Former Eskom CEO André de Ruyter believes his estimate that R1bn is being stolen a month from Eskom is “conservative”.
And he insists in the presentation he will give to parliament’s standing committee on public accounts (Scopa) on Wednesday — which Business Day has seen — that he took all the necessary steps to inform law enforcement authorities of the theft and corruption at the utility as required by the Prevention and Combatting of Corrupt Activities Act.
De Ruyter will appear virtually at a physical meeting of the committee at its request to justify statements he has made on corruption and theft at Eskom. In his written statement of 4,600 words he does not repeat allegations made in an interview with eNCA that high-ranking government officials were involved in the corruption, or that Eskom was a “feeding trough for the ANC”.
“I have publicly made the statement on a number of occasions that an estimated R1bn per month is stolen from Eskom. This is, if anything, a conservative estimate and is based on my assessment of the losses suffered by Eskom that have come to my attention,” De Ruyter will tell MPs.
He outlines at great length the already widely reported types of corruption taking place at Eskom’s power stations which in some cases involve the operation of cartels, but he cautioned that he was constrained by a number of factors in providing certain information. These included having to protect sources who feared for their safety and whose identities could be known to the Hawks.
“Substantial fraud and corruption takes place in the procurement process, particularly at power stations. Reconciliation of inventory to actual stock counts has been an ongoing process to address legacy and ongoing fraud. In financial year 2020, R1.3bn had to be written off, with a further R0.8bn in financial year 2021, equating to about R70m — R100m per month. The implementation of enhanced controls and procurement and inventory management processes have slowed down this type of crime, but internal resistance and non-compliance have hamstrung efforts.
“Significant infrastructure theft, including cables, overhead lines, transformers and conductors costs Eskom approximately R2bn per year (R170m per month). Non-technical losses of electricity, which accounts for a significant amount of electricity theft, amount to about R200m per month, or R2.3bn per year, according to the Eskom 2022 annual report.
“There is significant theft and fraud of prepaid electricity vouchers, which is estimated to amount to billions of rands per annum. The total loss due to prepaid voucher fraud could exceed R5bn per year, or R400m per month,” De Ruyter says.
Furthermore, coal theft through the replacement of good quality coal with poor quality coal is estimated to be a significant contributor to losses at Eskom.
“Given that Eskom spends about R132bn per annum on buying primary energy, the bulk of which is coal, even a 5% loss factor on coal would equate to some R500m per month. A large part of the problem relating to coal quality is rampant criminality.”
De Ruyter also elaborates on his allegation of theft of spare parts and the collusion between maintenance contractors and coal suppliers to sabotage generation equipment. Cartels operate in collusion with Eskom employees to defraud Eskom through illicit procurement and the destruction of equipment. These fraudulent procurement processes, De Ruyter said, are repeated at various power stations and amount to millions of rand a month per power station.
The theft of fuel oil at Tutuka is well documented, and curtailing this has saved Eskom an estimated R100m per month, which is the amount by which fuel oil consumption at Tutuka dropped after enhanced control measures were implemented.
De Ruyter says he took a number of steps to report corruption to law enforcement authorities and government officials at the highest level. He had met with senior police officials, including national police commissioner Fannie Masemola and representatives of the State Security Agency in June last year and asked them to investigate corruption at Eskom and to assist it in combating crime. Following this meeting, a police brigadier was designated by Masemola to be the liaison with an intelligence operation.
Similar exchanges have been held with senior commanders. Former Eskom chairperson Malegapuru Makgoba and the new board of Eskom had also been informed, as well as public enterprises minister Pravin Gordhan and national security adviser Sydney Mufamadi.
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