Eskom paid over R38 billion for inflated contracts – including one that ballooned 13,000%

The parliamentary standing committee on public accounts has revealed that major contracts held by local and international companies for Eskom’s Kusile Power Station were heavily inflated, with their combined value increasing more than 780%.

According to Rapport, the value of the contracts at the time the companies won them were around R4.92 billion – however, they have since climbed by R38.6 billion.

The most egregious of the reported contracts was one held by an American firm, which was won at R114 million in 2005, but has since inflated to R14.95 billion (an increase of over 13,000%).

Construction contracts have inflated from R1.3 billion to R3.7 billion, and a Swiss electrical contract ballooned from R2.2 billion to R3.1 billion.

According to Rapport, an engineering consultancy contract awarded in 2006 at R900 million was inflated nine times over 10 years to R6.2 billion in 2017.

In another example, a company that won a R963 million contract by offering a R33 million discount immediately received a R44 million benefit – and that contract was also inflated to R1.9 billion.

The committee said it was shocked to see the numbers, calling it plundering of the highest order. An investigation into all historic contracts has been ordered, to determine whether all the money paid has gone into the work the groups were hired for.

The Kusile power station, along with the Medupi power station, are well behind schedule and have missed their original completion dates by some margin as has been well reported.

The power stations were due to be online in 2015, with and original build cost of R69 billion (Medupi) and R100 billion (Kusile).

Due to limited skills, poor planning, labour strikes, and unrealistic timelines, these power plants were delayed for years and have still not been completed.

Medupi’s completion date has been pushed to 2021 and Kusile is scheduled to be completed in 2023 – while build costs have run wild, now estimated at R145 billion and R161 billion, respectively.

In February Eskom announced that more work would have to be done at the stations to extend the boiler stacks to prevent failure. To do this the 12 generation units at the plants will have to be taken off the grid for 75 days at a time.

Read: Eskom to take power units off the grid for 75 days at a time: report