The companies awarded fuel oil contracts by Eskom last year had engaged with the power utility outside of normal procurement processes and apparently even threatened the state-owned company if it did not cancel the multibillion-rand contract of Econ oil, a black female-owned company.
Independent Media’s special investigation unit is in possession of an email which reveals details of unprocedural activities and favouritism of suppliers, which could be another reason why Eskom’s chief executive, Andre de Ruyter, had cancelled Econ’s contract just days into his job.
In last year’s December 5 email with the subject line “fuel oil allocation” from Eskom’s procurement and supply chain manager
Boiketlo Mashila wrote to Thembokhule Bhengu, a senior acting manager for generation centralised contracts and Ntombizodwa Mokoatle, a senior manager for commodity sourcing at Eskom, saying: “I received a call from Ntombizodwa where she accused me of sabotaging the business and expressed disappointment in me and my team for not executing instructions, despite summering (sic) the same instructions as discussed with the chief procurement officer and asking for confirmation of alignment.”
Mashila had raised her concerns with the managers and said it was unprocedural to engage suppliers and promise them work outside a tendering process outcome, as both Sasol and the Fuel Firing Systems Refiners had been promised additional volumes after they had complained.
“The process that you have been asking the team to embark on contradicts not only the referential Procurement Policy Framework Act, but our own procedures. No one has the mandate to change board resolutions except the board itself, and we cannot use quantities that were not issued by the market for allocation purposes.
“It is unlawful to withhold contracts from Econ Oil based on threats from Fuel Firing Systems Refiners and Sasol, and it is also unprocedural for commercial management to engage with suppliers and promise them work outside the procurement process.”
According to the Eskom invitation to tender Corp 4786, the buyer remains the only contact person, but the commercial management have chosen to discard this procedure, she said.
“Numerous meetings have been held with the approved fuel oil suppliers, with a view to changing what has been approved by the board. I am writing this email to advise you of my discomfort in executing instructions that are not in line with the procurement process. I now view the delay in awarding fuel oil contracts with suspicion, but for the purpose of progress kindly allocate the project to someone else,” she concluded.
Eskom, who refused to comment on the leaked email despite being given enough time to respond, had previously stated that De Ruyter had cancelled the tender with Econ Oil company due to evidence of irregularities, which included price inflation and other illegal activity. However, a forensic report conducted by Advocate Wim Trengove on behalf of Eskom to prove De Ruyter’s innocence for cancelling the contract did not give much evidence to back his reasons.
The Eskom board had approved the contract of the three suppliers (Econ, Sasol and Fuel Firing Systems Refiners) at a budget of R14 billion last year.
Fuel Firing Systems Refiners declined Eskom’s contract, and Econ and Sasol’s alleged collusion in their proposals resulted in only one tender’s (Econ) contract being cancelled.
De Ruyter in the investigation report claimed that one of his main reasons for cancelling Econ’s contract was due to the collusion, but Sasol told Independent Media that they don’t know anything about this and did not receive any communication from Eskom alleging Sasol had colluded with any party.
Sasol’s media relations manager Matebello Motloung said Sasol did not have any issues with Econ being contracted by Eskom and did not threaten the power utility over contracts with any other company.
“Sasol accepted the award from Eskom and was not aware of Econ Oil’s contract being cancelled or of the reasons for the cancellation,” he said.
Econ Oil said it would not be drawn on the matter currently, but Independent Media understands that the company is in the process taking legal action against Eskom to have the Trengrove report set aside and the contract cancellation declared unlawful.
However, Fuel Firing Systems Refiners said that the cancellation of only one tender was unfair. Fuel Firing Systems Refiners managing director Andrew Canning explained the company had rejected the fuel oil contract to dodge improper tender processes and due to commercial concerns with the contract documentation that Eskom provided to them for signature at the time of the offer.
Canning said Fuel Firing Systems Refiners was not prepared to sign the documents as they stood even though their company has been a supplier to Eskom’s coalfired power stations since 2006.
“We could not sign the NEC3 Supply Contract as it also contained a lot of generic information and was not specific for the award of one station to Fuel Firing Systems Refiners.
“We had previously been awarded several contracts during this time and the quantities supplied by Fuel Firing Systems Refiners varied with the different contract allocations offered by Eskom,” he said.
Despite the previous relationship between the two, Fuel Firing Systems Refiners said they would no longer be “used” by Eskom.
Eskom’s spokesperson Sikonathi Mantshantsha did not comment much on Econ and Sasol’s alleged collusion, but only responded to the documentation that Fuel Firing Systems Refiners referred to.
“Every agreement that is drafted between two parties will undergo a few versions until one that is acceptable to both is agreed upon and then signed,” he said.