Transnet bought seven of the world’s most expensive port cranes because its Chinese state-owned supplier inflated the price to pay off the Guptas, a kickback contract shows.

Shanghai Zhenhua Heavy Industries (ZPMC) delivered the cranes to Durban container terminal in 2012 and 2013.

When Transnet awarded the contract in September 2011, the cranes were worth no more than $81-million (R570-million then), but ZPMC inflated the price to $92-million (R650-million then) to make room for “commissions and fees”.

This is according to an “agent agreement” between ZPMC and a Dubai company called JJ Trading (JJT).

JJT stood to take most of the crane price increase, plus an extra cut, altogether totalling $12-million (R84-million). In return, JJT would make sure ZPMC got its contract.

However, financial records in the #GuptaLeaks show that JJT was largely a cut-out for the Guptas, who got most of the JJT money.

The implication is that ZPMC paid bribes to the Guptas, who somehow influenced Transnet to give it the contract.

A crane expert described this as “the most expensive crane sale of its type ever recorded”. (The expert did not want to be named.)

This kickback contract adds to a mounting body of evidence that the Guptas were gatekeepers of Transnet contracts from which they extracted enormous tolls.

JJT styles itself as a scrap metal trader, but the #GuptaLeaks suggest it runs a brisk money laundering service.

Transnet said it was investigating.

China: ‘What corruption?’

This is the third Gupta-Transnet alleged kickback contract we have found. The others involved locomotive manufacturer China South Rail (CSR) and German software giant SAP.

Global firms SAP, KPMG, McKinsey and Bell Pottinger responded to the #GuptaLeaks by removing top executives and investigating. Bell Pottinger clients fled and it fell into business administration.

By stark contrast, the two state-owned Chinese firms, which are among the most seriously implicated, just shrugged off the allegations.

CRRC Corporation Limited, which absorbed CSR in 2015, ignored our questions.

After repeated emails and two preceding articles, ZPMC said: “What you intend to report relevant to ZPMC is untrue. We have no business or other relationship with the Guptas, your president Jacob Zuma or his family.”

It declined to explain its relationship with JJT but demanded that we retract our preceding articles.

The Gupta brothers Atul, Ajay and Tony are close to Zuma, bought a house for one of his wives and are in business with his son.

The Guptas have consistently declined to answer questions, but Atul did tell the BBC the #GuptaLeaks were fake.

Agents of ‘graft’

In late 2010, Transnet tendered to buy two ship-to-shore gantry cranes to move containers to and from ships at Durban container terminal.

Brian Molefe was Transnet’s chief executive officer from February 2011. Last week, he told us: “A lot of the shipping companies were at pains to tell us about the congestion at Durban port, and it was not possible to work with the cranes. They were very old. They were already breaking down, and there were huge delays, so the port needed new cranes.”

Meanwhile, a shadowy group of agents got to work on the tender behind the scenes.

A port insider with knowledge of Transnet’s crane deals alleged that the agents lobbied Transnet to change the crane specifications to suit certain bidders and to increase the number of cranes from two to seven.

The insider also alleged that the agents obtained and shared confidential documents, including port budgets, upcoming procurement plans and competing bidders’ proposals.

Such inside information could make or break competitors’ bids.

The #GuptaLeaks show that in December 2011, a senior Gupta manager emailed a person linked to JJT a confidential Transnet document outlining an upcoming crane tender.

The document metadata indicates that it was drafted by an employee in Transnet’s Office of the Chairperson and Group CEO. Then CEO Molefe told us he did not know how the Guptas got it.

‘Nothing to see here’

Transnet spokesperson Molatwane Likhethe said the company knew of nothing untoward: “A technical assessment indicated that the two 20-metre gauge rail cranes that the company initially planned to buy would not meet the weight requirements for the quay wall due to excessive wheel loads.

“The study revealed that the quay wall could only handle nine cranes of a lighter specification, two of which could only be purchased after the completion of the berth deepening project.”

So, Transnet cancelled the two-crane tender and issued a second one in 2011 for seven more expensive “tandem lift” ship-to-shore cranes.

But, the crane expert said: “The first two cranes Transnet planned to buy were dramatically lighter than the ones they ended up buying. Also, you can always add more wheels to disperse the weight and comply with individual wheel loads. Anyone that knows anything about cranes knows that.”

