The former head of South Africa’s state power utility said he probably underestimated the amount of money that’s being stolen from the company when he put it at 1 billion rand ($55 million) a month.
(Bloomberg) — The former head of South Africa’s state power utility said he probably underestimated the amount of money that’s being stolen from the company when he put it at 1 billion rand ($55 million) a month.
Ex-Chief Executive Officer Andre de Ruyter also said internal resistance to measures he implemented to try and curb corruption at Eskom Holdings SOC Ltd. is hampering the effort to end graft. His comments were contained in a written submission to lawmakers, seen by Bloomberg, before his testimony Wednesday to a parliamentary committee investigating corruption at the utility.
De Ruyter stepped down as CEO on Feb. 22 — more than a month before his scheduled March 31 departure date — after censuring the government over corruption at Eskom and accusing senior members of the governing African National Congress of stealing from the utility. The amount that’s being stolen is probably higher than 1 billion rand, he said.
“This is, if anything, a conservative estimate and is based on my assessment of the losses suffered by Eskom that have come to my attention,” De Ruyter said. He didn’t immediately reply to a call and a text message requesting comment.
Debt-strapped Eskom is currently implementing daily blackouts because its dilapidated power plants are unable to supply enough electricity to meet demand and it doesn’t have the money to invest in capital equipment. It’s been given a 254 billion rand debt-relief package under strict conditions that the bailout is only used to repay loans and settle interest payments, meaning it has to find money to repair its plants elsewhere.
Sabotage, Cartels
The submission to parliament’s Standing Committee on Public Accounts aired claims that De Ruyter first made in a television interview in February.
At the time that he made the allegations, his linking of theft at Eskom to unidentified government officials struck a nerve within the ANC. Even Public Enterprises Minister Pravin Gordhan, who has political oversight of Eskom and stood by De Ruyter’s campaign to fight graft during his three-year tenure, criticized the former executive for not spending enough time repairing the utility’s coal stations.
De Ruyter declined to identify those who he had connected to graft at the utility in the submission, citing constraints including material and documentation that remain in the possession of Eskom. He also said that divulging sources would compromise their identity and safety.
Attending the hearing virtually on Wednesday, De Ruyter — who appeared alone in a sunlit room — was pressed again by lawmakers to name any officials, citing “potential security risks.” He referred the committee to the Hawks, a police unit that investigates high-profile crimes, to better determine the detail that could be provided by various investigations.
“Alleged criminal and unlawful activities that are currently under investigation are of a very sensitive and complex nature,” he told the committee.
Fraud and corruption in the procurement process has reached considerable levels at Eskom and De Ruyter said measures taken under his leadership to eliminate the practices made only temporary progress.
“The implementation of enhanced controls, and procurement and inventory management processes have slowed down this type of crime, but internal resistance and non-compliance have hamstrung efforts,” he said.
The graft takes various forms at Eskom, including the “ghost delivery” of spare parts for equipment that’s recorded throughout receiving processes, but not physically present, De Ruyter explained.
Organized groups that mainly focus on crimes related to coal supply are associated with specific power stations and have their own identities including the Presidential, Mesh-Kings, Legendaries and Chief Cartels, he said, citing the findings of an investigation.
“The cartel leader or his subordinates will approach a specific end-user, who could be an Eskom engineer or manager at a power station to begin the illicit process,” De Ruyter said.
In the weeks following the initial allegations made by the former CEO, the government urged him to report the information to law-enforcement agencies.
De Ruyter said he’d taken a number of steps to inform the authorities, including a meeting on June 4 last year, with the national police commissioner and representatives of the state security agency. In the following month, Gordhan and National Security Adviser Sydney Mufamadi were also briefed, he said.
Eskom said by email it would respond to a request for comment later.
(Updates with details from appearance at committee in ninth paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.