Econ Oil rejects unproven allegations in the media

Company says overcharging claim by Eskom is before the arbitrator and is of no merit

Subject: Econ Oil Refutes Unproven Allegations in The Media and Rejects Disinformation Campaign Against The Company

10 April 2021

Econ Oil rejects unproven allegations, falsehoods, and the disinformation campaign against the company in an article titled, "South African Utility Eskom Contracts Swapped for Party Funding, Probe Finds" and the subsequent mainstream media reports.

There is no veracity in the circulating media reports about Econ Oil. The fact that they are alleged in the Bowman report does not make them true. Econ Oil and Eskom are currently engaged in a multitude of cases relating to such claims, all borne out by the award to supply fuel oil to 11 coal-fired power stations.

To put it in context, the basis of Eskom claims and the subsequent media reports is the Bowmans report, which has around ten significant disclaimers.

Under the section "Limitations and Restrictions", the Bowmans report immediately discredits its own report by placing significant disclaimers that outline why their report cannot be relied on. Bloomberg and the mainstream media conveniently omit this important part of the report in Bowmans' report, which states that:

The "investigation has not been finalised."

Bowmans report states they "have not verified the authenticity or validity of the documentation and or data extracts made available to us."

Bowmans report states that "they have included information that we obtained verbally in this report. Unless expressly indicated otherwise, we cannot confirm that such information obtained is credible or truthful."

Bowmans report states that they "have not discussed the findings or contents of the report with the individuals implicated in wrong-doing and or irregularities," they further state that they "have not afforded them with an opportunity to respond to such."

The report states that "all observations and recommendations made in this report are based on the assumption that the information provided to us is correct and accurate."

The question is, can anyone place any reliance on such a type of report, especially on these serious matters?

The overcharging claim by Eskom is before the arbitrator; needless to say, it is of no merit but calculated to create public sensation and influence public opinion. The claim further seeks to ride on the wave of a corruption narrative to influence the outcome of the processes currently underway. Econ Oil has filed its defence accordingly.

Over and above the R1,2 billion false claim, Eskom claims that we over-charged by other two different amounts for the same five-year period starting in 2012, and for the same set of invoices. The two other false claims of invoicing on the same issue we have seen are; a R397m claim allegedly based on the McKinsey report and a R500m claim based on the Trengove Report.

How did Eskom arrive at three hugely different amounts of "overcharging", but based on the same set of unchanging invoices?

It is very clear from the above claims by Eskom that there are desperate attempts to target Econ Oil, and engineer reasons to suggest that there is corruption in our conduct, when there is none. The current media onslaught is part of the engineered campaign against Econ Oil.

Econ Oil has at great expense employed the services of a forensic auditor to indicate that there has been no overcharging and that the formulas used by Bowmans are incorrect. This report will be made available when Eskom's claim for damages is adjudicated by AFSA in the coming months.

The invoicing process at Eskom is rigorous and goes through a review process before Eskom approves and pay. Every invoice issued and paid is linked to the contract, which Eskom verifies.

Bloomberg's claim that "Econ Oil secured Eskom deals by paying inducements, including donations to the ruling party" is false. The donation Econ Oil made in 2014 had nothing to do with the Eskom contract awarded in 2012, which is two years before the donation was made. It also had no bearing on any future contract whatsoever. We make donations as part of our CSI programme, and support different requests the company can afford to support.

Bloomberg's article has intentionally attempted to create a cloud of suspicion around a simple act of legitimate support to NGOs. Using conflation propaganda tactic, the reports sought to link a 2014 donation to Econ Oil's contract awarded in 2012.

It is very clear from the media report that this is a carefully orchestrated disinformation campaign against Econ Oil to smear the company and cast aspersion on its integrity and that of the director, Ms Nothemba Mlonzi.

Econ Oil won the 2012 bid following a transparent, fair and competitive process that goes through multiple committees at the power utility. The company did not ingratiate anyone at Eskom to win the 2012 bid, or any bids the company has done. Where we succeed or fail, we always do so on merit.

It has become a common tactic to use smear to destroy the image of black-owned companies. All you have to do is make a false allegation of emotive issues such as corruption to agitate the public. The Bloomberg article fits the playbook.

Now we would like to share a history of a set of events that have led to the current malicious, defamatory, and false allegations against Econ Oil.

In November 2019, Econ Oil bid for another five-year fuel oil supply contract, which Econ Oil won on merit. The contract award was to other suppliers as well.

Eskom Group CEO, Andre de Ruyter assumed office on the 6th of January 2020 and on the 16th of January 2020 the Eskom Board approved his recommendation of "cancellation of the fuel oil tender due to allegations of fraud and corruption between suppliers and Eskom employees…"

In addition to the above, on the 25th of March 2020 a further Board meeting resolved that "to approve the cancellation of BIDCORP 4786 (the tender we had won) for the procurement of fuel oil". In terms of the resolution of the 25th of March 2020, no irregularities or misconduct relating to Econ Oil were given for the cancellation of the procurement process.

