FF PLUS LAYS A COMPLAINT AGAINST ESKOM AT PUBLIC PROTECTOR

The Freedom Front Plus today formally laid a complaint with the Public Protector (PP) against Eskom due to the utility company's lack of general and financial management skills (letter herewith). "There appears to many indications of irregularities within Eskom that it warrants an independent and comprehensive investigation by the PP," Adv. Anton Alberts, FF Plus parliamentary spokesperson on Energy, said. The FF Plus has previously undertaken to refer the issue to the PP after Nersa's decision on tariff increases had been made known.

Further impetus for this complaint with the Public Protector was provided by the announcement of the fact that Eskom is supplying electricity to 138 un-named companies at drastically reduced tariffs. Eskom refuses to inform Parliament or the relevant Ministers who these companies are and what the motivation for the lower tariffs would be on the grounds of contractual terms which guarantees secrecy. It once again supports the FF Plus' position that Eskom overly relies on the income generated from ordinary households and the agriculture and then use it to subsidies other industries in secret.

"In this regard, the FF Plus will be directing an application to Eskom in terms of the Promotion of the Access to Information Act, 2 of 2000, to reveal who these companies are, at what tariff as well as the terms of the contract in each individual case. It is the party's opinion that Eskom will not be able to hide behind the fact that contractual terms of confidentiality binds Eskom to secrecy. Eskom is a utility company which is owned by the state on behalf of the public and which is exclusively responsible to deliver power to the advantage of the general public. That is why it would be in the interest of the public to reveal information which would indicate that Eskom is not acting in the interest of consumers," Adv. Alberts said.

The FF Plus will also further investigate the legality of Nersa's decision in the light that Eskom had created an intrinsic misrepresentation in its tariff application by not making mention of the subsidized contracts. The core question is how much higher Eskom's income would have been by creating parity between households and agriculture's contribution to Eskom's income and that of the subsidized secret companies. The FF Plus will not be leaving this case merely at this.

10 March 2010

The Public Protector
Hillcrest Office Park,
174 Lynnwood Road ,
Hatfield,
PRETORIA

Dear Adv Madonsela

RE: Request to investigate ESKOM for mismanagement and corruption

We refer to the above and advise that it is with grave concern for the welfare of South Africa that we are addressing this complaint to you.

It is a well-known fact, especially as highlighted by the events of the past few months and from the evidence presented during the National Energy Regulator of South Africa's (NERSA) hearings, that ESKOM is beset with many problems and challenges. It was also argued, and quite correctly, that the first and simplest manner in which to save and thus make more funding available for ESKOM's operational needs and capital expansion projects, is for ESKOM to ensure optimal internal efficiencies.

Logically this entails a lean operational parastatal that acts in accordance with, amongst others, the following norms:

1. The Constitution;

2. The National Energy Regulator Act 40 of 2004;

3. The Electricity Regulation Act 4 of 2006;

4. The Companies Act;

5. King III;

6. Public Finance Management Act 1 of 1999;

7. Employment Equity Act 55 of 1998;

8. Broad-Based Black Economic Empowerment Act 17 of 2003 plus the Codes of Good Practice on Black Economic Empowerment.

Against this background, we wish to request the Public Protector to investigate the management and financial practices of ESKOM, especially with regard to the following:

1. The material misrepresentation by ESKOM of substantive facts in its tariff application to NERSA by hiding the fact that it supplies electricity at a hugely discounted rate to about 138 companies, the details of which ESKOM refuses to disclose to all Ministers, State Departments and even Parliament (see Annexure "A" hereto).

2. The possible underreporting of revenue (see Annexure "B" hereto);

3. The distorted application of the Employment Equity Act resulting in underrepresentation of White, Coloured and Indian males and females;

4. The stunting of career paths of White, Coloured and Indian males and females by ESKOM management thus forcing expertise from ESKOM by way of constructive dismissal;

5. The lack of proper procurement practices leading to the appointment of inadequate service providers, especially with regard to the delivery of coal as well as the acquisition of sufficient and proper grade coal;

6. The possibility that senior officials are directly or indirectly benefiting from procurement contracts with ESKOM;

7. The lack of ability to plan and project manage the building of the two new power plants, especially if one has regard to the escalation of the costs thereof in a very short space in time (Mudipe Power Station: escalating from R26 billion in 2006 to R126 billion in 2008; Khusile Power Station: escalating from R80 billion in 2007 to a cost of R140 billion in 2008).

It is our view that only an in-depth investigation by your office can shed light on the above irregularities. Should the internal efficiencies of ESKOM not be corrected in a holistic and comprehensive manner, this country will have to budget for a future of power outages, negative growth and more poverty.

We are awaiting your advice herein.

Yours truly,

____________

Adv. A Alberts

Statement issued by Adv. Anton Alberts, FF Plus Parliamentary Spokesperson: Energy, March 10 2010

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