such as the controls that were done by the ABB. To take this out and install a new system would cost money and cause operational problems. In some instances, there was a combination of hardware and software which meant that the entire system would have to be undone. It would have implications and would cost money. Similarly, the SAP was used by various state entities and removing the system would cost money and people would have to go for training. It would cost billions of rands. As an oversight body, the Committee had to find an appropriate way forward which did not have unintended consequences for service delivery. There needed to be a general policy across government so that this discussion did not result in 35 entities coming to Parliament. He had asked the Minister to speak to that. Ultimately, National Treasury decides to do the blacklisting.

Further discussion

Mr F Essack (DA) said that the Chairperson had covered a lot of issues in his opening remarks. Slide 7 indicated that 334 employees held an interest in companies, of which 194 referrals were made. What had become of the other 140 employees that held an interest in companies? Were there no issues? Under the Zondo Commission, there was damning evidence that the country had been exposed to. He understood that many of the SIU investigations stemmed from the investigations under the Zondo Commission. He had raised the issue of lifestyle audits when the municipalities were interrogated last week. He asked about the lifestyle audits, and what the process was for Eskom employees. He understood fully that investigations were ongoing. However, it was difficult for the Committee to get feedback on issues that had transpired two to three years ago, if not longer. What were the expectations in terms of timelines of feedback from the various task teams that were alluded to on slide 31? Investigations were also being done by the South African Revenue Service (SARS). When could an update on this be expected? He realised that it was a cumbersome issue, but it would be interesting to get some feedback more quickly than one year down the line.

Mr A Beesley (Action SA) said that there was a saying that a fish rots from its head, and it was quite clear that Eskom’s head had been rotten for many years. He had done some research that revealed that people were paying four times more for electricity than they should be, based on inflation over the last 15 years. This had a massive impact on businesses and poor people, where a choice had to be made between eating or electricity. There were real ongoing consequences. He said that not one of the companies doing business with Eskom had been blacklisted on National Treasury’s database. He said that it did not matter how harmful it may be, companies should be blacklisted and prevented from doing business with the state. There should not be any excuses.

The AG had said that there was a huge breakdown in internal controls within Eskom. Had the SIU made any recommendations about internal controls? It seemed incredible how bad the internal controls were. Orders were being made in the early morning hours, and simple internal controls could stop this. He said that recommendations could be made regarding employees leaving before the disciplinary hearings. These employees were getting employed by other state organisations, and then the disciplinary hearings start, but they just kept on moving on. This was something that should be looked into, to see what internal controls could be put in place.

He congratulated Adv Mothibi for his reappointment. He said that there were efficient people in the SIU.

Ms H Neale-May (ANC) congratulated Adv Mothibi, and said she was looking forward to working with him. She said that the financial management, irregular expenditure and operational failures were a disgrace. Criminals were working to exploit a broken system enabled by Eskom insiders. It was not just theft, but wholesale robbery affecting the citizens of the country and depleting its financial resources. The multi-agency approach of the SIU should be used in all the SIU investigations. It was reaping results. Weak access protocols should be highlighted, and risk management systems should be updated. She recommended bringing artificial intelligence (AI) in, because it would make a huge difference. There were 5 464 employees who did not complete their declaration of interest. What was the percentage in relation to the total number of employees?

She was addressing the Mr Zulu and Mr Koko case, but her audio was bad.

The Chairperson asked her to turn off her camera.

Ms Neale-May asked whether the SIU had access to the George Fivaz forensic investigation report. If so, what were the findings? She was aware that the SIU was not sure who had funded that report. She was wondering whether it had been done by private service providers. There was a comprehensive plan to turn around corruption. Was this plan 100% supported by the board? What was their reaction to this report? There were security contracts that involved absolutely blatant collusion. Could this be classified as blatant sabotage, with financial benefits to the officials and costing South Africa millions of rands?

Mr G Skosana (ANC) also congratulated Adv Mothibi on his reappointment. The presentation had spoken about senior Eskom officials colluding with state capture actors when it came to the coal supply agreements. This included three power stations -- Optimum, Koornfontein and Brakfontein. Was it the same committees that were responsible for all the coal supply agreements, or was it different big committees? For example, Optimum had its own. He noted that Tegeta was the lowest common denominator in all three power stations.

