NEWS
18/10/2017 16:36 SAST | Updated 18/10/2017 16:36 SAST

Outa: Coal Prices Are Five Times What They Should Be

"Changes in 2001 to the way Eskom was allowed to procure coal had opened up opportunities for corruption."

Jim Urquhart / Reuters

Corruption at Eskom has driven up coal prices to as much as five times what they ought to be, MPs heard on Wednesday.

Testifying before Parliament's inquiry into corruption and maladministration at Eskom, Outa energy head Ted Blom said changes in 2001 to the way Eskom was allowed to procure coal had opened up opportunities for corruption.

"This opened up the space for corruption. In my estimate, this is where corruption started.

"Sixteen years later, the PFMA is still being breached by Eskom because they are still buying coal on the open market when there are other more cost-effective alternatives available."

"Those reports, a lot of them are hidden. When they don't point to the right person... they seem to disappear or get hidden. If they're too politically sensitive, they get hidden."

This allowed corruption to fester, and "for coal prices to be two, three, four, five times higher than they should have been".

This had resulted in electricity costing almost 80 cents a kilowatt-hour. A more realistic price would be 30 cents a kilowatt-hour.

Eskom, through Nersa, is currently applying for an increase in the price it sells electricity.

Blom claimed there were at least 100 forensic reviews, reports and investigations conducted by Eskom every year.

"Those reports, a lot of them are hidden. When they don't point to the right person... they seem to disappear or get hidden. If they're too politically sensitive, they get hidden."

"Fraud and corruption at Eskom didn't start yesterday; it's been around for a while."

He recommended the committee access these reports.

"In 2007, Eskom had to write off more than 400,000 tons of coal, which it had paid for, but they couldn't find. To give you an indication... this is enough coal to cover seven rugby fields up to the height of a tree. It's not easy to miss."

"Fraud and corruption at Eskom didn't start yesterday; it's been around for a while," he said.

Blom, a former Eskom employee, said that in 2007 he had become aware of Eskom executives taken kickbacks.

"This committee needs to investigate how many kickbacks Eskom executives took from labour brokers and HR firms."

He further accused Eskom of "deliberate financial manipulation". The utility had been deliberately boosting its own balance sheet in order to raise more debt.