In the same week that energy regulator Nersa granted Eskom a hefty tariff hike, the power utility reportedly paid R12 billion for flawed designs at one of its power stations – with an additional R1 billion paid to the same firm for repairs.
The City Press reported that a confidential tender report for Eskom showed that the power utility gave a blank cheque to a US firm to design the Kusile power station – which it then cashed for R12 billion.
However, the station was designed so poorly that many of the aspects had to be fixed up. To do this, the same firm’s contract was extended to 2022, and another R1 billion will be paid, the paper reports.
Nersa this week granted Eskom a 9.4% increase in tariffs for 2019/20, to allow the group to earn as much as R206 billion more in revenue for this year. This is on top of the 4.41% increase granted under the RCA.
Eskom begged Nersa and the South African public to allow for the increases so that it could try to turn the business around, as it is losing as much as R500 million every month.
Critics, particularly at civil group Outa and the Democratic Alliance, have slammed the price hikes, saying that the South African public continue to pay for corruption, and Eskom’s maladministration.
Taxpayers are already footing the bill for Eskom’s mistakes, with the government planning to bail the group out with R23 billion in financial assistance every year for the next three years (R69 billion in total).
Economists have noted, however, that even with the bailout and tariff hikes, Eskom’s financial woes are deep rooted.
The latest revelation that Eskom is paying billions in dodgy contracts adds to a long list of such deals, which includes advance payments to Gupta companies for poor-quality coal that was never delivered, and billions in consultation fees for business plans that were never adopted.
According to the City Press, the SIU has opened an investigation into irregularities in the contracts involved with the Kusile, Medupi and Ingula power stations.
The Sunday Times meanwhile reported that former Eskom executive Matshela Koko has also been accused of irregularly awarding a company an R800-million tender during his time at the company.
It reported that Koko guaranteed multinational engineering company Asea Brown Boveri (ABB) contracts worth R6.5 billion if they subcontracted work on the Kusile power station to a company part-owned by his stepdaughter, Impulse International.
ABB, a Swiss company, made the statement in reports submitted to the SIU, which is now investigating the matter. It is one of 11 companies under investigation for looting Eskom, stated the report.
It is alleged that in March 2015, ABB was awarded a contract worth R2.2 billion for work at Kusile. After it won the contract, it was told to appoint Impulse International as a subcontractor, and gave it work worth R800 million.
This was despite Impulse International failing subcontractor qualification questionnaires twice, with scores of 59% and 43%. The report added that the work Impulse International did at Kusile was found to be “substandard and overpriced”.