Paying for Eskom 'collusion' and BEE associates

[Frankie]

As a old employee of Eishkom I can verify that this story below is 100% accurate.
The power plants that experienced coal shortages were built on coal mines that had coal reserves to carry the power station past it's design life, but the contracts with these mines were severed because Eishkom 'management' decided to purchase coal from BEE suppliers where the backhanders were plentiful.

http://www.news24.com/News24/MyNews2...301954,00.html
Paying for Eskom 'collusion'

Over the last week, I have noticed that Eskom is now using the rising cost of raw materials procured for electricity generation as yet another means to justify their ends: a massive price hike.

However, what many don't know is that Eskom has a restrictive procurement policy in place, which means that instead of putting a large amount of their procurement requirements out on tender, they draw from a very limited pool of approved vendors.

Getting on the vendor list is notoriously difficult, and many smaller contractors and suppliers simply don't meet their excessively strict criteria.

Many of the criteria involved relate to BEE and preferential procurement, however, while we all realise that BEE is a fact of life, and here to stay, does that justify paying up to 20% or 30% more for goods and services?

Is this simply a means to ensure that Eskom's preferential procurement figures look good on paper? But to whose detriment?

Lack of competition

Having been involved in the contracting industry for many years, with a company that was on this elite list, I know that these companies use the lack of competition to their advantage.

Having a limited pool of suppliers also means that price fixing amongst these suppliers is rife.

In the industry I was involved in, there were only three contractors that I know of at the time, and in our area, who were allowed to, or indeed invited to, quote or tender on Eskom's projects.

Since the opportunity was so clear, it was often decided well beforehand who would take which contract, at what price, and what the others would get out of the deal.

Obviously, if Eskom wants to pass on their costs to the consumer, they would need to first examine their procurement policies, initiate fair and open tenders on all work, and ensure that they are getting the best possible price!

Ask yourself, would you purchase anything, particularly a major cost item, without first shopping around? No? Then why is it acceptable for one of the largest parastatals in the country to do so, and then complain that they are paying too much?

[Ozymandias]

Frankie - is the 20-30% extra that Eskom is to pay for coal mentioned in this article correct? I read somewhere that on average, Eskom had been paying about R52/t for the coal it secured through long-term contracts and now it will be paying over R100/t on it's newer contracts. Thats closer to 100% more. Will this more expensive coal have to be transported from the Richard's Bay coal terminal or is Eskom getting it from their original severed suppliers, based close to the power plants?

[Frankie]

Frankie - is the 20-30% extra that Eskom is to pay for coal mentioned in this article correct? I read somewhere that on average, Eskom had been paying about R52/t for the coal it secured through long-term contracts and now it will be paying over R100/t on it's newer contracts. Thats closer to 100% more. Will this more expensive coal have to be transported from the Richard's Bay coal terminal or is Eskom getting it from their original severed suppliers, based close to the power plants?

Yes, I expect that the price they pay now is at least that much higher than the original contracts with the on site coal mines.

Not only did the coal price skyrocket, but the reliability of supply was lost when they went for their BEE coal suppliers which typically used BEE road transport.

Their silence is deafening regarding the original coal supply arrangements.
We need to question why, regardless of price, these same power stations had very dependable coal supplies and now they have zero stockpiles - the answer is NOT price related.

I doubt that coal supplies would be imported, because we have sufficient reserves, it just needs to be managed without the underhanded BEE dealings.

Hopefully they will reestablish reliable supplies from the on site mines.