The big Eskom clean-up has started
Insiders say the suspension of two disgraced Eskom executivies halted some costly contracts
Eskom has begun to clean up the mess that the power utility descended into while under the management of politically compromised leaders.
Along with the suspension of several key players, the company has also reversed several controversial decisions.
Among them is a decision made by now suspended chief information officer and acting CEO Sean Maritz to merge two divisions, Technology and Telecommunications, into his portfolio, Group Information Technology.
The move would have expanded his powers, but was reversed last month shortly after he was replaced by current interim CEO Phakamani Hadebe and promptly suspended for signing off a questionable R400-million payment to a Hong Kong bank account.The R400-million is widely viewed as a kickback and was apparently made to secure a R25-billion loan from China's Huarong Energy Africa to build or refurbish power stations last year.
Eskom – which got a new board last month – has also cancelled a risk-based contract with international consultancy PriceWaterhouse Coopers (PwC) after discovering it transgressed treasury regulations, said spokesman Khulu Phasiwe.
The three-year capital scrubbing contract had been motivated and approved by disgraced Eskom executives Prish Govender and Anoj Singh. It would have seen PwC and its supplier development partner Nkonki Incorporated earn between R3-billion and R4.8-billion in fees for shaving R65-billion off Eskom’s Capital borrowing plans over the medium term.
An internal Eskom source likened the PwC deal to the highly controversial risk-based contract entered into with international consultancy McKinsey and Company, which was done without the required treasury approval.
That deal saw R1.6-billion paid to McKinsey, of which R500-million went to their Gupta-linked supplier development partner Trillian, which led to Singh's suspension.
A Megawatt Park insider with knowledge of the deal said former CFO Singh and former group capital investment assurance general manager Govender – both who have since resigned after being suspended – had pushed for the PwC deal because of their friendship with Nkonki boss Mitesh Patel.The insider also said Govender’s younger brother landed a senior managerial post at Nkonki’s Advisory division less than a month after Nkonki signed a supplier development contract with PwC in 2017.
The insider added that the suspension of Govender and Singh had thrown a spanner in the works as new Eskom officials on the contract, including acting CFO Calib Cassim, discovered the contract did not have treasury approval.
Cassim immediately halted work, changed the terms of the contract from risk-based to time and material, and then shortened it to end at the of February.
Phasiwe said they became concerned about the potential irregular expenditure that would arise from any payments made on risk.
“The contract was converted to time and materials and the risk-based portion was cancelled. This was communicated to PWC in October 2017 and was agreed to by PwC.”
He also confirmed that up until now the power utility had paid nearly R100-million to the companies, but that was based on time and materials.
PwC chief operating officer for Africa Fulvio Tonelli said the company had previously been informed by Eskom officials that all necessary approvals, including from the Treasury, had been received.
He said the company was one of three that responded to an invitation to tender for the contract from Eskom and all aspects of it, including the supplier development contract with Nkonki, had passed stringent risk management procedures.“Nkonki was a rational choice as a subcontractor to PwC based on the fact that they were incumbent in Eskom on other projects and hence had a good understanding of the client context. PwC and Nkonki have worked together previously in state-owned enterprises.”
“It should be noted that no payment was made to PwC on the basis of risk. All payments were made on ‘time and material’ supported by actual time spend and expenses,” he said.
Both Singh and Govender referred queries to Eskom. Nkonki spokesperson Bontle Tsikwe said Nkonki had performed work on the contract, for which it had been paid R17-million. Of this, R6-million had been paid to their own subcontractor, she said.
“Mr Patel has a client service relationship with Mr Anoj Singh and Mr Prish Govender. There is no conflict of interest or independence issues, as a result there was nothing to declare,” she said.
Tsikwe also said Govender’s younger brother had been employed at Nkonki more than three months after the contract had been awarded to PwC, so there was no conflict.