Transnet did not respond to follow-up questions.

Success fee

In June 2011, ZPMC marketing manager Aqwa Chen signed an “agent agreement” with an unidentified JJT representative.

It describes Transnet’s tender for the seven tandem-lift cranes and states that JJT “has agreed to assist [ZPMC] as an agent to facilitate in this bid”.

The contract describes an apparently innocent role for JJT.

JJT would “facilitate” and “handle” ZPMC’s bid “and other relevant matters”. It would communicate with Transnet on behalf of ZPMC and help the Chinese staff to understand South African laws, codes and customs. JJT would even send out invitation letters, make hotel reservations and arrange airport shuttles.

But, critically, ZPMC would only pay JJT on condition that Transnet gave it the contract.

Four months later, Transnet awarded the contract to ZPMC.

• Read the #GuptaLeaks documents here.

Ribbon cutting

There was much fanfare when ZPMC delivered the cranes in 2012 and 2013. Molefe and then public enterprises minister Malusi Gigaba attended the ceremony.

News reports said these were the first tandem-lift cranes to be installed in the southern hemisphere.

World Cargo News reported that no one outside of China used them, except for a Dubai port, which had by then adopted a different solution.

But the crane expert told us this was for a good reason: “Why did Transnet need the most expensive type of crane ZPMC makes when the Port of Los Angeles and the Port of Long Beach, which are premier high efficiency ports, don’t use it? Everyone knows they don’t work that well.”

They said that port logistics crews often battled to manage the double lift, so the efficiencies were seldom realised.

But, last week, Molefe told us: “We decided on the tandem-lift cranes of that size because the type of vessels that were calling into Durban were quite wide, and our cranes could not reach to the other side of the vessels. These new cranes can, and they can take two containers at a time instead of one.”

He said this would double the cranes’ efficiency.

Again, the crane expert disagreed: “Most cranes can do the double container lifts.” The tandem lift capability was not necessary for this.

Kickbacks

Ultimately, it is not clear if Transnet’s decision to buy expensive cranes from ZPMC made technical and economic sense, but if it did not make sense, as alleged, that is probably because ZPMC was paying off the Guptas.

We recently reported that JJT and related shell companies received about R1.5-billion in Transnet kickbacks.

CSR paid most of this. The first Gupta kickback contract we published showed that the payments were in return for the “agents” making sure Transnet gave CSR a locomotive contract. Most of this was paid on to Gupta-controlled companies in the United Arab Emirates.

From other JJT transfers, we identified about R55-million that ZPMC paid to the Guptas, through JJT, between 2011 and 2013.

Now that we have the ZPMC-JJT kickback contract, it is clear that ZPMC was in fact paying the Guptas to make sure it got the Transnet contract.

Together, the kickback contract and a related document explain that JJT was to be paid $12-million (R84-million then) – if ZPMC won the Transnet contract.

The documents explained that even though ZPMC “offered” to sell its cranes for $81-million, Transnet would pay an inflated price of $92-million, to make room for the “commissions”.

JJT would keep 85% of the increase plus 3% of the Transnet price – this all totals $12-million.

It is not clear who got the remaining 15% of the increase – $1.7-million.

We previously reported that during the tenures of Molefe and Anoj Singh, Transnet’s former chief financial officer, Transnet spent about R30-billion on contracts against which suppliers kicked back about R5.6-billion to the Guptas.

Meanwhile, the Guptas bankrolled Singh’s alleged girlfriend, hosted him in luxury in Dubai six or seven times, opened a secret offshore shell company for him and, the #GuptaLeaks suggest, gave him large amounts of cash.

Singh and Molefe said they were not bribed.

We have not traced anyone who admits to representing JJT.

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Suspended Eskom chief financial officer Anoj Singh allowed billions in public money to slip through his fingers and into the Guptas’ pockets while they paid him offshore, the #GuptaLeaks suggest.

We have identified around R30-billion in crane, train and other Transnet contracts against which Gupta companies stood to get about R5.6-billion in kickbacks.

These were all during Singh’s tenure at Transnet, alongside chief executive Brian Molefe, where the Gupta-friendly duo executed a spending plan worth hundreds of billions.