There were security contracts where the service providers had been appointed, but were not qualified to do the work. These service providers would then subcontract about 90% of their work to other service providers who could do the work. The process talked about intermediaries. Was it an institutional thing that there would be people who were intermediaries who lay between Eskom and the service providers? If not, was it part of the corrupt practice to get intermediaries? If so, where were the intermediaries in the whole investigation?

Econ Oil had overcharged Eskom to the tune of R1.2bn. How did this happen? Was it an overcharge on the agreed contract, or was the contract itself overcharged, based on the norm?

Who constitutes the DAB? Who does this board's work? Were the board’s recommendations binding, and if so, to what extent?

Mr K Mileham (DA) welcomed Adv Vanara back to Parliament, because much of what the Committee was looking at was a result of his involvement in the initial Eskom inquiry by the Portfolio Committee of Public Enterprises.

What was the timeline for concluding all of these matters? How long was it going to take to see prosecutions and civil remedies? Had any progress been made in recovering the overpayment of pensions, particularly to certain members who were implicated in receiving pensions that they were not entitled to, including Members of this House? Has there been any feedback from the SIU on whether there was a collusion between George Fivaz and the relevant security contractor? How much was paid for the George Fivaz investigations? Were there any issues with the investigations?

Eskom reported to the Portfolio Committee on Electricity and Energy. Until last week, he was unaware of the SIU investigation. He would appreciate a full briefing. He suggested that there should be an update regularly between the two Committees to see what was happening and what needed to be done by both Eskom and the Ministry. This would assist with the facilitation of proper checks and balances and proper good governance.

The Chairperson said that the declaration of interest was bothering him. There were 5 464 declarations of interest that were not done, but this did not necessarily mean that there was a conflict of interest. Upon further investigation, it was found that 194 cases needed investigation because they were related to corruption -- was this what the SIU meant?

Responses

Adv Mothibi said that the Chairperson was correct -- that there were 5 464 employees who had failed to declare a conflict of interest. He asked Mr Govender to address this question.

Mr Govender said that the Chairperson was correct in his understanding. The 5 464 employees did not complete the declaration. Slide 10 referred to the disciplinary referrals. 334 Eskom employees had been linked to companies. Due to the SIU’s mandate, it had to establish more than just a link. It had to establish whether that link or interest was a disclosed interest or an unauthorised interest. These employees could have applied for an authorisation to participate in the entity. This might have been approved. From a data analytics perspective, the SIU was red-flagging people who were linked to entities. The SIU had to establish whether these entities were vendors to Eskom. In many instances, this was the case. Interestingly, they did not do any work for Eskom. This was the reason that some matters required further investigation. Other than merely saying that people had an interest in a company and that the company was a vendor, there was another part that the SIU was required to investigate. It had to investigate the extent to which they would have received financial benefit, either directly or indirectly. This would require further investigation for bank statement analysis.

There was a question about the 334 employees who held an interest in companies, and the 194 referrals that were made. The remaining investigations had been closed out with no positive findings. There were 100 ongoing investigations. The SIU was planning to finalise that focus area within the next six months. However, it had to be mindful of the fact that this was ongoing, and people were entering and leaving Eskom. There was a natural attrition, where the organisation was growing and shrinking. New people were coming in that had to be looked at. There were people picked up in the procurement investigation who had started to work at Eskom during the period of 2018-2020 and had undisclosed interest, receiving money directly from Eskom vendors. It was not double dipping -- it was coming from separate entities and separate employees.

Adv Mothibi said that this was a summarised version of the outcomes. He suggested that the SIU be given an opportunity to produce a comprehensive report to the Committee.

The Chairperson said what had been discussed was sufficient, and the SIU could move on to the other questions.

Mr Govender seemed to experience some connectivity issues -- the Committee could no longer hear him.

Adv Mothibi asked whether Mr Lekgetho could come in to assist. He said that Mr Govender was about to address the length of time needed to finalise the matters that had been referred. In terms of civil litigation, the SIU was reporting on matters it was able to pursue that had been taken to the High Court or special tribunals. On the NPA matters, the SIU could not determine the length of time it would take to finalise them. It was always helpful for the NPA to come and indicate to the Committee from time-to-time on how far they were. Various matters had been enrolled in various courts. It was difficult for the SIU to say how long things would take on the criminal side.

