The African Development Bank Group (AfDB) confirmed on Wednesday that it had imposed penalties on Hitachi, of Japan, following a three-year probe into allegations of “sanctionable practices” relating to Eskom’s Medupi power station boiler works contract, awarded in 2007.
AfDB is a part funder of the R105-billion project to build a six-pack coal-fired power station in Limpopo, which will have an eventual capacity of 4 764 MW. Only one 794 MW unit is currently operational, with the subsequent five to be added between 2017 and 2020.
No indication was given as to the nature of the sanctionable practices discovered.
However, the penalties follow a September Foreign Corrupt Practices Act charge against Hitachi by the Securities and Exchange Commission (SEC), of the US, for inaccurately recording “improper payments to South Africa’s ruling political party in connection with contracts to build two multi-billion dollar power plants”.
Hitachi agreed to pay $19-million to settle the SEC charges.
The AfDB investigation was carried out by its Integrity and Anti-Corruption Department (IACD) into allegations against two Hitachi subsidiaries: Hitachi Power Europe (HPE), based in Germany, and Hitachi Power Africa (HPA).
HPA was controversially associated with the African National Congress’s Chancellor House and disappeared in early 2014 when Mitsubishi Hitachi Power Systems Africa was formally launched, following the merger of the thermal power units of Mitsubishi Heavy Industries and Hitachi.
AfDB imposed a 12-month debarment on HPE and HPA, which would be terminated as soon as Hitachi enhanced its integrity compliance programme to the standard set by the AfDB’s Integrity Compliance Guidelines.
Hitachi had also voluntarily agreed to make a “substantial financial contribution” – the size of which was not disclosed, to the AfDB. The proceeds would be used to fund anticorruption causes in Africa. Hitachi also promised to cooperate with the IACD on a variety of matters.
The severity of the penalties had been influenced, the AfDB said, by the fact that Hitachi and its affiliates had “cooperated fully and openly with the IACD investigation”.
“The sanctions imposed under the settlement agreement reflect the level of cooperation provided by Hitachi in the investigation of the Medupi matter, for which the IACD is grateful,” IACD director Anna Bossman said in a statement.