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- The failure of Eskom’s 2015 board to question the request to authorize a pre-purchase payment of R1.68 billion to a Gupta-owned company cast doubt on the prudence of the directors.
- The State Capture Commission heard that tThe board made the decision to approve payment to the “proposed” owners of the mine, in which Vice President of the Supreme Court Raymond Zondo said he should have raised red flags among the board members.
- Zondo criticized the former directors of Eskom for not questioning the presentation to extend the payment to Tegeta exploration and resources.
The failure of Eskom’s 2015 board to question the submission to authorize a pre-purchase payment of R1.68 billion to a Gupta-owned company cast doubt on the prudence of the directors, and the chairman of the Capture of the State, the Vice President of the Supreme Court, Raymond Zondo, came to call them negligent on Wednesday.
The board had approved the transaction as part of a contract to ensure continued coal supply by Optimum Coal Mine, which was about to change hands. The mine, previously owned by Glencore, was at the time in financial ruin and undergoing a corporate bailout. Tegeta Exploration and Resources, a company linked to Gupta, had been lining up to buy the mine.
The board made the decision to approve payment to the “proposed” owners of the mine, in which Zondo said it should have raised red flags among the board members.
A former Eskom board member, Pathnathan Naidoo, who was also on the finance and investment committee that discussed the payment, attempted to justify the payment and the board’s apparent lack of judgment when questioning the presentation.
‘I have no idea’ who owned Optimum
Naidoo told Zondo that the board was under the impression he was being asked to discuss and finalize the payment to Optimum’s owners, which would have been Glencore, not Tegeta.
“We had no details of the owners at the time. In our minds, Glencore was still the owner,” Naidoo said.
However, Zondo objected to the direction in the board presentation, which then tasked then-CEO Brian Molefe, former generation boss Matshela Koko, and CFO Anoj Singh to negotiate an advance payment agreement with the owners. ” proposed “from Optimum.
The petition, according to the evidence before the commission, had been drawn up by Suzanne Daniels, a former secretary of Eskom’s company.
Zondo asked why no one among the group of 12 highly educated board members and the finance committee did not examine the presentation and understood that, in fact, they were being asked to authorize the payment to the proposed owners, rather than the owners. current mine.
Although Naidoo initially stood firm in his defense of the board’s conduct, he eventually admitted that the word “proposed” in the presentation “opens a great door.”
Could be ‘more’ than negligent
Zondo spoke harshly about the conduct of the board, whose activities in various commercial matters of the electric utility have become the subject of investigation by the commission.
“What’s in the board resolution suggests to me that … the board was grossly negligent. It may well be a lot more than that, but I’m not saying that at this point.
“It may well be that there was negligence on the part of some members … perhaps they knew more than others,” Zondo said, adding that it was “concerning” that so many board members were not paying attention to what was written in the submission. .
“There is great responsibility on the board when it comes to money and other decisions, particularly when it is asked to authorize the payment of such a large amount from Eskom to someone else.
“When you serve on a body like the board of directors of an entity like Eskom or any board, you are playing an oversight role over the management. You must put the interest of the entity at the forefront,” Zondo said.
The R1.68 billion prepayment issue has featured prominently in the extensive evidence heard by the commission in relation to Eskom, including allegations of outside interference at the board of directors and executive level of the state electric power company.
The Guptas’ takeover of Optimum Coal Mine was bogged down by allegations of political interference, and it is alleged that former mining minister Mosebenzi Zwane traveled to Switzerland to meet with Glencore bosses to push for the sale of mine to a politically connected business family owned entity. .
While under Zondo’s scrutiny, Naidoo also admitted that the board may not have been fully enforced when dealing with the advance payment filing. However, he argued that the directors operated in a high pressure environment and handled large volumes of work.
“At this point, trust and integrity come to the fore. You have to have trust and integrity because you work in a high pressure environment,” he said.
The money was meant to keep Optimum running
Naidoo had previously tried in its testimony to highlight the importance of prepayment, detailing that the prepayment proceeds of R1.68 billion were intended to allow Optimum Coal Mine to extinguish its existing liabilities and ensure that it remains a going concern for secure the future supply of coal for Eskom and save jobs.
The contract would secure supply for the Hendrina and Arnot power plants and help ensure constant power generation. He said that granting advances to commercial entities was normal practice.
In December 2015, Glencore entered into an agreement to sell the Optimum mine to Tegeta for $ 15 billion. It later emerged that the company had a financing gap of 600 million rand to secure the deal and had been having trouble obtaining financing from the banks.
Former public protector Thuli Madonsela, in her state capture report, found that an advance of R659 million that Tegeta had received from Eskom was used to help the company purchase the Optimum mine.
Eskom-related testing will continue on Thursday.