There had been an issue raised around the employees leaving the organisation before action was taken against them. He said that Mr Govender had indicated that employees resigned when they noticed during the interview stage that action might be taken against them. In this instance, the state institution must inform the SIU so that the SIU could act timeously. However, the SIU also needed to be in a position where it could continuously check with the state institution regarding the names of the employees who had been interviewed. The SIU asked that this be monitored, and that it be informed when employees resign. This was an area that required further attention from a process perspective. Some guidelines could be issued to the state institutions. This would help to improve communication, especially the timing of communications. If there were evidence of criminal action by employees who had since resigned, the matter would be referred to the NPA. Various employees had been charged. The SIU still needed to investigate whether those employees who left had been included as respondents in civil litigations. These were the people that had contributed to the losses. This was something that would continue to be monitored.

The SIU could do a supplementary report on what had become of the George Fivaz report. The report had been handed over to the SIU and the Hawks. The Hawks was doing a deep dive into the criminal syndicates' investigation, while the SIU was focusing on the quality governance administration part. The report was sponsored/funded by the business. It had been found that it was not authorised by the board. The SIU could submit a supplementary report, and would be guided by the Portfolio Committee on Electricity and Energy for a briefing. Most of the investigations had been completed, and the SIU was awaiting the outcomes. It was following the referrals to the NPA, civil litigation and disciplinary hearings, with the exception of the 2024 proclamation. The issue of blacklisting should be addressed by Eskom. The question was to what extent companies were kept in the system. He hoped that Mr Govender could address the issue around the lifestyle audits. He asked whether Mr Lekgetho could assist.

Mr Govender indicated that he was back on the platform. Eskom had appointed an external service provider to conduct lifestyle audits on people in senior management. The findings of the investigation have been submitted to the SIU. There had been 34 matters referred, and 11 disciplinary referrals. There were two matters under investigation, and some matters had been closed. The nature of the external investigation was one where somebody would cooperate and provide information to the external service provider. An assessment based on that would be done, and people would be flagged on that basis. There was an ongoing discussion between the SIU and Eskom about whether there was a need for a fuller lifestyle audit. Whilst this discussion was ongoing, the SIU had identified the need for high-risk employees to start with a profile. The SIU had started to check just over 500 laptops of those identified people in the senior management space, as well as people involved in procurement across all workstreams.

Adv Mothibi said that the SIU findings had supported the AG’s finding on the breakdown of controls. Systemic recommendations were made to Eskom based on the areas that the SIU had investigated. This was done, based on the modus operandi that was used in the various sections. The SIU had looked at how to improve the environment at Eskom. The systemic recommendations were sent to Eskom’s management and the board. The expectation was that Eskom would implement those recommendations. The SIU team that deals with corruption prevention would now be involved in developing a prevention framework for Eskom. This would overall cover the areas where the SIU had made systemic recommendations. In its next appearance, the SIU would be able to indicate the extent of the development, and where it needed to improve internal controls. He said that if he had missed anything, the team would respond to it.

The Chairperson said his notes showed that the SIU had responded to everything.

Ms Mente-Nkunda acknowledged that the Committee should wait on the National Treasury and the Minister of Finance. However, she asked for recommendations from the SIU. The Committee sought to ensure that corruption was out of the system. Could the SIU ever successfully recommend that certain companies must be blocked, and they were successfully blocked? There were certain companies with an explanation that they were already in the system and could not be removed. What was the plan to phase out these particular companies? What would happen two years down the line when these particular companies with strong findings of corruption remained in the system? Nothing was being done. She compared this to the AG’s findings of there being corruption. There was damning evidence of people being corrupt and having no regard for the law and the system of South Africa in terms of regulations governing that particular space. What did the SIU have to do beyond the recommendations, when the companies that were recommended to be blacklisted, were not? What became the remedy for the country in that regard?

