Probe finds $1.28b of questionable deals at South African power utility Eskom during Zuma rule

Eskom Holdings had entered into irregular contracts worth 14.7 billion rand (S$1.28 billion). PHOTO: REUTERS

JOHANNESBURG (BLOOMBERG) - Former South African President Jacob Zuma knowingly and willingly facilitated audacious looting and wanton mismanagement at the state power utility during his almost nine-year rule, a judicial probe has concluded.

Eskom Holdings SOC Ltd entered into irregular contracts worth 14.7 billion rand (S$1.28 billion), mainly with entities linked to members of the Gupta family, who were Mr Zuma's friends and in business with one of his sons, Chief Justice Raymond Zondo said on Friday (April 29) in a new report on government corruption.

While much of the content is already in the public domain, its publication will increase pressure on law enforcement agencies to take action against those who were implicated in wrongdoing.

"The evidence proves a scheme by the Guptas to capture Eskom, install the Guptas' selected officials in strategic positions within Eskom as members of the board, the committees of the board and the executives and then divert Eskom's assets to the Guptas' financial advantage," Chief Justice Zondo said.

"Central to the Guptas' scheme of state capture was President Zuma, who the Guptas must have identified at a very early stage as somebody whose character was such that they could use him against the people of South Africa."

The judge recommended that prosecutors consider filing criminal charges against former Eskom chief executive officers Brian Molefe and Matshela Koko, ex-Chief Financial Officer Anoj Singh, and some members of its 2014 board.

In his previous report, Chief Justice Zondo instructed law enforcement agencies to conduct further investigations into Zuma with a view towards prosecuting him.

Eskom, which supplies more than 90 per cent of South Africa's electricity, is still struggling to repair the damage caused by the embezzlement of public funds.

Weighed down by about 400 billion rand of debt and unable to afford to properly maintain its aged plants, it continues to subject the nation to rolling blackouts to prevent the grid from collapsing, curtailing economic growth and deterring investment.

Scores of witnesses who testified before Chief Justice Zondo over the past four years described how Eskom entered into deals secured with bribes and kickbacks, and bypassed procurement procedures.

The primary beneficiaries were identified as the three Gupta brothers, who fled to Dubai shortly before the ruling party forced Zuma out of office in 2018 to stem a loss of electoral support.

"It is clear that from quite early in his first term, President Zuma would do anything that the Guptas wanted him to do for them," Chief Justice Zondo said.

The Guptas and Zuma have denied wrongdoing.

Mr Mzwanele Manyi, a spokesman for the Jacob Zuma Foundation, didn't respond to a call and text messages seeking comment.

Eskom said it's set up a team to deal with Chief Justice Zondo's recommendations and has already taken steps to reclaim money irregularly paid to suppliers.

"We look forward to working with the National Prosecuting Authority to ensure that the miscreants speedily face criminal charges," Chairman Malegapuru Makgoba said in a statement.

Eskom was one of several state companies targeted by looters during Zuma's tenure.

In his earlier reports, Chief Justice Zondo said state port and freight rail operator Transnet SOC Ltd signed dubious contracts worth 41.2 billion rand over almost a decade, making it the "primary site of state capture in financial terms".

He also found the abuse of taxpayer funds was rife at state weapons company Denel SOC Ltd, South African Airways and the national tax agency.

President Cyril Ramaphosa, who succeeded Zuma, estimates that more than 500 billion rand was stolen during his predecessor's tenure.

Chief Justice Zondo expects to submit his final report by mid-June, and Mr Ramaphosa will have four months from that date to respond to it.

The President has said he will only act on the panel's recommendations once he has considered its findings in their entirety and submitted them to Parliament.

The annual budget released in February allocated 426 million rand to the National Prosecuting Authority's investigating directorate and the Financial Intelligence Centre to enable them to hire a total of 158 permanent new staff and follow up on cases highlighted by Chief Justice Zondo.

Chief Justice Zondo's other key findings include:

- Singh, Molefe and Koko were central to a scheme that saw Eskom conclude irregular and unlawful contracts worth more than 1.6 billion rand with consulting companies McKinsey & Co, Regiments Capital and Trillian Capital Partners Pty Ltd.

- Eskom's 2014 board took many decisions that were in breach of their fiduciary duties, including suspending executives who were paid out millions of rand.

- Zuma appointed Mr Mosebenzi Zwane, who had no experience in the mining industry, as his minister of mineral resources in 2015 because the Guptas wanted him to get the post.

- All Eskom officials who were party to or facilitated Glencore Plc's disposal of its coal interests to the Guptas and a related guarantee were prima facie guilty of theft and ought to face criminal charges.

- A 3.7-billion-rand coal-supply deal Eskom concluded with Tegeta, a Gupta-owned entity, was procedurally flawed, irregular and illegal, and placed the utility at risk.

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