De Ruyter cleared of misleading Eskom board

Eskom CEO Andre De Ruyter has been cleared of accusations that he misled the board on a fuel oil supply tender.

The power utility on Monday released the full report on the investigation by Advocate Wim Trengrove.

In a statement accompanying the report, Eskom said that Trengrove’s investigation which dated to 14 July 2020, “unconditionally cleared” de Ruyter of accusations of misleading the board.

“At its meeting on 20th July 2020 the Eskom Board adopted Advocate Trengrove’s report and expressed its full support for Mr De Ruyter,” the statement read.

According to the report, as far back as May 2019, Eskom issued a tender for the supply of heavy fuel oil to its power stations for five years. By October of that year, Eskom approved awards to three suppliers – Sasol, Econ Oil & Energy and FFS Refiners. The budget for the oil supply was R14 billion.

In December 2019, Eskom’s procurement officer applied to its executive committee for the budget for the contract to be increased to R18 billion. This application came before the Investment and Finance Committee on 10 January 2020, which subsequently turned down the application, the report read.

“De Ruyter, who had taken up office as Group Chief Executive days earlier, attended the meetings. He was concerned about the quality of the information provided in the application for the increase in the budget of the heavy fuel contracts and decided to investigate the matter,” the report read.

Based on the outcome of the investigation, De Ruyter concluded that the contracts had not been properly awarded.

At the first board meeting De Ruyter attended on 16 January 2020, one of the main areas of focus he proposed was the cancellation of fuel oil contracts, owing to allegations of fraud and corruption with some fuel oil suppliers and Eskom employees. Reference was also made to the Eskom board’s decision on 30 January 2019 to pursue “a new strategy” for the procurement of fuel oil by the power utility for all its coal-fired power stations directly from the refineries, as a cost saving measure. This was supported by Treasury, the report noted.

A memorandum was prepared for the board to inform it of the “serious issues” concerning the fuel oil contracts and to recommend that it consider the cancellation of contracts. The board ultimately resolved to cancel the contracts, via a round robin resolution, based on several grounds such as the detection of possible collusive practices by bidders, breaching a section in the Competition Act and breaching principles of fairness, transparency, equitability and competitiveness, among others.

Two of Eskom’s directors however, Sifiso Dabengwa and Dr Pulane Molokwane, “strongly objected” to the proposal. “The theme of their objections was that the grounds for the proposed cancellation were speculative and unproven and thus did not justify the proposed cancellation,” the report read. 

Subsequently, in a series of emails following the board meeting where the proposal was approved, Dabengwa accused “management,” and De Ruyter in particular, of misleading the board.

Eskom instructed Trengrove to investigate Dabengwa’s accusations and determine whether they are justified. 

In his conclusions Trengrove said that the evidence established a “high degree of probability”, that Eskom’s board adopted a new strategy on 30 January 2019 to procure heavy fuel oil only from refineries.

“The evidence establishes, beyond all doubt, that Mr De Ruyter in any event honestly believed that the board had adopted such a strategy. He said that the based his statement on the letter from National Treasury dated 15 February 2019,” the report read.

“It follows that Mr De Ruyter’s statement was in all probability correct but in any event entirely honest and justified.”

Trengrove noted that Dabengwa’s accusation of dishonesty was “baseless and irresponsible”. “Mr Dabengwa did not have shred of support for his accusation of dishonesty. It was irresponsible of him to make it,” the report read. -IOL