Eskom was effectively “fooling the system” when it made a multimillion-rand prepayment to the Guptas for coal from the ailing Optimum coal mine, the Zondo commission of inquiry into state capture heard on Tuesday.
During his testimony on Tuesday Eskom official Snehal Nagar was asked to detail the events that led to the controversial R659-million prepayment being made to Gupta-owned Tegeta Exploration and Resources. The payment from the power utility allegedly helped the Guptas seal the deal on their acquisition of the Optimum coal mine.
Nagar told the commission that in order to make the advance payment for coal, Eskom effectively had to cheat the normal procurement system which is designed only to make payments for deliveries already received by the utility.
“You are almost fooling the system,” Nagar said.
“You are creating the order and settling the order.”
Nagar recounted a phone call from then general manager in the office of the chief financial officer, Maya Naidoo, on April 13 2016.
According to Nagar, Naidoo instructed him to effect the payment — which had already been approved in an Eskom special board tender committee meeting — in the next two or three hours.
He told the commission that Eskom had budgeted to buy coal, not to make the prepayment.
Later that day, an email was sent by Naidoo to role players in the value chain, including Eskom’s treasury office. The email asked that the payment be made at 2pm on April 13 2016. The email was sent at around 12 noon.
Nagar told the commission that the urgency of the payment did not allow for standard processes to be followed.
The advance payment for coal from Tegeta was done through the coal supply agreement Eskom already had with the entity’s Brakfontein mine, Nagar explained. “Because there wasn’t enough time to follow the process,” he said.
“The vendor was the same supplier. So the banking details were the same … It was easier to use the Brakfontein contract because the Brakfontein agreement already had tenure and it had value,” Nagar said.
This was not “an ideal or correct procedure to follow”, Nagar conceded. He told the commission that although the urgency of the instruction was “startling”, it had come from the office of the chief financial officer. Anoj Singh was was Eskom’s chief financial officer at the time.
“Not doing this is insubordination,” Nagar explained.
Eskom has come under scrutiny at the Zondo commission for allegedly propping up the mining interests of the infamous Gupta family. A number of Eskom executives — including Singh, Matshela Koko, Suzanne Daniels and Brian Molefe — have been implicated in corruption at the utility in the testimonies of witnesses at the commission.
Nagar called the R659-million prepayment “unusual”, explaining that Eskom does not make payments in advance of receiving goods.
The other unusual thing about the payment was that a prepayment usually indicates additional risk, he said. “It is not normally a transaction that you would want to enter into,” Nagar told the commission.