Furthermore, on the 3rd of April 2020, De Ruyter requested the National Treasury's approval of the recommendation for the cancellation of the fuel oil tender awarded to Econ Oil as approved and recommended by the Board on the 25th of March 2020. An additional letter was addressed by Chief Procurement Officer, Mr Solly Tsitangano to National Treasury on the 4th of May 2020, apparently giving more detail to National Treasury regarding the reasons for the request for a second cancellation.

On the 17th of July 2020, National Treasury responded to De Ruyter's request, wherein approval was not supported. The reasons for cancellation were not in line with paragraph 13 of the PPPFA Regulations, 2017 and public procurement.

Furthermore, a paragraph from the National Treasury letter states as follows: "It is also not clear how Eskom will defend itself against possible litigation process from service providers who have been awarded letters of award."

Despite the above advice from the National Treasury and repeated attempts by our company to implement the contract, on the 31st of July 2020, Econ Oil received a notification by way of a media statement about Eskom's cancellation of the contract.

During the period from November 2019 (the award of the contract) up to November 2020, Econ Oil was awarded emergency ad hoc contracts to supply the fuel oil to Eskom.

The unfounded allegation of "corruption" against Econ Oil was simply a narrative used as a ruse to justify why Eskom attempted to renege from the December 2019 contract, and to justify the unfair treatment against our company.

When Eskom made the false allegations of corruption against Econ Oil, we sued Eskom for defamation, and De Ruyter in his personal capacity. Further to the civil claim, we opened a criminal case with the South African Police Services against the two parties.

When we saw Eskom refusing to allow implementation of the November 2019 contract, Econ Oil subsequently accepted Eskom's cancellation as a repudiation of the contract. In terms of the underlying terms of the contract, we applied to have the November 2019 award adjudicated upon. Submissions by both Econ Oil and Eskom were made to the appointed adjudicator, advocate Kevin Trisk SC, and in December 2020, the adjudicator confirmed that a valid, binding and enforceable contract was concluded between Econ Oil and Eskom on the 8th of November 2019.

The adjudicator ordered Eskom to place all of its orders for the supply, delivery and off-loading of fuel oil of various Grade 1,2 and 3 for its eleven coal-fired power stations under the contract with our client. Something Eskom has not done.

In addition, the arbitrator awarded R21m in damages against Eskom.

What was revealed in publicly circulated letters by Eskom CPO Solly Tshitangano is that in parallel to our process, inside Eskom, De Ruyter was pushing aggressively to get them to sit urgently in a Supplier Review committee to deregister Econ Oil from Eskom's database. The aim of deregistering Econ Oil from the Supplier Database was to undermine and nullify the award won at arbitration, and further lay a basis for the cancellation of November 2019.

Currently, there are multiple legal actions between Eskom and Econ Oil, and it is clear that the smear and disinformation campaign a tool used by Eskom to litigate in public against Econ Oil. It is a public record that De Ruyter is facing racism allegations levelled by the Tshitangano. This media onslaught against Econ Oil is being used to deflect attention, and legitimise the false allegations which we have been forced to answer in the media.  

The allegation of unproven overcharging in the Bowmans report was only finalised in December 2020, almost one year after the false allegations of irregularities and misconduct surfaced. And it's most certainly not ten days after De Ruyter assumed occupation of his position in January 2020. On the 17th of December 2020, Eskom filed a statement of claim against Econ Oil regarding the alleged overcharging, which we are defending in court and at the arbitration.

Tshitangano's widely circulated letters and email attachments reveal that De Ruyter relied on the "self-discredited" Bowmans report's unproven allegations to further victimise Econ Oil, using the internal Supplier Review Process to remove Econ Oil from the Eskom database. Internal emails further revealed that "Eskom had a backlog of over 100 cases awaiting supplier review", but Econ Oil matter was expedited at the instruction of De Ruyter.

Right now, we have not seen any white-owned suppliers of Eskom subjected to deregistration from the Supplier database of Eskom – especially those implicated in State Capture, and those who openly admitted to over-charging Eskom, or committing a transgression against Eskom. Is the Supplier Review process reserved only for innocent black-owned companies that are subject to engineered smear campaigns?

While the matters are going to be dealt with in court, we felt it necessary as Econ Oil to refute the false, defamatory allegations in the media, including the carefully disguised propaganda smear campaign against our company.

By sharing the timeline of events, we clearly outline the pertinent reasons we are a target of this coordinated smear campaign timed to precede De Ruyter's racism hearing, and the court cases.

It is very clear from the timeline of events that, firstly, Econ Oil was accused of "corruption" without basis, and then investigations were later conducted to "legitimise" the baseless allegations at all costs. That is why the Bowmans report put a huge disclaimer to distance itself from its own content of the "forensic report" now used as a weapon against Econ Oil.

Econ Oil will not allow itself to be used as a deflection tool to 'sanitise' certain individuals. We will continue to discharge our duties with our company's underpinning values, which is dedication, honesty, and delivery excellence.  

Issued by Econ Oil, 10 April 2021