Meanwhile, the Guptas opened a shell company for Singh in a highly secretive United Arab Emirates (UAE) jurisdiction – just after Transnet kickbacks started rolling into their accounts.

The #GuptaLeaks contain glimpses of the Guptas paying someone who appears to be Singh hundreds of thousands in cash in Dubai.

They also show that the Guptas employed Singh’s alleged mistress and seemingly helped her to buy a house with a loan.

Meanwhile, the Guptas bankrolled six or seven luxury Dubai stays for Singh (and at least one for his alleged mistress), some of which coincided with key decisions he made in their favour.

When he moved from Transnet to Eskom in 2015, Singh’s conflicting interests – the Guptas’ versus South Africans’ – followed him and found expression in his actions there.

Eskom’s lenders recently demanded Singh’s removal, and he was suspended in July.

Both the opposition Democratic Alliance and the lobby group Organisation Undoing Tax Abuse have laid criminal charges against him for his actions at Eskom. Three Eskom-commissioned investigations and another by the National Treasury indicated he has a case to answer.

Did he look away on purpose? Did he get his hands dirty? The evidence suggests both, though Singh says he is clean.

He told us he would cooperate with law enforcement authorities, but at the time of writing they had not yet approached him.

If they ever do, he has a lot to explain.

“Just a soapie”

On July 19, this year, Singh presented Eskom’s financial results.

They were bad, and Eskom’s auditors provided a gruesome account of the company’s internal controls, which were so weak that the bean counters could not be sure which expenses were regular and which were not.

On the day, we asked Singh a few questions.

Why did the Guptas repeatedly host him in Dubai? Why did they pay many thousands for his massages there? Why did they pay him money offshore? Was he bribed?

The usually smooth-talking CFO leaned uncomfortably on the table as he spoke into the microphone.

“I can go on record to say I have not received a bribe of any sort or taken a bribe from anybody,” he said. “I think, as it relates to the gifts, I will be submitting a tell-all document, so let’s just wait for that, and we will see where that lands up.”

Seven weeks later, Singh has yet to produce the document.

But Singh was irritated.

In response to written questions, he said: “As you may remember, during the Eskom results presentation, speculative information was presented by a journalist to me in this very public platform, which had very little relevance to the substantive issues raised but was presented nonetheless in a very deliberate way designed to impugn my character and reputation in the court of public opinion.

“In this vein,” he said, “I [will] not participate in the soap­-opra-­fication (for lack of a better word) of my alleged role in alleged corruption in the companies that I’ve worked in.”

He said: “Issues of corruption are currently subject to forensic investigation. The [National Prosecuting Authority] and the Hawks have recently indicated that they are beginning an investigation into these matters, and I will cooperate with any law enforcement authority if required to do so.”

In a recent BBC Radio 4 interview, Gupta brother Atul denied wrongdoing. He said: “Let’s talk Gupta leaks; there is no authenticity of Gupta leaks at all. They are all everyday deception-mongering to drive their own agenda.”

The Gupta brothers and their associates have otherwise consistently declined to comment on detailed #GuptaLeaks allegations.

A servant of the people

Singh, now 44, is a qualified chartered accountant. He studied at the University of Durban-Westville (now University of KwaZulu-Natal) before working as an accountant in the Spar group. Later, he headed big accounts at the auditing firm Deloitte.

He joined Transnet in 2003 where he worked as a senior financial manager in the company’s biggest operating division, Transnet Freight Rail. He later moved into the Transnet group head office where, in 2009, he became acting CFO.

In an email to us, Singh, described the “pivotal role” he thought state-owned companies played in South Africa’s economic transformation. “Tens of millions of people rely on the services, which has a direct bearing on their quality of life, opportunities and economic prospects.

“This is why I chose a career in the public sector.”

People who know or have worked with Singh said he was charming, persuasive and fiendishly clever. One said he was “a frikken genius at fundraising”.

In a 2012 interview, CFO South Africa asked Singh what he was most proud of. He said: “My role as the CFO at Transnet. We recently launched a R300 billion capital investment programme, the Market Demand Strategy. It is an ambitious plan that is expected to create 588 000 economy-wide jobs and transform Transnet Freight Rail into the world’s fifth biggest rail freight company.”

But it was exactly this R300-billion strategy that made the Guptas inordinately wealthy.

