Eskom Media Release

Dentons Report incomplete, Full Judicial Commission needed

The Organisation Undoing Tax Abuse (OUTA) has called for a full judicial commission into Eskom’s affairs, after studying the unsanitised version of the Dentons Report into corruption at the parastatal.

“South Africans deserve to know what caused the near collapse of the power entity in 2008, and also why Eskom chose to hide the report from the public,” says Ted Blom, OUTA’s Portfolio Director of Energy. “We demand a full investigation of the apparent lack of oversight exercised by the Eskom board, and furthermore, the National Energy Regulator (NERSA) needs to answer some tough questions regarding their lack of action with regards to obvious corruption and maladministration within Eskom.”

While Eskom paid R20 million for the report, it denied the multinational law firm Dentons access to vital information needed in order to complete it. Eskom’s conduct in trying to keep the report under wraps and eventually giving in to pressure is in itself an act of unacceptable conduct and a lack of transparency to the citizens of South Africa.

Of greater concern was Eskom’s release of the report in a redacted format. Fortunately, good investigative journalism uncovered and released the uncensored version to the public.

“It is a pity that Eskom could not see fit to do the right thing and publish the uncensored report themselves. Close scrutiny of the unredacted report reveals major shortcomings, which become evident after reading Dentons own comments, as well as the qualifiers to their comments.” Says Blom.  “It is clear that only a limited number of issues were addressed in the context which Eskom provided in their submissions to Dentons. “However, for those well versed in Eskom’s misdemeanours, it is clear that the Dentons report only deals with a portion of what needs to be uncovered. For instance, the report points to poor coal procurement practices, but then ignores the fact that this was the result of a board decision taken in 2001.”

The report also alludes to Eskom’s extremely poor project management skills and lack of capacity, but then fails to quantify the impact of this on the construction of Medupi, Kusile and Ingula – three long overdue power plants which have resulted in massive cost and time overruns. “Only once a full independent enquiry takes place, will we be able to quantify what the incompetence and lack of accountable leadership within Eskom has truly cost the South African economy,” says Blom.

Other important observations in the report relate to an escalation of more than 18% in the price of coal since 2007. “While Dentons appears to whitewash these increases, as they are in line with the Producers Price Index for coal, Dentons did not investigate the extent to which Eskom dominates the PPI, as very little other coal is traded on the inland market by any entity other than Eskom. Hence, by overpaying for coal, Eskoms conduct has a compounding effect on the index.”

It should also be asked why NERSA, as the regulator, did not uncover the massive irregularities within Eskom, despite numerous calls for an investigation as early as 2008.
When OUTA met with NERSA in 2016, they were informed by NERSA that the regulator could only act within its mandate – which precludes criminal investigations. “We find this notion absurd, in that a regulator is able to play the role of hapless bystander whilst the Eskom board and executives ignored their fiduciary duties and perpetrated the gross mismanagement.

OUTA believes the regulator should have exercised more control. “It is high time the relevant authorities initiate a judicial commission of enquiry into the full range of Eskom’s governance failures since 2000,” says Blom. Further, this commission should be appointed with haste as we are convinced the gross violations, mismanagement and lapses in fiduciary duty continue at Eskom to this day.

Judicial sanction of the report is especially important now that Eskom seeks to embark on new nuclear power plants, as this has the potential to be an even greater fiasco and a waste of the consumers’ and taxpayers’ money.

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