Corruption carnage at Kusile – Furniture deliveries by taxi and a donation to a suspicious Zuma foundation

Millions of rand was siphoned from power utility Eskom through irregular contracts, excessive furniture spending, and a donation to a suspect foundation chaired by former president Jacob Zuma.

This is according to The Sunday Times, which was reporting on a series of investigative reports into Eskom contracts by law firm Bowmans.

The reports – which were obtained by the Global Initiative Against Transnational Organised Crime – were initially commissioned by former Eskom CEO Phakamani Hadebe in 2018.

The latest findings revealed by The Sunday Times centre around suspicious contracts and spending which formed part of Eskom’s construction of Kusile – a 4,800MW coal power plant being built in Mpumalanga.

Construction of Kusile has been hampered by corrupt contracts and design defects, which delayed its completion date by several years and increased its construction cost by more than R160-billion.

The project first started in 2008 and all six units were originally planned to be completed by 2014. However, by 2019 only Unit 1 was in commercial operation.

Various technical modifications have had to be made to the station to address the design problems.

Eskom in March announced that a third unit at the station had achieved commercial operational status, bringing the completion of the power plant to its halfway mark. It is now expected to be completed by 2023.

Deputy President David Mabuza recently commended the leadership of Eskom on progress made in the construction and correction of the design defects after a visit to the power station.

Kusile Power Station
Kusile Power Station during early days of construction.

Power and mining expert Ted Blom previously blamed the cause for Kusile’s performance issues on the corrupt switching of tenders to the benefit of Hitachi.

“The tender contracts for Medupi and Kusile were corrupt from day one,” Blom said.

“Hitachi tendered for the turbines and are well-known worldwide for turbine execution, while Alstom tendered for the boilers.”

“The powers that be at Eskom swapped the tender offers and Hitachi ended up with what they didn’t tender for – the boilers – and Alstom ended up with the turbines,” Blom said.

This resulted in big performance issues at the power station – particularly with the boilers – which only had 20% availability at Kusile.

Blom claimed Hitachi got the boiler contract because it was the larger tender.

Notably, the ANC’s investment company, Chancellor House, owned shares in Hitachi Power Africa (HPA), having bought them for R1.25 million in 2005.

The Bowmans reports claim the corruption at Kusile went even further.

Among the most notable revelations reported by the Sunday Times were:

  • Contractor Stefanutti Stocks and Basil Read (SSBR) had its initial R1.79-billion Kusile construction contract hiked by a further R903 million through irregular additions to the required work.
  • Former Eskom senior manager for Capital Contracts France Hlakudi helped secure a R100,000 donation paid by SSBR to a foundation linked to Jacob Zuma’s family. Beyond a launch event, there is no proof that the foundation had any further activities.
  • Eskom bosses and contractor representatives colluded to initiate a R15-million productivity study on the Kusile project. There is no evidence that this study was conducted.
  • Former Eskom group executive for group capital Abram Masango had a personal interest in inflated furniture purchases worth R22 million.

The latter finding came after a whistleblower working at Eskom’s group capital department witnessed a minibus taxi deliver some of the ordered furniture.

These were planned to be used in the R840 million Wilge Residential Development, a housing complex intended for workers at Kusile.

Work on the 336-unit housing complex – which was intended to house workers at Kusile – was halted due to steep cost overruns in its six years of construction.

The furniture purchased at inflated prices for the complex included:

  • R18,000 for a pool table typically priced at R3,500, a 425% mark-up.
  • R2,900 for desks currently priced at R499, a 481% mark-up.
  • R4,400 for two-seater couches worth R500, a mark-up of 780%.

A further R4 million was spent on kitchen equipment, R440,000 on crockery, and R47,100 on cutlery.

Wilge Residential Development

The latest details on more suspected corruption at Kusile come after the National Prosecuting Authority was granted a restraint order to seize assets to the value of R1.4 billion against former Eskom executives and contractors, some of whom were involved in the latest revelations.

These include Hlakudi and Masango, who are now facing charges of fraud and corruption.

While this appears to be a major step in clamping down on corruption at Eskom, the Bowmans reports have red flagged contracts and tenders to the value of R178 billion.

Director and head of business crimes and investigations practice at Werksmans Attorneys Bernard Hotz has labelled corruption at the utility as nothing short of commercial terrorism.

Hotz said there had to be consequences for the perpetrators, and called on the NPA to seek assistance from private entities which could help.

“It is high time that public-private partnerships are put in place. You have to fight nuclear battles with nuclear weapons,” he said.

“You need to throw money and proper resources at investigating these matters to put the criminals behind bars.”

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Corruption carnage at Kusile – Furniture deliveries by taxi and a donation to a suspicious Zuma foundation