Cape Town – Eskom’s coffers will this month be bolstered after the power utility struck a deal to recoup over R1.56 billion irregularly paid to service provider ABB.
This comes after the Zurich-based industrial giant ABB was fingered in suspicious payments relating to contracts awarded in 2015 involving the control and instrumentation work at Kusile power station, amounting to R2.14 billion.
An investigation arose as a result of ABB’s voluntary disclosure of alleged collusion with certain Eskom officials to irregularly award ABB a contract.
The Special Investigating Unit (SIU) began a probe following the signing of proclamation R11 of 2018, authorising the agency to dig into allegations of corruption, maladministration and malpractice in the affairs of Eskom.
Eskom CEO André de Ruyter said on Friday the repayment agreement between ABB, Eskom and the SIU was signed this morning, and the utility is expected to receive the proceeds before the end of the year.
“(The amount paid to ABB) was R324 million more than the price offered by the lowest bidder at the time.
“At the time, it was motivated to award the contract to ABB on the basis that ABB could offer scheduled acceleration, and I think subsequent events have proven that there were other motives,” De Ruyter told the media.
De Ruyter said the settlement amount agreed upon with ABB includes a variation order amounting to R800 million; the cost associated with the irregular award of contracts due to collusion with certain Eskom officials of R250 million; interest on the money on irregular payments of R380 million, and profit accrued by ABB amounting to R160 million.
“We accept that ABB has performed work for which we have received value, and therefore we have not claimed back the entire contract amount. We’ve sought to claim the amount that has been irregularly enriching ABB and was therefore unlawful.”
Another hurdle faced by Eskom is that Kusile is still an ongoing project, which is about 90% complete, De Ruyter said.
“For Eskom to approach a new contractor with different technology, it would probably cause us to incur a delay in the commissioning of Kusile, which is already late, by a further four years, and will create a real risk of claims from other contractors for standing time, amounting to about R1 billion.”
De Ruyter said this would increase the risk of load shedding.
The CEO said they would approach the Treasury to approve the continuation of work by ABB, with a proviso that the company will make no profit.
De Ruyter said the utility is delighted and views the move as a continuation of a series of recoveries.
Eskom has already recovered R1.1 billion from McKinsey and R171 million from Deloitte Consulting.
It has also instituted a claim for R3.8 billion against members of the Gupta family, Gupta associates, former Eskom executives and a former government minister, as well as a R95 million claim against PwC.
“We’re committed to pursuing those who sought to enrich themselves unlawfully at the expense of Eskom and South African taxpayers and electricity consumers,” said De Ruyter.
According to De Ruyter, the settlement amount with ABB will not make a significant dent in its financial woes, as it amounts to only 2.5% of the total debt.
“It’s helpful in easing some of our liquidity constraints, but it’s not the solution we’re looking for.”
Justice and Correctional Services Minister Ronald Lamola congratulated the SIU for a job well done.
He has described it as groundbreaking, saying it is the biggest recovery the SIU has ever made in a single investigation.
“It sends a clear message to the people of our country about the commitment of government to assist the SIU and all other law enforcement agencies to do their job.”
Minister of Public Enterprises Pravin Gordhan said the recoveries and claims are examples of practical actions taken to bring money back to the coffers, even though it takes many years to break ground.
Gordhan believes that Eskom and other State-owned entities have been a target of State Capture.
He also hailed the board and new management of Eskom for their courage, persistence and resilience in bringing the investigation to this point.