Eskom prepayment to Tegeta was ‘startling’ and did not make sense – witness

The head of finance at Eskom’s primary energy division, Snehal Nagar, concurred with the evidence leader at the commission of inquiry on Tuesday, advocate Phillip Mokoena, that it did not make sense that the power utility made an urgent prepayment of R659 million to Gupta-linked Tegeta for the supply of coal even though Optimum Coal Mine at the time, 2016, could not deliver coal to the entity.

Nagar concurred with Mokoena that it didn't make sense why the payment was effected to Tegeta while Optimum could not deliver the coal required. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 5, 2019

The power utility agreed at the time to pay Tegeta almost R659 million in advance for coal on the same day it became clear that the Gupta-affiliated company was short of that same sum to purchase the Optimum coal mine.

Nagar told the commission that on April 13, 2016, Maya Bana, now Naidoo, who worked at the office of Eskom CFO Anoj Singh, instructed at around 12.38pm that the R659 million should be affected by 2pm, only a couple of hours later.

Naidoo sent an email to a few role players in the payment process instructing that the payment should be done by the set time along with supporting documents which included a resolution from Tegeta dated April 13, 2016, and a pro-forma invoice dated April 12, 2016.

Mokoena questioned Nagar how it would have been possible that Tegeta, before its meeting on April 13, 2016, dispatched a pro-forma invoice on April 12 2016.

“Chairperson, it does not make sense and I cannot answer that question,” Nagar said.

The email sent by Naidoo also contained an extract of a resolution by the Eskom board tender committee which convened a meeting via telephone conference at 9pm on April 11, 2016, and resolved that Singh was authorised to approve the prepayment to Tegeta.

Again, Mokoena raised the issue with the Nagar that the Eskom board tender committee resolved to make the prepayment on April 11, 2016, before Tegeta met to discuss the matter on April 13, 2016.

Furthermore, Nagar told the commission that there was nothing to show that Tegeta had approached Eskom to request the advance payment.

“I am not aware of any request, chair,” Nagar said.

Nagar told the commission how Eskom processes were flouted for Tegeta prepayment to be affected.

READ MORE: State capture inquiry hears how Eskom processes were flouted for Tegeta prepayment

To affect the prepayment by the 2pm deadline, a preexisting purchase order for Tegeta under the Brakfontein coal supply agreement was amended to reflect the R659 million payment which needed to be made, Nagar said.

Nagar says Tegeta payment was effected through the existing account of Brakfontein. He says Brakfontein order had to be changed to accommodate the R659 million. Tegeta had no account with Eskom at the time. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 5, 2019

The processes to affect the payment were eventually followed and the Brakfontein payment was reversed and reflected accordingly.

Nagar says the pre-payment contract of Tegeta was signed by Matshela Koko and witnessed by Anoj Signh. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 5, 2019

Though Nagar acknowledged that this was in contravention of processes and procedures followed at the power utility to make payments to suppliers, considering the time in which the prepayment had to be done, those processes “could not be followed”.

“It was not the ideal procedure to follow, it was the only procedure we could follow,” Nagar said, accepting it was the “wrong process”.

Nagar added that though the prepayment was “startling” and that he accepted that “the incorrect process was followed”, his department sought approval from Naidoo before “we affected the payment”.

An amount of R728 million was made to Tegeta, Nagar said, explaining that the amount included two other invoices which Naidoo had instructed should be settled.

Nagar says a total of R728 million made to Tegeta. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 5, 2019

“We don’t normally make a prepayment, already, one that was unusual, the second unusual point was the [short time in which the payment had to be made],” Nagar said.

Nagar says the pre-payment to Tegeta was unusual because Eskom normally receive service or goods first before making payments.#StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 5, 2019

Nagar told the commission that he failed to get an “adequate response” when he raised concerns about the prepayment with Naidoo and some of his superiors.

“Chairperson, this transaction was certainly startling,” Nagar said.

However, he explained that though there was a concern over the “startling” and “intriguing” instruction to make the prepayment to Tegeta, teams involved in affecting it would have most likely wanted to carry out the instruction because it came from the upper echelons of Eskom.

Nagar says at the time they received the instruction to pay Tegeta, Eskom employees were more into carrying the instruction than questioning the rush to pay Tegeta. He says they were aware that something was wrong with the transaction. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 5, 2019

“We certainly did not follow the correct procedure in the way it is normally done,” Nagar said.

The inquiry has adjourned until 2pm.

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