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DA: Statement by Pieter van Dalen, Democratic Alliance shadow deputy minister of public enterprises, on Eskom and BHP Billiton (29/04/2010)

29th April 2010

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The Democratic Alliance (DA) will today submit an application for the Public Protector to investigate the special price agreements in force between Eskom and BHP Billiton and its subsidiaries.

On 21 April, the DA revealed a secret Eskom dossier, which provides definitive proof that Eskom has been charging vastly discounted rates to BHP Billiton and its subsidiaries - while it takes up 9.3% of all electricity generated by Eskom, making it the single biggest user of electricity in South Africa. In addition, in response to a parliamentary question posed by the DA, the Minister of Public Enterprises revealed that the contract with Motraco commenced on December 1997 and will end on December 2025. This means that Eskom will keep on charging below cost prices to Mozal for the next 15 years. (95% of Motraco's electricity is passed on to a BHP Billiton subsidiary, Mozal.)

We also now understand from sources that a senior official at the National Energy Regulator, who was involved in the negotiations on the special pricing agreements, was taken into the employ of BHP Billiton shortly after the agreements were finalised. If this is true, then it clearly further necessitates an investigation by the Public Protector.

Furthermore, the National Energy Regulator of South Africa (NERSA) did not approve the special pricing agreements as mandated by law - Eskom told the portfolio committee on Public Enterprises that the special pricing agreements was excluded from its submission to NERSA for a general electricity tariff increase. This possibly constitutes a significant oversight by NERSA in not adjudicating on the agreements per se, or at least taking them into account for the purpose of approving the general tariff increase.

The mere existence of the special pricing agreements - without any explanation from Eskom (it is estimated that BHP Billiton contributes only 0.1% of economic growth, while using almost 10% of the available electricity), is already sufficient reason for an investigation. The possibility of a conflict of interest and possible corruption makes the case for an investigation much stronger.

The Public Protector has a wide ranging authority to investigate the government or parastatals whenever improper activities allegedly occurs due to dishonesty or improper dealing with respect to public money, improper enrichment, and receipt of improper advantage, amongst others. We believe that the Public Protector needs to investigate this matter.

This would not be the first time that a severe conflict of interest had affected the dealings of Eskom: the Public Protector has already found that the agreement reached between Hitachi and Eskom for the supply of boilers for the Medupi power plant amounted to a severe conflict of interest.

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