The Chairperson said that Ms Mente-Nkuna was saying the same thing. One of the things that Parliament had to do was to manage the implications of its own decisions. If the decision of Parliament was for Eskom to install a new system, Eskom should be supported with an appropriation of the money. Parliament could not state that Eskom must do something that was going to cost R7bn, but then the next year, it shouted at Eskom for losing R4b. He was saying that the implications of their own decisions must be managed. The Minister of Finance would be able to precisely answer Ms Mente-Nkuna’s questions. There had to be a fair and consistent policy that allowed Parliament to visit the consequences on companies fairly across the board, including those that were systematically important. It could not run away from the fact that there were certain companies that, if they were to move out tomorrow, there would be a big problem somewhere. There must be a consistent policy. Parliament must also be aware of the consequences of its own decisions and back the SOEs behind those decisions, and not vote for a budget that did not account for those decisions. Parliament did that all the time. It could not keep acting in this inconsistent manner. This was why it was important to have the Minister of Finance come to the Committee to speak about the blacklisting policy and the cost implications. It was about how to back these decisions with the budget, otherwise that decision would be irresponsible. This was the point that the Committee needed to get through.

Ms Mente-Nkuna pleaded with the Chairperson not to respond on behalf of the SIU. She wanted to understand what became the SIU’s remedy in a situation where the SIU had gone out to utilise resources to investigate, but their findings were undermined.

The Chairperson said that he was not answering on behalf of the SIU. In the meeting with the Standing Committee on Appropriations, Eskom had been asked to send a detailed document, and that was what they had done. It would not be helpful for the Committee to have the same conversation again with Eskom. There had to be a conversation with political principals, such as the Minister of Finance. The Cabinet must ultimately make a decision, and it was the Committee’s job to hold the Cabinet accountable. Eskom had gone to the National Treasury to retain this company. He did not want to have this conversation again with Eskom. He would rather have a conversation with the Minister of Finance.

Ms Mente-Nkuna said that she was not saying they should have another conversation with Eskom. She asked what the SIU’s remedy was for this situation.

The Chairperson asked the SIU to respond.

Adv Mothibi said that as a general response, the SIU makes recommendations to the accounting authorities because, by law, they are the ones who appoint service providers. They were the ones that must process the blacklisting process. This was escalated to National Treasury, to ensure that the resources employed in the investigations did not go to waste. The SIU did not just leave the process there. The matter got escalated to National Treasury as the custodian of that process. If National Treasury was not acting, the matter would be explored with Cabinet, or through other legal processes. He shared Ms Mente-Nkuna's concerns and said that state resources should not be wasted. He looked forward to the Committee having an opportunity to engage with the Minister of Finance and National Treasury as a regulator in the blacklisting issue. They would be able to address the instances where services were still needed.

The Chairperson said that since the matter had been escalated to National Treasury, it would be fair for the Minister of Finance to answer.

Ms F Hassan (ANC) said that before the beginning of the presentation, there had been remarks relating to fraud and some of the illegal connection work that may not necessarily be in the mandate, and that this could be a potential point of collaboration and work that could be done.

The Chairperson said this had come up in the AG’s report, and asked Adv Mothibi to respond.

Adv Mothibi said there were continuous engagements with Eskom, especially regarding whistle-blower referrals. Some of them would point to issues that were attended to by Eskom. There were media reports that Eskom was now tackling the fraud and corruption involving tokens, where people interfere with meters -- in the main, Eskom employees. There was a team that would put together the information the SIU had received, and then engage with the Eskom management with the need to possibly pursue a separate proclamation covering the new areas. This was how the SIU would deal with the new areas.

Closing remarks

The Chairperson said that this was something that the Committee would ask Eskom to respond to, specifically in their submission to Parliament. The Committee would inform the Portfolio Committee on Electricity and Energy on the confirmed date later.

The Chairperson congratulated Adv Mothibi on his re-election. He was proud of the work that the Head of the SIU had done. He said that the Committee noticed not only the work that Adv Mothibi had done, but also the rest of the team at the SIU. The Committee never gets a chance to meet them in Parliament, but it knows that Adv Mothibi does not work alone. He wanted to ensure that the work was done so that the money that belonged to people went where it was supposed to go.

He thanked everyone for attending the meeting. The next phase of the programme would be communicated.

The meeting was adjourned.