On Thursday, Eskom CEO Brian Molefe accused former Public Protector Thuli Madonsela of double standards, in not affording him an opportunity to explain himself before implicating him on a large scale in her State capture report.
At Eskom’s interim results presentation in Sandton, an emotional Molefe said he would take Madonsela’s report on judicial review and is weighing up his options.
He said he takes full responsibility for the fateful decision to not buy coal from Glencore at R530/ton while Eskom had an existing contract with the company at R150/ton and doesn’t see how he could have done anything else.
He said he couldn’t see why the Eskom board, public enterprises minister Lynne Brown or President Jacob Zuma should resign, “because we didn’t buy from Glencore at R530/ton. “I would resign before he (Zuma) resigns,” he said.
Eskom chair Dr Ben Ngubane responded after Molefe left the stage briefly, wiping tears from his face. He said: “Thuli Madonsela has dealt Eskom a deadly blow. If we lose Brian, she must take the blame.”
Molefe said when he joined Eskom late last year the utility was load shedding, had no cash, was using costly diesel to generate electricity and as a result, primary energy costs shot through the roof.
He said in May this year Glencore came to Eskom with a request to have the price of the coal it has to deliver to Eskom at R150/ton until 2018, adjusted to R530/ton. At that stage, the negotiations had been going on for a while and the parties were close to reaching an agreement.
“I said no, Eskom doesn’t have the money to pay R530/ton. We have a contract for R150/ton.”
He said even if he agreed to pay the increased amount, he would still risk an adverse report from the Public Protector. “I would still have a Public Protector’s report saying I am corrupt, because I’m paying R530 instead of R150.”
That decision, he said, led to a domino effect “of phenomenal proportions”.
Glencore CEO Ivan Glasenberg then threatened to halt supply, which he pointed out would result in worse load shedding.
Molefe refused to negotiate with a gun to his head and Glencore put its Optimum mine under business rescue. This gave the business rescue practitioners the gap to cancel the coal supply contract with Eskom.
They gave Eskom notice to start paying the increased tariff or they would stop supply within 24 hours – which is exactly what happened at the beginning of August when Eskom refused to bow to blackmail, Molefe said. The utility risked losing the whole capacity of its Hendrina power station as a result – and that in the middle of load shedding.
Eskom relied on its stockpile and “scavenged” for coal. It managed to keep Hendrina going.
A representative from Optimum then called Molefe, offering to resume supply at R400/ton, “because now we are getting nothing”. Molefe refused, saying there was a contract for supply at R150/ton. He refused to talk before the supply was resumed, which happened the next morning. At R150/ton.
The business rescue practitioners then communicated that they wanted to sell the mine. By that time Eskom had already issued a summons for the R2 billion penalty it imposed on the mine for non-compliance with specifications. “We needed the money.”
Molefe said there were various interested parties. One of which later made a presentation to Madonsela. This party, like the Guptas and Tegeta later, asked Eskom to waive the penalty and increase the coal price to R530/ton, which Eskom refused.
Tegeta then decided to buy the Optimum mine. “On the day they signed I was not there with a gun to anybody’s head.”
The company supplied coal to Hendrina while under business rescue and since then it has come out of business rescue and Eskom is now pursuing the R2 billion penalty again.
At the end of last year another contract for coal supply to Eskom’s Arnot power station came to an end. Eskom was paying R1 132/ton. During the negotiations, the supplier wanted a renewal at R1 400/ton, which Eskom refused.
It looked for coal from other suppliers and nine came forward. Seven of them couldn’t proceed and two remained on board, one of them being Optimum. It was still in business rescue, but owned by Tegeta.
Tegeta then approached Eskom saying there was a section of the mine Glencore didn’t mine. Tegeta was prepared to mine it, but did not have the development capital, partly because the banks closed their accounts.
Tegeta made an undertaking to provide Eskom with three months of supply and Eskom agreed to make a prepayment. It took 100% of Tegeta’s shares as security. The coal has since been delivered and the prepayment debt settled in full.
Molefe said Eskom has made prepayments to other suppliers in the past.
He said Madonsela never called him or Eskom CFO Anoj Singh to give their version of events. “She asked us for files and we gave her 120 files. She subpoenaed us. We had a date to explain, but she cancelled.
“We never appeared before the Public Protector. She sent questions the day before she finalised the report and we answered her.
“She never called us and therein lies my gripe. I thought our Constitution also talked about the rights we had.”
Molefe referred to a recent finding of Madonsela that Eskom was guilty of maladministration for not giving a consumer the opportunity to explain, after being caught for the third time for tampering with his electricity meter. He said she was correct, but equally he would have liked the opportunity to explain himself.
Molefe criticised Madonsela for drawing conclusions from cellphone evidence that he was in the vicinity of the Gupta residence in Saxonwold between August 5 and November 15 last year. He said he could have been visiting a shebeen situated two blocks from the Gupta residence.
“The (former) Public Protector painted me with a corrupt brush.” He said it could be two years before the envisaged judicial commission of enquiry finalises its report into State capture. “During this period my reputation will be tainted. My children will be taunted at school: ‘Your father is corrupt!'”
Molefe said he believes the accusations are the result of him refusing to pay Glencore R530/ton for coal, but believes he would have been accused of corruption either way.
“I will go the the commission of enquiry. I will take the report on judicial review”, he said. “I will weigh my options and decide what to do.”
He said he thought long and hard about the matter and believes there is nothing he could have done differently.
“What pains me most, is I never had the opportunity to explain myself before Madonsela.”
Molefe did not take questions on the matter, but will host another media briefing on Friday to deal specifically with the Public Protector’s report.