Eskom to overspend by more than R52 billion on power contracts

Issued by Alf Lees MP – DA Shadow Deputy Minister of Finance
02 May 2018 in News

A report submitted to the Parliament Appropriations Committee by the Office of the Central Procurement Officer has revealed that Eskom will overspend by R 52,2 billion or 48,5% on the Medupi and Kusile power stations. The split between the two power stations is:

  • Kusile power station               R 26,2 billion (45,3%) overspend.
  • Medupi power station            R 26,0 billion (52,2%) overspend

I have since written to the Office of the Chief Procurement Officer to determine whether there are any active forensic investigations into these contracts, and if not, to request that they be instituted as a matter of urgency.

Eskom Rotek Industries, a subsidiary of Eskom, is handling a contract on which there has been a 936,1% overspend. This is not only suspicious but shows a lack of transparency in the procurement process within Eskom

The biggest overspend goes to Mitsubishi Hitachi Power with an overspend of R 10,2 billion. These contracts have been mired in controversy ever since the involvement of ANC’s investment arm, Chancellor House, was exposed.

In 2015, the DA laid charges against ANC’s Chancellor House after it emerged that Hitachi Ltd, the company which won a R38.5 billion tender to provide Eskom with boilers for the Medupi and Kusile power stations in 2007, admitted to have made improper payments to Chancellor House, to the value of $6 million, in the process leading up to the tender being awarded.

Other extreme overspends are;

  • ALSTROM S&E AFRICA            R 9,7 billion (49,8%) overspend          – turbines, instrumentation.
  • MPS JOINT VENTURE              R 6,6 billion (224,2%) overspend        – civils
  • KUSILE CIVIL WORKS              R 4,8 billion (106,0%) overspend        – civils
  • ESOFRANKI CIVILS                   R 1,9 billion (460,6%) overspend        – underground civils
  • BASIL READ                                 R 1,8 billion (123,5%) overspend        – construction
  • AVENG AFRICA                           R 1,3 billion (258.3%) overspend        – plant installation

The conclusion that must be arrived at is that there was extreme mismanagement of these contracts, fraud and corruption or a combination of these.