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SA power supply deal faces legal challenge over graft

DNG Energy, sued to halt the government’s award of emergency power supply contracts, alleging that the process was tainted by corruption.
Image: Tomohiro Ohsumi/Bloomberg

DNG Energy, a South African gas company, sued to halt the government’s award of emergency power supply contracts, alleging that the process was tainted by corruption.

Some of the eight bid winners, especially Turkey’s Karpowership, which operates mobile, vessel-based power plants, were granted unlawful exemptions from the tender requirements, DNG said in court documents. Its lawsuit could hamper attempts to bring new generation capacity on line and address a crisis that’s seen state utility Eskom subjecting the nation to intermittent electricity outages.

Aldworth Mbalati, DNG’s executive director, said in an affidavit to the High Court that he was approached by a businessman with “close ties” to Energy Minister Gwede Mantashe and government officials who offered assistance to win a contract. Mbalati said he was told the outcome would be pre-determined, but rejected their proposal, according to the affidavit. He didn’t identify the people who approached him because he intends filing a criminal complaint.

Bloomberg couldn’t immediately reach Karpower’s spokesperson at its headquarters in Turkey, which is under a national coronavirus lockdown. A company representative wasn’t immediately able to comment when contacted on mobile phone. Sechaba Moletsane, one of three directors of Karpower’s local partner Powerships SA, didn’t answer a call to his mobile phone or respond immediately to a text message and an email requesting comment.

Power outages

The tender winners have been contracted to generate 1,845 megawatts of electricity by August next year, projects the government expects to bring in R45 billion ($3.2 billion) of investment. The deals have yet to reach financial close.

Karpowership, a unit of the Turkish Karadeniz Energy Group, won the bulk of the contracts, which will run for two decades — a deal worth an estimated R218 billion. That’s sparked concerns that the country’s may fail to reach carbon emission reduction targets.

“People who go to court are answered in court,” Mantashe said by phone. “Editors are not judges.”

His spokesman, Nathi Shabangu, said the Department of Mineral Resources and Energy, which Mantashe oversees, or the Independent Power Procurement Office will issue a statement on Friday.

The opposition Democratic Alliance party on Thursday had a motion, backed by environmental activists, to have a parliamentary probe of the contract rejected.

Karpowership was granted exemptions with regard to conducting environmental assessments prior to submitting a bid as well as a so-called local content requirement, designed to stimulate South African business.

The power vessels supplied by Karpowership “were originally designed to supply electricity to countries with little to no electrical infrastructure such as war-torn countries, or countries which had suffered natural disasters,” DNG said. “The fact that these ‘short-term emergency ships’ would operate for 20 years in three critical ports further prejudices the development of liquefied natural gas terminals and severely prejudices the development of a gas economy.”

AmaBhungane, a South African investigative news organisation, reported on the court documents earlier on Friday.

© 2021 Bloomberg

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Corruption in South Africa? Not possible. Our guys are angels.

Desperately trying to keep out of the bush.

Unfortunately its back to the bush!!!

anc will ensure nothing survives.

Can’t actually understand it, surely with all the hype around corruption the Cabinet would on something like this, be sure to be crystal clean. Suppose there’ll be a commission of enquiry into this in say three years time and that’s where it’ll probably stop.

Another thing that confuses me about this, is why is SA spending so much on a foreign provider, how does this stimulate local spending.

Something just doesn’t add up, we could for that amount of cash, have wave power, solar power, wind power, hell even build a hydro dam

The stench of the deal was nauseating when first announced. The the raw sewage will flow once the bubble of innocence’s is broken !!

NB: Read Paul Semple’s assessment of the Powership 20 year deal on Daily Maverick!
Semple is Futuregrowth Investment Portfolio Manager. Doesn’t sound promising…..

End of comments.

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