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De Ruyter accuser allegedly extended irregular contracts worth R8bn to oil firm

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De Ruyter accuser allegedly extended irregular contracts worth R8bn to oil firm

Photo by Donna Slater
Eskom CEO André de Ruyter

9th April 2021

By: News24Wire

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Suspended Eskom procurement chief Solly Tshitangano supported the awarding of contracts worth more than R8-billion to Econ Oil in 2019 - despite being aware of evidence of impropriety and possible corruption involving Econ and Eskom officials.   

He also took no steps to further investigate Econ Oil's possible misconduct, allegations which were first raised in 2016 and again in 2018, and allegedly misled the Eskom board over the status of Econ, resulting in the board approving further contracts to the company. 

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Detailed charge sheets in the disciplinary proceedings against Tshitangano, seen by News24, reveal that he supported the awarding of four contracts to Econ during the course of 2019 and again in late 2020 after he had become aware of evidence of wrongdoing by Econ Oil.  

Prior to his suspension, Tshitangano made bombshell allegations of racism and abuse of power against Eskom group executive André de Ruyter – within days of De Ruyter and Tshitangano exchanging emails over the possible cancellation of Econ Oil's five-year contract awarded in 2019. 

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De Ruyter denied the allegations, dismissing them as "spurious and defamatory".

Report

Law firm Bowmans was asked by Eskom to investigate allegations involving Econ in August 2018 and found evidence, communicated in a preliminary report in January 2019, that a former senior Eskom employee "may have improperly interfered, on behalf of Econ Oil, in issues between Eskom and Econ Oil with regard to the procurement process".  

"Despite the fact that the preliminary investigation against Econ Oil had 'uncovered evidence' of what any reasonably skilled and qualified procurement official would identify to be breaches by Econ Oil of (among other things) the Eskom Supplier Integrity Pact, following the Board meeting of 29 January 2019, there is no indication on record that you took any steps in your position as CPO, following the suspension of the Bowmans investigation, to protect Eskom's financial or reputational position in relation to Econ Oil," the charge sheet issued to Tshitangano on 19 March 2021 reads.  

"There is further no record of any recommendation to reconsider Econ Oil's position on the Eskom Supplier Database. Such actions and investigation fall clearly within your area of direct responsibility." 

The Bowmans probe was suspended by Eskom in February 2019.  

A month later, in March 2019, Tshitangano's department issued a closed Request for Proposals (RFP), which resulted in Econ being awarded a short-term fuel oil supply deal – which he supported.  

Eskom had also been aware, since 2016, that Econ Oil had potentially over-invoiced for fuel oil supplied under a previous contract following a probe by McKinsey Consultants – which has since been quantified into a claim of R1.2-billion against the company.  

Breach

"You committed gross misconduct in the form of gross dereliction of duty and/or a failure to exercise due care and skill in breach of your duties and responsibilities as CPO and a member of the executive committee of Eskom and failed to exercise properly and/or to properly discharge your management responsibilities during January 2019 to December 2019 in your failure to take appropriate action to protect Eskom from losses or harm arising from Econ Oil," a supplementary charge sheet reads.  

"Ignoring and or failing to take appropriate action on the January 2019 Report constituted negligence in the performance of your duties as CPO and misconduct under article 2.28 of the Code and is an omission which caused harm to Eskom, which is misconduct under article 2.29 of the Code," it continues.  

Econ Oil is owned by Nothemba Mlonzi and has been a supplier of fuel oil to Eskom's power stations since 2003. The company has been awarded upwards of R15 billion in contracts to supply Eskom. 

Mlonzi has filed criminal defamation charges against Eskom CEO De Ruyter and is defending court action by Eskom to cancel the 2019 five-year contract it was awarded.  

The Bowmans investigations found evidence that former senior Eskom official Thandi Marah solicited donations from Mlonzi to the ANC Liliesleaf Branch, which she chaired, and to other causes. She further leaked, at Mlonzi's request, confidential supplier pricing information to Econ and pressured other Eskom officials to award further work to Econ. 

In 2020, after the appointment of De Ruyter as group chief executive of Eskom, the board mandated Bowmans to take up the investigation again. 

Bowmans provided further reports in May, October and December 2020 recommending that Eskom file criminal charges against Econ and initiate a claim against the company for R1.2-billion - but Tshitangano yet again supported a closed RFP to Econ on 23 December 2020, awarding the company yet more work.  

The charges set out that he maintained that Econ's alleged misconduct were "just allegations" and, in late 2020, demanded in an email to know "which supply chain management policies prevented" Econ from bidding. 

These awards are central to Econ Oil's defence of litigation initiated by Eskom to cancel the latest five-year deal, with Econ now arguing that the allegations against it cannot have been substantiated in light of the continued awards of new contracts.  

