Eskom chief executive Brian Molefe. Picture: Timothy Bernard

Johannesburg - Power utility Eskom prejudiced commodity trading and mining group Glencore in order for Optimum Coal Mine and Optimum Coal Holdings to get into business rescue.

Eskom also awarded a contract for the supply of coal to its Arnot power station to Tegeta to enable the firm to purchase all shares in Optimum Coal Holdings.

The damning findings are contained in the long-awaited Public Protector’s report on state capture.

The report said Eskom might have repeatedly broken the law to accommodate the Gupta family-owned Tegeta Resources.

Former Public Protector Thuli Madonsela has recommended that President Jacob Zuma appoint a commission of inquiry headed by a judge selected by Chief Justice Mogoeng Mogoeng.

Madonsela investigated complaints of alleged improper and unethical conduct by Zuma and other state functionaries on alleged improper relationships and the involvement of the Guptas in the removal and appointment of ministers.

She also probed the family’s influence in the appointment and removal of State Owned Entities directors and the improper award of state contracts and benefits to the Gupta family’s businesses.

The report potentially hauled Eskom over the coals for its dealings with Tegeta.

“Glencore appears to have been severely prejudiced by Eskom’s actions in refusing to sign a new agreement with them for the supply of coal to Hendrina Power Station, this was not in line with previous discussions held by Glencore with Eskom, furthermore, it is unclear as to why approval was needed from (then) acting chief executive (Brian Molefe) before the agreement was signed, as the necessary approvals appear to already have been obtained,” the report said. “It appears that the conduct of Eskom was solely for the purposes of forcing Optimum Coal Mine and Optimum Coal Holdings into business rescue and financial distress.”

Benefited

Madonsela’s report said the only entity that appeared to have benefited from Eskom’s decisions on Optimum Coal Mine/Optimum Coal Holdings was Tegeta.

It probably enabled it to purchase all shares held in Optimum Coal Holdings. She said the favourable payment terms given to Tegeta needed to be examined further.

“Optimum Coal Mine clearly had 30 day payment terms with Tegeta for the supply of coal to Arnot Power Station, and Eskom appears to have been aware of this. It also appears that Tegeta did not meet all its obligations to Optimum Coal Mine as Optimum Coal Mine was owed R148 million (R148 027 783.91) by Tegeta as at July 31 and an amount of R289.8m (R289 842 376.00) as at August 31.”

The report said the move could amount to a possible contravention of the Public Finance Management Act (PFMA) which states that a board needs to prevent fruitless and wasteful expenditure.

“It appears that the Eskom Board did not exercise a duty of care, which may constitute a violation of section 50 of the PFMA. Eskom’s awarding of the initial contracts to Tegeta to supply coal to the Majuba Power Station will form part of the next phase of the investigation,” the report said.

Tegeta also has a 10-year coal supply agreement with Eskom to supply coal to the Majuba Power station.

In its responses, Eskom denied involvement in the transaction charging that its role was limited to the approval of the cession and assignment of the coal supply agreement from Optimum Coal to Tegeta.

The report also questioned the status of the Eskom board, saying it appeared to have been improperly appointed and not in line with the spirit of the King III report on good Corporate Governance.

It said the Eskom board, appointed in December 2014, consisted predominately of individuals with direct and indirect business or personal relations with Zuma’s son, Duduzane, the Gupta family and their related associates.

Molefe, who has since been appointed to the position, has consistently defended the Guptas in public. The report said in the period between August 2, 2015, and March 22 this year, Molefe has called Ajay Gupta a total of 44 times.

BUSINESS REPORT