Leaked emails show exactly how the Guptas captured Eskom: report

The latest round of information coming from the Gupta leaks detail exactly how the Guptas came to be in control of Eskom, by using political connections to score irregular coal contracts, and appoint allies to the board of directors.

The leaks, published by amaBhungane and Scorpio, show that the Guptas’ first foray into Eskom’s business came in 2014, when the company’s mining group, Tegeta, offered to sell sub-standard coal to the power utility, which was declined.

At the time, Tegeta was not a 50%+1% BEE company, as preferred by Eskom, and by the power utility’s account, all its power stations were being adequately supplied with coal from other producers.

According to sources speaking to the investigative units, around January 2015, there was “pressure from above” on the procurement department to accept the Guptas’ offer. This a month after Public Enterprises minister Lynne Brown replaced eight members of the board.

Six out of the eight new appointees – Ben Ngubane, Mark Pamensky, Nazia Carrim, Maria Cassim, Devapushupum Naidoo and Romeo Khumalo – were either family of or had business ties to the Guptas and their business partners, according to the Public Protector’s report.

From here, life got really good for the Guptas.

Another offer from Tegeta, for 65,000 tonnes of sub-standard coal a month at R277/ton was ultimately approved. This would be a 5 year contract (totalling over R1 billion), that did not go through competitive procurement processes.

But the Guptas still weren’t happy, and asked for the contract to be pushed up to 100,000 tonnes of coal per month, over 10 years (totalling R3.8 billion), as well as a grace period for Tegeta to become BEE compliant.

The leaked emails do not detail what happened in the interim, but two weeks after the demand from the Guptas, Eskom relented and signed a contract for 113,000 tonnes of coal per month.

Things continued to rapidly go the Guptas’ way.

In March 2015, the coal being supplied by Tegeta was found to be sub-standard and high risk for use. This was ignored by Eskom, despite the warnings coming internally.

At the same time, Ben Ngubane replaced the ousted Zola Tsotsi as chairman of the board – with email correspondence showing that the Guptas knew of this an advance, and had in fact drafted the release about Ngubane’s appointment.

Ngubane and Gupta business partner, Salim Essa were already well-acquainted, being business partners in Gade Oil and Gas.

A month later, minister Brown announced that Brian Molefe and Anoj Singh would be moving to Eskom. The Gupta email leaks show that Singh had already been to Dubai on several occasions, and the Public Protector’s report into state capture showed that this is when Molefe started getting in contact with the Guptas.

From this time to the end of 2015, the Tegeta coal contract would be suspended and reinstated, despite continuing to fail quality checks, and Eskom would end up paying far more than the terms of the contract.

At the end of 2015, the Optimum coal mine saga initiated, where the Guptas wrangled the R2.2 billion acquitision of Optimum from Glencore.

New information regarding that particular saga released in the Gupta leaks is that Eskom had agreed in principal to pay Tegeta R1.7 billion up-front for future coal, after South Africa’s banks refused to give the company money for the acquisition.

At the time of the request for the R1.7 billion, president Jacob Zuma fired former finance minister Nhlanhla Nene, setting the course for the web to be unravelled.

The full detailed account of the capture of Eskom, including an account of events in 2016 and 2017 can be read on amaBhungane and on the Daily Maverick.

Read: Why Molefe thinks he should still be Eskom CEO

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Leaked emails show exactly how the Guptas captured Eskom: report