The finding of the report released yesterday by the Public Protector that former Eskom Chairman, Valli Moosa, has acted improperly in awarding a R 38.5 billion Medupi power station contract to the Hitachi business consortium - which is directly linked to the ANC's investment arm Chancellor House - confirms a conflict of interest. The ANC must now admit wrongdoing, prosecute the offenders and disinvest from business entities which pose a conflict of interest.
The DA has today written to the World Bank, from whom Eskom is seeking a loan to finance Medupi, and other power plants - to ascertain how this will affect the loan. (see letter below). A copy of the letter will also be forwarded to the President's office.
The Hitachi link to Eskom has a sordid history of ANC denials and empty promises to appease the public:
On 21 February 2008, ANC Treasurer Mathews Phosa stated that the Hitachi deal will be exited from because "governance is an issue and there is public focus on this". There was no confusion regarding this issue two years ago as it was a clear case of conflict of interest - yet nothing happened. See article - Business Report
Then the ANC performed an about turn on its opinion:
On 20 Janaury 2010, ANC Secretary General Gwede Manthashe maintained that "There is nothing wrong with investing in public companies and the Chancellor House has done nothing wrong," and further stated that "Hitachi won the contract because it is a global company (with the skills) ... not because it has a minority shareholder which is called the ANC," See article - Politicsweb
Finally, Phosa himself then contradicted his original position:
On 25 February 2010, Sake24 reported that Phosa stated questions on Chancellor House were "spiteful" and "unfair" and reportedly stated "To hell with the media!"
The report by the Public Protector is a clear and unambiguous sign that the deal was wrong, not in the interest of South Africa, and obviously intended to benefit the ANC first and foremost. Essentially, Eskom's capital expansion program was a covert way to channel funds directly into the ANC. It could be argued that it is a money laundering scheme on a national level - unprecedented in scale and audacity.
Now that the Public Protector has made this decision, the DA wants to know what will be done about it. We will call on President Zuma to disinvest the ANC from Hitachi as a matter of urgency and to prosecute the individuals involved. More importantly, the real test for Jacob Zuma will be what he does with the report - does he act on it, or sweep it under the carpet.
The situation as it stands can also severely impact on Eskom's application for a loan from the World Bank. Surely, the United Nations affiliate cannot provide funding to a political party through government apparatus. The DA will remain in contact with the World Bank to establish its protocol in these matters and to advise on ways to force the ANC to disinvest from Hitachi without compromising the loan.
The World Bank
1818 H Street, NW
Washington, DC 20433 USA
26 March 2010
Dear sir/madam,
REQUEST FOR INFORMATION ON ESKOM LOAN
The Democratic Alliance (DA), as South Africa's official opposition party, hereby officially request information from the World Bank pertaining to a loan application by Eskom. This information will assist in our planned action of pursuing a variety of dubious aspects of Eskom's relationship with the South African government.
It has been reported by the Public Protector before Parliament that the contract between Hitachi South Africa, a supplier of boilers to coal-fired power plants, and Eskom was improper and constitute a conflict of interest. Hitachi in June 2007 entered into a (R 38.5) contract with Eskom. The African National Congress (ANC) investment arm, Chancellor House, has a significant shareholding in Hitachi South Africa.
The ruling party is, in terms of legislation, responsible for appointing the management of Eskom. The conclusion of a contract between those appointees and a company in which the party responsible for appointing them has strong financial interests creates a conflict of interest.
The possibility that this conflict of interest led to inappropriate decisions in the awarding of tenders is contained in internal Eskom documents that have been made public. These documents show that the particular boilers were not optimal and that there were irregularities in awarding the tender to Hitachi.
Reliable sources has informed the DA that Eskom has adopted a fleet strategy in its acquisitions, which means that all future coal fired power plants (which makes out the gross majority of electricity generation by Eskom) will use Hitachi parts.
Eskom has a complete monopoly on electricity generation and distribution in South Africa. If it does not operate efficiently, and if it does not base its decisions on sound business grounds, then our electricity supply is endangered, with obvious serious consequences.
The DA therefore requests the following information:
1. What is the World Bank protocol in granting a loan to an entity that has financial links to a political party?
2. Given this protocol, what is the effect on the likelihood of granting such a loan, and on the structure of the loan?
3. Would the World Bank be able to attach conditionalities to the loan? Specifically, would the World Bank be able to request the ANC to divest itself of any financial involvement in Eskom before granting the loan?
The DA would like to thank the World Bank in advance for receiving this mail and for providing the requested information.
All the key documentations on this case is available on the internet. However, these documents can also be made available to the World Bank on request.
Sincerely,
Sejamothopo Motau, MP
DA Shadow Minister of Energy
Statement issued by Sejamathopo Motau, MP, Democratic Alliance shadow minister of energy, March 26 2010
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