Eskom signed Tegeta contract despite low-quality coal
The commission of inquiry into state capture heard on Tuesday how Eskom continued with a R4.3 billion coal supply contract with Brakfontein Mine, a subsidiary of Gupta-owned Tegeta in Delmas, despite irregularities.
The power utility's acting managing director, Daniel Mashigo, was the second Eskom witness to appear before the commission on Tuesday.
Mashigo gave an extensive explanation of the many processes which are followed to determine whether coal is of sufficient quality.
He told the commission that the contract between Eskom and the Brakfontein mine was for the supply of coal to the Mujaba Power station after the 2008 load shedding crisis when Eskom embarked on 10-year coal supply contracts.
Evidence leader Kate Hofmeyr told the commission that Mashigo's evidence, alongside three others including the late Eskom executive Mark van der Reit, showed that the contract was rushed.
"The evidence will show that considerable pressure was placed on Eskom employees to conclude this agreement. They were told to finalise the agreement within 48 hours and to have it signed on the 10th of March 2015.
"The day after the agreement was signed, Mr. Matshela Koko was suspended and the evidence will show that the agreement was concluded despite financial due diligence not being completed. The financial due diligence was in fact completed at the end of April 2015 after the agreement was implemented and coal supply had commenced.”
The financial evaluation, which Mashigo told the commission was required to decide whether Eskom awards the contract to Tegeta, eventually found that the company had recorded an accumulated loss of R20.8 million and a loss for the year of R17.4 million.
It concluded that Tegeta, which has since been placed under business rescue, was not fit to be awarded the contract.
Mashigo said the financial due diligence was probably done to tick a box, as the contract had been awarded by the time it was completed.
Hofmeyr read a statement provided by Van der Riet, who passed away before he could testify at the commission.
Van der Riet, who was an Eskom employee for at least 30 years, told the commission that his teaminvestigated after concerns where raised about the quality of coal that was being supplied by Brakfontein. Two independent laboratories concluded that the coal failed the quality test.
According to him Koko arranged for the coal to be tested by another independent lab, which found that the coal was fit for purpose. However, Van der Riet maintained that the coal failed the quality test and was subsequently suspended for 32 weeks.
"Mr. Van der Riet was told by Koko that the new sampling would be done without any Eskom personnel. Mr. Van der Riet conveyed to Mr. Koko that that would be irregular and without the contract quality management processes, but despite that, the sampling went ahead and it was analysed under mysterious circumstances."
Mashigo said Brakfontein stopped supply Eskom with coal in February 2018 after it was placed under business rescue.
"For every mine that Tegeta has failed to supply coal to Majuba from Brakfontein is equivalent to 2.4 days, meaning that we have had to go to our strategic coal pile and burn off the two days because it is not coming from Tegeta and we could not replace that coal quick enough. Hence Majuba is one of the power stations that had a severe deterioration of coal stock levels to a point that it dropped below 10 days which was a very critical state.”