Tshitangano's charges accuse him of gross misconduct among a laundry list of 22 charges of further misconduct and dereliction of his duties, which include failing to prepare key submissions on time and failing to attend meetings on a regular basis.  

"In acting as set out above, without taking any action to finalise the recommended investigations, in particular to establish whether there was a reasonable basis to believe that Econ Oil may have previously fraudulently overcharged Eskom or engaged in corrupt practices or other practices which breached Eskom's Supplier Integrity Pact, you were directly exposing Eskom to financial and reputational harm and or misleading the Board of Eskom. 

"This represented, among other things, a failure to protect Eskom from financial losses as is required under the PFMA which, as the official with responsibility for the P&SCM function at Eskom, is your direct responsibility," the charge sheet reads.  

He initially failed to respond to the charges, leading to his suspension, and has since failed to appear before the disciplinary hearing, which was scheduled to commence on 25 March. 

News24 understands the disciplinary is set to continue on 19 April. 

Tshitangano refused to respond to detailed questions from News24, saying it was "unfair labour practice" for an employer to "conduct disciplinary proceedings through the media". 

Ignoring the evidence 

At the centre of the charges against Tshitangano is Econ Oil and his alleged failure to act to protect Eskom financially and reputationally by not taking steps to first investigate with finality the allegations against Econ and by recommending the company be awarded further work.  

Read the detailed charges against Tshitangano here.

De Ruyter, shortly after taking up his position at Eskom on 15 January 2020, immediately started to come to terms with major issues within Eskom – including deals with Econ Oil.

By 6 May, the board had asked Bowmans to return and finalise its investigations.  

Throughout the course of 2020, Bowmans filed three reports - in May, October and December. Eskom also obtained legal advice that found the company should not have awarded further work to Econ.  

But Tshitangano has continued to fight against the suspension of Econ from Eskom's supplier database – defying direct instructions and internal legal advice, also first delaying a meeting of the Supplier Reconsideration Committee, which he chairs, and then providing Econ additional time to respond to allegations against it without consulting internal Eskom lawyers.  

Instead, Tshitangano sought to use the Econ Oil issue as an example of alleged racism by De Ruyter, who he claimed was unfairly pushing for Econ's suspension while favouring white-owned companies in letters he sent to Public Enterprises Minister Pravin Gordhan and Parliament's Standing Committee on Public Accounts (Scopa).  

The Eskom board has confirmed that advocate Ishmael Semenya SC was appointed to investigate the allegations against De Ruyter, while Scopa agreed on Wednesday that it would hold off on its own probe of Tshitangano's claims until the internal Eskom process was finalised. 

Eskom was requested to provide comment, but had not responded at the time of writing.

Mlonzi denied that Econ Oil overcharged Eskom on its invoices, saying that claims by Eskom of R1.2-billion had no basis. She said the matter was subject to court processes. 

"The invoicing process at Eskom is rigorous, and goes through a review process before Eskom approves and pays. Every invoice issued and paid is linked to the contract, which Eskom verifies," Mlonzi said. 

"Eskom claims that we over-charged by three different amounts, for the same five-year period starting in 2012, and for the same set of invoices. The three false claims of invoicing on the same issue we have seen are a R397-million claims of overcharge (based on the McKinsey report), a R500-million claim of overcharge (based on the Trengove Report) and a R1.2-billion claim of overcharge (based on the Bowmans report). It is very clear from the above claims by Eskom that there are desperate attempts to target Econ Oil, and engineer something that can suggest that there is corruption in our conduct. We reject it with the contempt it deserves, and would deal with it in court," Mlonzi added. 

She further denied that Econ had benefited from contracts to the tune of R8bn and issued a strenuous denial that Econ or its directors knew Tshitangano at all beyond dealing with him once in 2019 which Mlonzi described as professional communications around the awarding of Econ's R5.2-billion portion of the five-year fuel oil supply deal - the selfsame contract Eskom is asking the court to set aside. 

"We have not "benefited" from Eskom to the amount R8-billion. That amount and the claim itself is a clear fabrication and a cheap propaganda attempt to link Tshitangano to Econ Oil."

Mlonzi said the short-term supply contracts awarded in 2019 were a result of transparent, competitive bidding processes.

"In conclusion, it is very clear that some people will go to every length to weaponise corruption to discredit companies that do honest work. The current propaganda onslaught against Econ Oil is timed to precede the court processes, the disciplinary process of Tshitangano, and the racism inquiry against De Ruyter. As Econ Oil, we reject the propaganda and attempts to use our company as a hook for the false narrative that some people want to use as a public defence in their battles," Mlonzi concluded.  

She said the company would in due course issue a full statement dealing with issues around the Bowmans report.

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