Home Business and Technology Eskom’s suspended chief officer explains excessive spending

Eskom’s suspended chief officer explains excessive spending

Eskom

Eskom’s suspended chief procurement officer Solly Tshitangano’s failure to curb excessive spending led to the utility paying R26 per single one-ply toilet paper roll and R51 per black refuse bag. These are some of the claims made in a 53-page affidavit submitted by Eskom CEO Andre de Ruyter to Parliament’s Standing Committee on Public Accounts (SCOPA).

Eskom suspended Tshitangano in February over non-performance in procurement savings. Tshitangano hit back, accusing De Ruyter of impropriety and racism in employee appointments and awarding supplier contracts.

Following this, SCOPA launched a probe to determine if there was any truth to Tshitangano’s claims. De Ruyter’s affidavit was provided as a response to this.

André de Ruyter

However, SCOPA has since suspended its probe after Eskom launched its own independent investigation into the matter. The committee has given the utility 90 days to complete its investigation and report back on its findings.

In the affidavit, De Ruyter refuted Tshitangano’s claims. He said Tshitangano is trying to undermine Eskom’s disciplinary proceedings over his inability to curb spending. Among his allegations, De Ruyter highlighted Tshitangano’s failure to act on the reckless “free text” procurement system which Eskom had been using.

Eskom

De Ruyter said prior to his appointment at Eskom, transactions of less than R5 million – the majority of Eskom transactions – were performed using this system. It allowed a person to type the description of an item with a price which did not match any contractual commodity.

Employees could therefore write any amount alongside any item or component which Eskom required for its day-to-day operations. Under such a system, items do not have to be purchased from a list of suppliers who have been pre-approved as cost effective,” De Ruyter said.

“Instead, items can be purchased from any a supplier, and at any price, in order to avoid contractually agreed prices, often for corrupt purposes. The abuse of the system therefore created a clear opportunity for corruption and fraud and resulted in Eskom paying significantly inflated prices for various goods.”

These included basic day-to-day items like black refuse bags being purchased at R51 each, single ply toilet paper bought at R26 per roll, and milk bought for R21 per litre.

In the table below, we compared these prices to that of Checkers Homebrand products – illustrating just how inflated the purchases were. De Ruyter also provided examples where orders with excessive values were placed for various components by buyers at the Matla and Kendal power stations.

In one instance on 11 March 2019 a buyer at Kendal Powers Station placed an order with a company called Sebaramalele Projects for refurbishment of two compressors to the value of R368,550. It was later discovered that this company had sub-contracted SSS Innovations to perform the work, who in turn sub-contracted A&E Agencies and Repairs.

The latter completed the job for R41,400, R327,150 less than what was paid to Sebaramalele Projects. Eskom further discovered the price of two completely new compressors would have been R112,000.

The table below shows the free text order figures as opposed to the actual prices Eskom had previously paid for the same components or how much the work had actually cost.
De Ruyter said his previous corporate experience taught him that the percentage of purchase orders placed on a free text basis was a good indicator of the efficacy of governance in the procurement environment.

He was alarmed to discover that approximately 75% of Eskom’s procurement was being performed using this system when he arrived at the utility. Following his intervention, this figure was brought down to 8%. De Ruyter said that Tshitangano was duty bound to ensure that Eskom’s procurement was subjected to proper control.

“This he failed to do, as is evident from the examples of overpayment detailed above. It was only after my appointment, and at my direction, that the ‘free text’ system was replaced with a system which ensures proper oversight of procurement,” he added.

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Source: mybroadband