Seven Chinese cranes

Let us begin in 2011.

A Transnet operating division, Transnet Port Terminals, bought seven cranes to lift containers from ships at Durban harbour.

The Chinese state-owned Shanghai Zhenhua Heavy Industries (ZPMC) supplied the cranes for $92-million (R650-million then).

At the same time, ZPMC started paying off a Dubai shell company called JJ Trading, which quickly paid similar amounts to Gupta companies in the UAE and South Africa.

We shall see that the Guptas frequently used JJ Trading, whose beneficial ownership is unclear, to wash kickbacks.

Singh said of this and a later crane deal: “If a procurement activity has gone through all the process checks and balances, why would any CFO question it on face value? I as CFO had very little involvement in the process per my delegation of authority.”

ZPMC said: “We have no business or any other relationship with Guptas.”

It asked us to retract our earlier article about it, but then declined to explain the JJ Trading payments.

95 Chinese locomotives

In 2012, Transnet appointed Singh permanently. He and CEO Brian Molefe then launched their legacy project, the R300-billion capital investment plan.

Later in 2012, Transnet signed one of the first big contracts under the plan. Another Chinese firm, China South Rail (CSR), would supply 95 electric locomotives for R2.7-billion.

Against this, CSR agreed to pay R537-million in kickbacks to Gupta front companies in Dubai and Hong Kong.

JJ Trading washed a lot of this money, again.

CSR did not respond to questions.

Intangibles

Molefe and Singh were still planning to buy another 1 064 locomotives, at about R50-billion.

In preparation, Singh needed to raise cash, so in December 2012, Transnet went to tender and appointed a consortium of financial advisors.

The consortium was to be led by McKinsey, a renowned corporate advisory firm, that is today in hot water over Eskom benefits it allegedly channelled to the Gupta-linked company Trillian, now led by one Eric Wood.

Back in 2012, Wood was a partner at Regiments Fund Managers. Regiments was supposed to be McKinsey’s minority partner at Transnet, for roughly a R10-million cut.

Instead, Regiments effectively elbowed McKinsey out of the way and took over the job. Its scope and cost of services blossomed to about R266-million.

Singh and Molefe provided the fertiliser through a series of motivations and approvals.

For example, in a letter to McKinsey, Singh wrote that the main scope of the McKinsey engagement would be reallocated to Regiments.

A subsequent contract addendum purported to be between Transnet and McKinsey, but Wood scratched out “McKinsey” and signed for Regiments. Singh signed alongside, increasing Regiments’ portion of the contract to R21-million.

In a later memorandum, Singh retrospectively motivated for Regiments to be paid an extra R89-million. Molefe approved.

Along the way, Regiments picked up other Transnet contracts worth at least R219-million.

There were no open tenders for the extra contracts, but Regiments said all was above board.

Over the same period, Regiments paid at least R84-million to a Gupta shell company in South Africa called Homix.

Homix, we shall see, was also used by the Guptas to wash kickbacks for other Transnet contracts.

100 Chinese locomotives

Around the end of 2013, Transnet decided to buy another 160 locomotives, supposedly because the big 1 064 purchase was delayed. China South Rail would provide 100 of these. There is no evidence of an open tender.

Once again, the #GutpaLeaks show, CSR agreed to kick back to JJ Trading and other Gupta fronts offshore: R924-million against a R4.4-billion Transnet contract.

22 Swiss cranes

In February 2014, Transnet contracted to buy 22 more cranes for Durban harbour, this time from the Swiss firm Liebherr.

On the day that the contract was awarded, one of several Liebherr payments hit the Guptas’ UAE accounts. In the #GuptaLeaks, we identified payments totalling $4.2-million (about R46-million then).

After we published this in July, Liebherr said it was investigating: “We take the allegations very seriously. The business practices described in the article are unacceptable to us. We currently expect the investigation’s results during next week.”

That was 10 weeks ago. Liebherr did not respond to subsequent emails.

359 Chinese locomotives

The next month, March 2014, Transnet announced the big one.

Transnet had chosen four companies to supply the 1 064 electric and diesel locomotives. China South Rail got the biggest chunk: 359 locomotives at about R18-billion.

Against this, CSR was to pay a staggering R3.8-billion to JJ Trading and other Gupta fronts.

