Eskom looting could be as much as R500 billion – report

The Sunday Times reports that 11 contractors are under investigation for stealing as much as R139 billion during the construction of Eskom’s Medupi, Kusile and Ingula power plants.

The looting from the state power company could be as much as R500 billion since 2005, the Sunday paper said, citing two sources close to the investigation.

The Special Investigating Unit (SIU) is currently investigating the theft of R170 billion from Eskom, with the biggest chunk related to the power plants.

SIU spokesperson Nazreen Pandor said the unit is investigating “the performance of, and payment made to the value of more than R139 billion to 11 identified contractors appointed by Eskom in respect of the Medupi, Kusile and/or Ingula station”.

Design quality

Earlier this month, public enterprises minister Pravin Gordhan said that the Medupi and Kusile plants are “badly designed and badly constructed”.

The power plants, which were meant to add almost 9,600 megawatts to the grid and be fully operational in 2015, are still years away from completion, with their projected build costs doubling to R292.5 billion.

Gordhan has approached Enel SpA, Italy’s biggest power utility, to provide technical help to assess the problems, and the company will send engineers to South Africa soon, the minister said.

The Sunday Times said that the total cost of building the plants has reached R334 billion – with Gordhan’s estimate that R100 billion was lost to state capture was too conservative.

The SIU has also identified 1,980 employees who failed to declare their interests to Eskom, and 148 employees who are still conducting business with Eskom, worth billions of rands, in defiance of government policy, the Sunday Times reported.


Eskom will receive the biggest bailout in the nation’s history after the government stepped in to prevent its collapse, this past week.

The state company will get a R69 billion cash injection over the next three years to help service its debt and free up cash for operations, finance minister Tito Mboweni said in his budget speech Wednesday.

Part of the utility’s transmission business will also be sold to private investors and it will have to drastically reduce costs.

“Pouring money directly into Eskom in its current form is like pouring water into a sieve,” Mboweni said. “We are setting aside R23 billion a year to financially support Eskom during its reconfiguration.’’

The government’s plans to reorganise Eskom and increase renewable energy purchases from private producers put it on a collision course with labor unions concerned about potential job losses.

That bodes ill for the ruling African National Congress, which is due to contest national elections on May 8 and is heavily reliant on its union allies to help it campaign.

Mismanagement Legacy

Eskom is saddled with R419 billion of debt and isn’t selling enough power to cover its interest payments and operating costs, a legacy of years of mismanagement and cost overruns on new plants.

The government warned lawmakers last week that the utility is “will cease to exist at current trajectory by April 2019.”


President Cyril Ramaphosa announced plans to split Eskom into generation, distribution and transmission businesses under a state holding company in his Feb. 7 State of the Nation address.

That will enable each unit to manage its costs more effectively and make it easier for them to raise funding, he said.

The businesses will have their own boards, take over some of Eskom’s assets, liabilities and staff and have to produce financial statements, the National Treasury said in an annexure to the budget.

The transmission company should be set up by mid-2019 and control the national grid, power substations, and the gas turbines, hydro and pumped storage facilities that supplement the electricity supply during peak times, it said.

The SIU investigation also includes the Hawks, the National Prosecuting Authority (NPA) and the Asset Forfeiture Unit (AFU).

The SIU will also probe the appointment and payment of former Gupta-linked companies US-based McKinsey, Trillian and Regiments Capital, which rendered services to Eskom.

And, according to the Sunday Times, Gupta-owned coal-mining company Tegeta Exploration and Resources, and multibillion-rand contracts around the supply of coal to Eskom facilities will be prioritised. Tegeta had a R3.7bn contract with Eskom.

Read: Here’s how to take your home off Eskom’s grid

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Eskom looting could be as much as R500 billion – report