Eskom allegedly paid millions of rands to a sub-contractor at its Kusile power station in Mpumalanga despite not having a contract with the company.
JOHANNESBURG - Eskom allegedly paid millions of rands to a sub-contractor at its Kusile power station in Mpumalanga, even though the power utility did not have a direct contract with the company at the time.

In a scenario reminiscent of the controversial payments to McKinsey and Trillian, Eskom paid more than R170million to Tubular Construction Projects (TCP), a subcontractor at the Kusile project. TCP is at the centre of an Eskom investigation after an anonymous letter was recently sent to Eskom’s interim board chairman, Zethembe Khoza, accusing TCP of paying kickbacks to key staff at Kusile.

Also read: Eskom in kickback scandal at Kusile

Eskom last week confirmed that it had also reported the matter at the Bedfordview Police Station. TCP has not responded to requests for comment.

Business Report (BR) can today reveal that Eskom made payments to TCP before the two entities signed a contract on April 29, 2016. The contract was for the erection of an air cooled condenser (ACC) for Kusile’s Unit 4 to Unit 6. In January 2008, Eskom entered into a turbine generator works contract with Alstom. It, in turn, subcontracted DB Thermal for the ACC contract. DB Thermal then entered into a contract with TCP for the erection of the ACC.


Eskom decided to “descope” Alstom and DB Thermal in favour of dealing directly with TCP because of disputes between TCP and DB Thermal.

Eskom paid Alstom and DB Thermal for lost profits. In response to questions last week, Eskom said: “The settlement was agreed between all parties and in the best interest of the Kusile project as a whole, and was therefore not unfavourable to Eskom overall. “Eskom legal was involved and supported the process.”

Eskom has repeatedly denied that it paid TCP before there was a contract between the two entities. BR has seen documents which show that the money was paid. The utility, instead, said its contract with TCP took effect on December 10, 2015. “The contract between Eskom and Tubular Construction Projects for the ACC Erection Works on Units 4 to 6 at Kusile Power Station was actually placed on December 10, 2015, not April 29, 2016.

"Importantly, no payments were made by Eskom to TCP pertaining to the ACC erection works for Units 4 to 6 at Kusile Power Station before there was a contract in place between the two entities,” Eskom said in a statement yesterday.

Incidentally, December 10, 2015, is the day the contract was taken to the Eskom board tender committee. Eskom has implied that the contract was tabled to the board tender committee and took effect on the same day. By the time the contract went to the Eskom board, the power utility had paid TCP approximately R95million, which was transferred in the period between November 26, 2015, and December 8, 2015.

In that period, which - even on Eskom’s version of events - was before there was a contract, the utility paid TCP R22.8m, R21.4m (both on November 26), R24.9m and R26.2m (both on December 8).

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A person familiar with Eskom’s procurement processes, who declined to be named, said yesterday that it was “practically impossible” for the power utility to lawfully pay a supplier without a contract.

In order to lawfully make a payment to a supplier, Eskom needed an invoice, information on goods received and a valid contract.

Eskom invited TCP to participate in the ACC contract “as a sole negotiating party” in September 2015.