Eskom board played Russian roulette with economy, #StateCaptureInquiry hears
Johannesburg - Eskom treasury official Sincedile Ebenezer Shweni on Monday corroborated Andre Pillay's testimony on how Eskom executives pushed through an unsolicited R25 billion loan transaction from China-based Huarong Asset Management despite red flags raised internally.
Shweni's testimony before the Zondo-led state capture commission inquiry follows that of Eskom's treasury head Pillay last week.
He testified on how disgraced former CEO Seun Maritz, former CFO Anoj Singh and the board "played Russian roulette" with the country's economy regarding the Huarong transaction, which he said almost collapsed the country's economy. Shweni is a corporate specialist: funding execution at Eskom's treasury department.
He said the transaction was not taken to the Asset and Liability Committee (Alco) as required. The Alco scrutinises and vets processes at Eskom and was at that time chaired by Singh.
The evidence leader asked Shweni: "The fact that the Alco was skipped, did that have a negative impact on the handling of the proposal?"
Shweni replied: "In my mind, yes. Alco has a very rigorous process of interrogating and vetting processes. First of all, this proposal was new and that made the terms and conditions not that honourably, there would have been several vetting processes...this transaction would not have gone through."
Shweni said he had to handle the transaction's term sheet and that there were internal concerns about the facility fees -- including the pricing, commitment fee, the cancellation fee and other fees set out in the transaction. Soon after the term sheet was signed, a trip to China was arranged. Shweni said he was not part of the delegation to China that included Singh, Pillay, Poobie Govender and Prish Govender. The trip was paid for by Eskom.
Eskom entered into the dubious agreement with Huarong in 2015. The Chinese entity had approached the cash-strapped power utility with a proposal to grant it $1.5 billion (around R25 billion) for Eskom to build or refurbish power stations.
Huarong had partnered with a South African-based electrical engineering contractor, Tribus Energy owned by Rajeev Thomas, to establish a BEE-compliant consortium, Huarong Energy Africa, which would implement this proposal to Eskom.
Pillay told the commission that Eskom had decided to issue a Request for information (RFI) notice, which he said was "a new process" as the power utility would normally have issued a request for Proposal (RFP) to ensure there were no similar proposals out there.
He said Huarong was appointed as the preferred bidder among the 12 that had responded, which included JP Morgan, Absa, and Rand Merchant Bank.
"We wanted funding to be greater than R15 billion and that would not trigger defaults against debt covenants, to be in line with Eskom's capital projects, and to be implemented within a reasonable short period of time," Pillay said.
When the deal's "non-binding" term sheet was presented to Eskom, Pillay said he realised that there was a commitment fee of 0.8 percent amounting to $24 million, and a 0.2 percent cancellation fee amounting to $30 million if Eskom repudiated or cancelled the deal.
Pillay said this deal was never presented to Eskom's internal legal department as Eskom relied on an external legal firm, White and Case. He said Singh pressured him to sign the non-binding term sheet as Huarong partners wanted to be "at ease about the good working relationship".
African News Agency (ANA)