How Eskom board whisked through a R1.68bn agreement that benefited the Guptas

Former Eskom head of legal and compliance Suzanne Daniels has told the Zondo Commission of Inquiry into State Capture that in hindsight she would have asked more questions regarding a 2015 board decision to prepay Optimum Coal R1.68-billion, which included obvious influence from the Gupta family.

“At the time, I just didn’t want to upset the applecart. Now, when you look back at it, I should have done so,” she said on Monday.

Daniels returned to testify about Eskom’s prepayments to Tegeta Exploration and Resources, which facilitated the Guptas’ acquisition of Optimum. Her testimony on Monday focused on the board’s December 2015 decision, the precursor to payments the next year.

She said she took minutes at a meeting on 24 November 2015 between former Eskom group executive for generation Matshela Koko, Gupta associates from Oakbay, Nazeem Howa, Ashu Chawla and Ronica Ragavan, Optimum Coal business rescue leader Piers Marsden and a representative from Glencore, Optimum’s parent company.

Eskom leaders had been squeezing Optimum to sell its Optimum Coal Mine (OCM) to Tegeta since Brian Molefe had been appointed CEO at the energy parastatal earlier in the year, but during the meeting, said Daniels, Koko told the business rescue practitioners the sale should include all of Optimum Coal Holdings’ (OCH) assets.

In early December 2015, shortly after the meeting, Daniels drafted a letter from Koko to the Department of Mineral Resources’ director-general, Dr Thibedi Ramontja, which painted a dire picture, accusing Optimum of threatening coal supply to the Hendrina, Arnot and Komati power stations.

Ramontja has testified that he found a draft reply to Koko in his in-tray – he didn’t know who wrote it – suggesting the transfer of mining rights should be fast-tracked and a prepayment for coal should be considered.

Ramontja knew about the issues and signed the response without thinking there were alternative motives. His letter was used as the justification for a board decision to prepay Optimum R1.68-billion, which never eventuated.

Eskom board members approved the prepayment through a round-robin process on 9 December 2015. They made their decision on the basis of a submission Daniels had sent, which was approved and pushed by Koko and Anoj Singh, who was Eskom CFO and acting CEO at the time, motivating for the prepayment.

That submission to Eskom board members had already gone through leaders at Gupta-linked Regiments.

Eric Wood and Mohammed Bobat and other Regiments employees made comments on the document sent to Eskom board members, such as removing references to adhering to the Public Finance Management Act (PFMA) and that the document should go to Eskom’s board rather than the board’s Investment and Finance Committee (IFC).

The comments from the Regiments leaders made their way into the submission to the board.

The title of the submission to the board referred to a pre-purchase proposal with Optimum, but the detail referenced paying proposed buyers of the company, who were not identified.

There’s no legitimate justification for agreeing to the figure of prepaying R1.68-billion.

There was a suggestion it might be used to cover Optimum’s rehabilitation costs, money that mines pay to lessen their environmental impact when they eventually close. There have also been claims that the amount was linked to Optimum’s debts to creditors or capital expenditure costs.

Optimum’s business rescue practitioners have testified that they were not consulted on the R1.68-billion and it did not relate to its debts, rehabilitation fund requirements or capital expenditure.

However, the amount matched how much the Guptas needed at the time to buy Optimum.

“At the time, I really did not interrogate the letter to that degree,” Daniels responded to a question on whether she had queried the submission to the board regarding the need for the funds.

The deal was referred to Eskom’s IFC, which approved the deal within hours of seeing the details, and board member Pat Naidoo hailed it as a positive development for Optimum, Eskom and South Africa, even suggesting Glencore and Eskom leaders issue a joint statement.

“In the mind of IFC, this resolution for the prepayment of coal was in relation to Optimum and not Tegeta?” asked evidence leader Pule Seleka.

The day after the Eskom board approved the deal, Singh unilaterally decided it should be converted into a guarantee to benefit Tegeta rather than a cash payment to Optimum. Although Tegeta was never mentioned in the board’s decision, it was due to receive a R1.68-billion benefit.

“It’s not made by the board, it’s not made by Eskom, it’s made by Mr Anoj Singh and he’s making it in favour of a completely different entity,” said Seleka.

“So this guarantee would have been given for an ulterior motive or purpose?” he posed to Daniels.

“That’s the only conclusion that one can draw, yes,” she said.

The parties behind the scenes quickly got to work on the details of the agreement. Koko forwarded correspondence from an email address from “Business Man”, which Daniels suspected was from Gupta agent Salim Essa, that set out the terms for the adopted deal.

Daniels, despite the duties her job required, didn’t question the terms of the deal, which clearly came from outside the state-owned entity. Inquiry chairperson Deputy Chief Justice Raymond Zondo was aghast.

“What I witnessed in that year and knowing what Mr Essa was capable of, I was quite careful,” said Daniels.

Zondo could not understand why Daniels did not ask Koko who Business Man was.

“I just want you to please understand the mood was very, very different to the ordinary corporate environment and especially if you want to give the appearance of being friendly,” she responded.

Eskom never paid Tegeta the R1.68-billion and Daniels said it was converted to a guarantee to protect the SOE’s interests.

But without the December 2015 agreement, it is unlikely that in April 2016 Eskom would have prepaid Tegeta R659-million, the balance the Guptas needed to acquire Optimum.

Koko, who appeared at the commission last week, has strenuously denied the allegations against him. He claimed the commission was “following people, not the evidence”. He is due to return on 11 December.

Daniels is also due to return soon to testify further about how Tegeta received its R659-million prepayment.

Beginning her testimony on Monday, Daniels complained about being made a scapegoat for more influential Eskom members after making disclosures to assist investigations.

“It would appear from my treatment that unless you are a whistle-blower who has made exactly zero mistakes, you are likely to become an object of scorn. Very few whistle-blowers are pristine. Very few of us carry a halo and yet we tried to do the right thing and expose wrongdoing even when some of the exposure may affect our own reputations,” she said.

“By virtue of my role, these decisions flowed past or through me and for this reason I am a handy scapegoat for some of them.”

The inquiry will continue to hear Eskom-related evidence this week. DM