Eskom keeps details of short-term coal contracts confidential

In response to a parliamentary question posed by the Democratic Alliance (DA), Eskom has refused to divulge information on its short to medium term contracts. The response to the parliamentary question states that: "All coal requirements in excess of those supplied by the long-term agreements are procured through short to medium term contracts. The detail in this regard is confidential and its disclosure could be prejudicial to Eskom's commercial negotiations in support of security of supply."

A copy of the full reply is available upon request.

The fact that Eskom has overspent its budget by R 8 billion, mostly due to wasteful spending on short term contracts, clearly shows that it is a crucial part of information that needs to be made public - it cannot hide its dismal management by simply averring confidentiality and security considerations. That is what the Apartheid government did.

The DA will demand answers on the short-term contracts and will ask the Minister of Public Enterprises, Barbara Hogan, how it is that parastatals can claim confidentiality at all if they are owned by the government and therefore the people of South Africa. The DA will call on the chairperson of the parliamentary portfolio committee on Public Enterprises to have Eskom called before the committee and explain why they are shirking their constitutional obligation to submit to parliamentary oversight and to explain in detail the cost and reasons for engaging in short term coal procurement contracts.

Eskom is a public enterprise and has received billions in government bailouts in recent years, but conventionally forgets the oversight role of Parliament after the state funds have been paid over. The reality is that Eskom is wasting millions of rands in its short term coal contracts, and it is desperately trying to cover its tracks.

The fundamental problems with Eskom's incapacity to manage its short-term coal purchases is something that Susan Olsen warned the ousted Eskom CEO, Jacob Maroga, back in 2007. In the report, Olsen, an internationally renowned energy consultant, states that "[Eskom's] failure to enforce the quantity provisions of existing coal supply agreements has resulted in an unstructured, undisciplined and opaque program of buying up the gaps between contract ceilings and actual production."

The big coal suppliers stated before the parliamentary portfolio committee on Public Enterprises that they could have supplied Eskom with the required coal and of the right quality, and the prices would be significantly lower had they done so.

Again, it seems as if nothing has changed since the Olsen report in 2007 - Olsen states that:

"[Eskom] routinely fails to notify tied collieries of coal requirements within the contractually specified notice periods leaving itself open for mining houses refusing to comply with requirements".

Parliament has an oversight responsibility and it is absolutely essential to have this information on the short term contracts in order to hold Eskom accountable. It would seem as if the entire structure of coal procurement needs an urgent rethink in order to avoid this kind of waste in the future.

The confidentiality argument of Eskom is again showing the true nature of the so-called developmental state; parastatals that waste taxpayer money by the billions refuse to be held accountable to the public. Parastatals have become a law upon themselves - last week SAA refused to provide details on accusations of price fixing, alleging that the information is sub judice. Crucially, the Competition Commissioner, Shaun Ramburuth said that the SAA allegations are not sub judice - which means SAA actually lied to Parliament.

Statement issued by Pieter van Dalen, MP, Democratic Alliance deputy shadow minister of public enterprises, March 15 2010

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