South African Treasury Says Eskom Resists Gupta Firm Probe

South African Rand Caught in Turmoil of Split ANC
  • Department accuses utility of ignoring correspondence
  • National Treasury is reviewing Eskom’s coal contracts

South Africa’s National Treasury said state-owned utility Eskom Holdings SOC Ltd. is resisting its efforts to review coal-supply contracts with Tegeta Exploration & Resources Ltd. and ignores the department.

“The National Treasury would like to categorically state that its efforts have met resistance,” it said in an e-mailed statement on Monday. The department has made attempts over the past four months to get information from Eskom, including a list of payments made to Tegeta and invoices received from the company between September and April. Eskom has failed to submit comments on a Treasury report into the utility’s coal contracts and ignored correspondence, it said.

Tegeta is part-owned by the Gupta family, who are friends with President Jacob Zuma and in business with his son. The Treasury is reviewing the coal contracts of Eskom, which maintains that it has been cooperating with the investigation. Tegeta wasn’t targeted, Treasury Chief Procurement Officer Kenneth Brown said on Johannesburg-based Power FM.

“A company or entity that is doing business with government and has nothing to hide should be transparent and should welcome reviews of its dealings with the state,” the Treasury said.

Pravin Gordhan
Pravin Gordhan
Photographer: Chris Ratcliffe/Bloomberg

The department’s statement follows a week of political and market turmoil after reports Finance Minister Pravin Gordhan could face arrest. Opposition parties and analysts have speculated that Zuma may use a police investigation into Gordhan to install a more compliant head of the National Treasury and reassert his authority.

Precarious Position

“The Treasury admonishment of Eskom and the related linkages to the Guptas show just why Gordhan’s position is so precarious and why the knives are out for him,” Daniel Silke, director of Political Futures Consultancy in Cape Town, said by phone. “This is a very public display of defiance from the embattled finance minister who seems to be resisting apparent intimidation and the possibility of criminal action against him.”

The Treasury said its director-general, Lungisa Fuzile, asked Eskom in a letter to withdraw a statement that said all coal contracts by Tegeta have been audited by agencies including the department. The utility said on June 12 the contracts were “extensively” examined.

Eskom is in the process of compiling a response to a letter it received from the Treasury and was granted an extension to provide comments on a document regarding the contracts, it said in a statement. “We therefore think it is neither unreasonable that our board will have considered responses to the 172-page document by end of September 2016 nor a reason for National Treasury to label Eskom as uncooperative.”

The Gupta family announced Aug. 27 that they plan to sell all shareholdings in South Africa by the end of the year.

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