Forner Eskom Group Executive for Generation Matshela Koko. FILE PHOTO
Forner Eskom Group Executive for Generation Matshela Koko. FILE PHOTO

Matshela Koko: Glencore made its bed and it had to lie on it

By Opinion Time of article published Feb 2, 2021

Share this article:

Matshela Koko

OPINION - Hitherto Glencore was often presented as a victim that was bullied out of Optimum Coal Holdings (Optimum) with the help of Eskom.

Eskom, then under the control of Mr. Brian Molefe, Dr Ben Ngubane and Mr. Matshela Koko allegedly squeezed Glencore out of business and signed a R1.6 billion guarantee in favour of Tegeta to help it buy the shares of Glencore in Optimum.

The revelation at the State Capture Commission already show that Glencore was not the innocent bystander.

Glencore made its bed and it had to lie on it.

Mr. Cyril Ramaphosa was a long standing black economic empowerment partner of Glencore.

In October 2011 Glencore acquired a 31.2% interest in Optimum for $382 million.

In March 2012, a consortium of Glencore and Mr. Cyril Ramaphosa acquired additional interest in Optimum for a total consideration of $381 million thereby increasing their ultimate ownership in Optimum from 31.2% to 67.58% with Mr Cyril Ramaphosa holding a 9.64% effective interest in Optimum.

The remaining shares in Optimum were held by various minority partners (2.92%) and the community and employee trusts (19.86%).

The acquisition of Optimum by a consortium of Glencore and Mr. Cyril Ramaphosa closed on 26 March 2012 and Mr Cyril Ramaphosa immediately replaced Mr. Bobby Godsell as Chairman of Optimum.

Slightly more than a year after Mr. Cyril Ramaphosa took over as Chairman of Optimum, in July 2013, Optimum claimed “hardship” as contemplated in clause 27 of the Coal Supply Agreement.

However, in the period after March 2012, from the time when Mr Cyril Ramaphosa took over as chairman of Optimum, Eskom did not apply coal quality penalties relating to non-compliant coal supplied to Hendrina power station by Optimum in accordance with the Coal Supply Agreement.

The parties failed to resolve the Optimum hardship claim within the prescribed 180 days and they were obliged to refer the dispute of hardship to arbitration on the terms as set out in clause 27.4 and 30 of the Coal Supply Agreement.

The arbitration agreement between parties was signed on 12 December 2013. Advocate Cedric Puckrin SC was appointed the arbitrator to determine the hardship dispute. The arbitration process had to be concluded within 90 days, that is, by April 2014.

This dispute of hardship was the second dispute that had to be resolved by arbitration since the Coal Supply Agreement was signed on 4 January 1993. The first arbitration process was concluded on 12 April 2011.

The arbitration process of 12 April 2011 resolved the dispute related to penalties payable by Optimum in respect of the failure to deliver coal of the specified minimum quality and the dispute in respect of the price payable to Optimum for coal sold and delivered to Eskom in terms of the Coal Supply Agreement. The parties recorded their agreement in a settlement of arbitration and second addendum to the Coal Supply Agreement on 12 April 2011.

When Mr Cyril Ramaphosa became the Chairman of Optimum on 26 March 2012 there was no dispute between Eskom and Optimum relating to penalty claims, there was also no dispute related to the price payable to Optimum for coal sold and delivered to Eskom and finally there was no dispute related to the price escalation clauses in the Coal Supply Agreement.

What Mr Cyril Ramaphosa and his team had to show in their hardship claim of 3 July 2013 was that relevant circumstances had arisen since 12 April 2011 and that these relevant circumstances were outside the control of Optimum and could not have been anticipated by a consortium of Glencore and Mr. Cyril Ramaphosa when they acquired Optimum. That these relevant circumstances resulted in the condition of hardship for Optimum.

What is interesting is that “relevant circumstances” may not in terms of clause 27.2 of the Coal Supply Agreement include any circumstances resulting in Optimum being unable to sell coal in the export market.

The Chief Executive Officer of Glencore’s coal interests in South Africa during the period 2013 to 2017, Mr Clinton Ephron told the State Capture Commission that Optimum hardship condition was the result of “difficult (export) market conditions and the continued deterioration of the export price conditions”. This does not constitute relevant circumstances in terms of the Coal Supply Agreement.

The hardship claim of Optimum was bound to fail and this failure was not engineered by Mr Brian Molefe or Dr Ben Ngubane. They were not even there, and I was also not in the picture.

Mr Clinton Ephron told the State Capture Commission that Glencore and Mr Cyril Ramaphosa acquired Optimum without doing a due diligence exercise.

This is patent nonsense. They could not have acquired Optimum to the tune $ 760 million without having had sight of the coal supply agreement and knowing exactly what they were in for.

Mr Ephron’s story is false. The only reason could have been that they had a card up their sleeve. I will not quibble with those who say that card was none other than Mr Cyril Ramaphosa.

The hardship claim of Optimum was not resolved by April 2014 and within the 90 days prescribed period.

Eskom Executives who were doing the bidding for Optimum instead concluded the Co-operation Agreement with Optimum on 23 May 2014 without the authority from the Eskom Board.

The agreement was irregular and occurred to conceal the fact that Eskom Executives had since Mr Cyril Ramaphosa took over as Chairman of Optimum failed to levy R1.43 billion penalties against Optimum in accordance with the Coal Supply Agreement.

It was a stratagem to cover-up the penalties that were not enforced during the period since March 2012 and an attempt to resolve the hardship claim of Optimum via the back door.

I hold no brief for a consortium of Glencore and Mr Cyril Ramaphosa that acquired Optimum in March 2012.

They made their bed and they had to lie on it.

Matshela Koko is the former Eskom Interim GCEO. The views expressed here are not necessarily those of Independent Media.

Daily News

Share this article: