Eskom and the Special Investigating Unit (SIU) announced on Friday that an agreement had been reached with ABB South Africa in terms of which the multinational technology group would repay R1.56-billion to the State-owned utility to settle an overpayment dispute relating to a corrupt Kusile contract awarded in 2015.
Eskom would, however, request the National Treasury not to blacklist ABB as a contractor, as the control and instrumentation (C&I) package in question was 90% complete and the appointment of a replacement contractor could delay the already-delayed Kusile by a further four years and raise the threat of standing-time claims from other contractors worth up to R1-billion.
Eskom CEO Andre de Ruyter added that ABB equipment was widely embedded throughout the utility’s coal fleet and that a blanket blacklisting from future contracts could have serious implications for operations.
The settlement agreement, which is the largest-ever involving the SIU, was signed by all three parties at Eskom’s Megawatt Park head office on the morning of December 11 and De Ruyter indicated that the proceeds were expected to flow into the group’s bank account before the end of the year.
He stressed that, while significant, the proceeds would in no way dent its unsustainable debt burden, which currently stood at R424-billion, as it represented only 0.25% of the total debt.
Nevertheless, it “sent a strong signal” that Eskom was committed to recovering funds from illegal contracts and also set a “precedent” for other suppliers that might have benefitted unlawfully during the State-capture era, which afflicted not only Eskom, but most other State-owned enterprises (SOEs).
Besides the ABB settlement, Eskom had already recouped R1.1-billion from McKinsey & Company and R171-million from Deloitte Consulting and it is pursuing a claim for R95-million from PWC and has launched a civil claim to recover R3.8-billion from members of the Gupta family and their associates.
The ABB settlement itself relates to a R2.2-billion C&I contract awarded in March 2015 and for which Eskom had already paid ABB over R3-billion, after several illegal variation orders valued at R800-million.
The settlement took account of these variations, with the balance of the payment made up of the cost of collusion (R215-million), interest (R380-million) and profits accrued to ABB as a result of the contract (R160-million).
The difference between the repayment amount and the total contract value was based on the fact that Eskom accepted that ABB had performed parts of its obligations on the contract.
“It is with this in mind that Eskom, despite the contract being unlawful, is only claiming from ABB the portion of payment in excess of what was independently determined as being a fair and reasonable contract value,” De Ruyter said.
The settlement is inclusive of the capital amount and interest and the agreement will be subject to the review of the High Court in early 2021.
Public Enterprises Minister Pravin Gordhan said that Eskom and the other SOEs were determined to recover yet more money from illegal contracts and urged other companies to follow ABB’s lead in making voluntary disclosures and in agreeing to settle.
Ahead of the ABB settlement, McKinsey & Company announced that it would repay another R650-million in fees earned at Transnet and South Africa Airways, but Transnet responded by indicating that no settlement had been reached and that it would continue to pursue a R1.2-billion claim against the consultancy.
Gordhan estimated that “tens-of-billions” should still be recovered across the SOE system and said that the SIU, in cooperation with international law-enforcement agencies, intended to “hunt” down ill-gotten gains and return these to the entities or the fiscus.
The ABB contract, which was found to be R324-million more expensive than the lowest bid tendered, had been the subject of intense investigation since 2018.
The probe involved investigators not only from the SIU, but also US agencies, including the Securities and Exchange Commission and the Federal Bureau of Investigation, and SIU head Advocate Andy Mothibi indicated that it intended to continue to cooperate with international law enforcement agencies in its quest to recover yet more money.
Mothibi said that a criminal investigation arising from the contract was ongoing, but refused to reveal the identities of those being probed, saying only that no arrests had yet been made and that the public would be informed once the case reached that point.
“Further investigations against other contractors and suppliers, Eskom employees (former and current) and other interested parties are ongoing, and further legal action to recover embezzled funds will be instituted in the near future,” Eskom and the SIU said in a joint statement.
De Ruyter confirmed that Impulse International, in which former Eskom interim CEO Matshela Koko's stepdaughter was a shareholder, was one of the companies under investigation, as it was a subcontractor to ABB.