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BEE Commission red flags Eskom's Duvha Power Station tender

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BEE Commission red flags Eskom's Duvha Power Station tender

12th June 2019

By: African News Agency

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The BEE Commission on Wednesday said Eskom failed to comply with the Broad-Based Black Economic Empowerment (BBBEE) Act in 2014 when it awarded the tender for Duvha Power Station to a Chinese-owned entity that did not meet black empowerment requirements. 

As a result, the Commission has recommended to Eskom to cancel the contract within 90 days and to conduct an independent audit of all its contracts above R1-billion from 2014 to check compliance with BBBEE requirements.

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In May 2017, the Commission received an anonymous complaint alleging that the procurement process for the boiler at Duvha Power Station (RFP CORP 3571) did not comply with the requirements of the BBBEE Act.

The complainant told the Commission that the tender was awarded to a Chinese owned company, Dongfang Electric Corporation Limited, which did not comply with the BBBEE requirements in South Africa. 

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Upon investigation, the Commission said it found that Eskom failed to comply with section 10 (1) (b) of the BBBEE Act in awarding of the tender to Dongfang, an entity with zero percent black ownership when the tender required at least BBBEE Level 4 and which quoted the highest price.

The BBBEE Act was amended in 2013 specifically to make it mandatory in section 10 for organs of state and public entities to implement the BBBEE Act, and not only when they choose to do so.  

Section 10 of the BBBEE Act requires that every organ of state and public entity to apply the relevant code of good practice.

The Commission said it received responses from Eskom and other implicated parties, except Dongfang, and all responses were considered carefully.    

The Commission said Eskom had gone against the BBBEE requirements in its procurement policy and procedure signed by Matshela Koko when he was acting group executive for technology and commercial. 

The policy specifically required BBBEE Level 4 for the tender, consistent with the requirements of section 10 of the BBBEE Act.

The Commission said that whereas Eskom included the BEE requirements for the tender, the power utility however failed to implement these requirements during the procurement process for the Duvha boiler. It did so without appropriate authorisation to deviate from the requirements in question.

The Commission said it was apparent that Eskom and its board had little regard, if any, to the BBBEE requirements in that the power utility proceeded to award the contract in direct violation of its own procurement policy and procedure.

Eskom did not obtain prior approval for exemption or deviation from the specifications in the tender, which it awarded to an entity that had no BBBEE credentials and bid the highest price. This was contrary to the objectives of the BBBEE Act.

"Therefore, in addition to the recommended contract cancellation and the independent audit by Eskom Holdings SOC Limited, we recommended investigations in respect of officials that were involved in this tender process so that decisive action can be taken to prevent this in future," said the Commission.

"Of concern also is the possibility that this tender process may have been deliberately compromised to favour a specific entity. Eskom Holdings SOC Limited has cooperated and agreed to implement the recommendations of the Commission."

The Commission said it has since referred the findings in this matter to the minister of public enterprises and the director-general of National Treasury for further consideration in line with the recommendations. 

Responding to a direct question for comment on Twitter, Koko said he felt vindicated.

"I was hunted like an animal for basically nothing. I am yet to be approached by relevant authorities. Let us see if those involved here will make headlines," said Koko.

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