On Monday, April 21, 2014, one month after the contract, JJ Trading paid the Guptas 7.3-million Emirati dirham (AED; R20.9-million then) in cash, the #GuptaLeaks show.

On Wednesday, it paid another AED 1.8-million (R5.1-million), this time to one of their Bank of Baroda accounts. Another AED 3.3-million (R9.4-million) followed on Thursday. And so on.

A month later, JJ Trading had already paid the Guptas about R590-million.

Singh’s little secret

On March 20, 2014, just three days after Transnet awarded China South Rail the 359-locomotive contract, the Guptas opened up a shell company in the UAE.

It was called Venus Limited, and it cost the Guptas AED 11 000 (R32 000 then) in administrative fees to open.

Venus was registered in the name of a man who regularly worked for the Guptas. This man, the #GuptaLeaks show, sometimes moved huge amounts of cash into their Dubai accounts for them – a textbook “bagman”, it seems.

Five weeks later, just after the JJ Trading money landed with the Guptas, Singh boarded a plane to Dubai.

There, the Guptas hosted him at the Oberoi hotel where, the #GuptaLeaks have shown, the Gupta brothers regularly looked after South African cabinet ministers, politicians, fixers and officials.

Singh was joined at the Oberoi by brother Tony Gupta and their business partner Salim Essa, travel bookings show. While they were there together, the Gupta “bagman” transferred Venus into Singh’s name.

Where “Confidentiality is King!”

Venus is registered in Ras Al Khaimah, one of the seven emirates of the UAE.

It is notorious – or “popular” – for two reasons: Financial secrecy and tax avoidance.

Online websites that tout Ras Al Khaimah explain “the surprising level of banking privacy” in “RAK”, where “Confidentiality is King!”

According to one: “RAK Offshore sets the bar very high in terms of internal, local, federal and international compliance yet keeping customers’ confidentiality at the heart of the system” (their emphasis).

In other words, should someone send illicit funds to Singh’s new company, no one would know.

Singh declined to explain the company’s purpose.

“Mr A Singh’s” cash

We have seen no financials for Venus and do not know if the Guptas or their associates paid money to it. However, they appear to have given him cash around that time.

On June 6, 2014, Singh jetted off to Dubai for his second Gupta sojourn. There he spent two nights at the Oberoi with Tony Gupta.

One month later, the Guptas booked Singh in for a third stay at the Oberoi, although evidence suggests he may not have made this appointment.

But Singh was back in Dubai on August 29, his travel records show, when Tony Gupta appeared to give him AED 200 000 (R578 000 then) cash.

This is according to the Guptas’ internal accounting records, where a spreadsheet appears to record expenses incurred by Tony Gupta. The entry notes: “Mr A Singh Atlantis”.

It appears “Mr A Singh” was paid at Atlantis, The Palm, an ostentatious resort in Dubai.

This spreadsheet records 97 transactions. They are not listed chronologically, so it is suggestive that immediately below the AED 200 000 paid to “Mr A Singh”, a second record notes that AED 200 000 (R584 000 then) was paid to “AS Global” a few weeks earlier.

Putting aside the possibility that “AS” refers to Singh’s initials, a reliable source told us this company was for Singh’s benefit. We could not independently verify this.

Singh declined to explain these payments.

Dirty fingers?

On November 7, 2014, Singh was back at the Dubai Oberoi to spend two nights. Again, travel booking records suggest Tony Gupta and Essa were there too.

Coincidentally, at that point, the South African telecommunications network company Neotel was trying to clinch a big deal to service Transnet.

According to a report later commissioned by Neotel’s board, the negotiations had been tough. Transnet and Neotel were caught on a few “sticking points”.

These were surmountable, Neotel’s investigators noted, but a month later, Transnet “inexplicably” informed Neotel that negotiations were off.

So Neotel CEO Sunil Joshi sat down with Singh in the seedy, subterranean gloom of SLOW Lounge, Sandton on December 11, 2014.

Describing Joshi’s account, Neotel’s investigators reported that Singh confirmed the deal was off.

“Mr. Joshi was shocked and failed to comprehend how there could have been such a change in attitude from Transnet,” they reported.

Returning to Neotel’s offices, Joshi asked his staff to call up a company called Homix – the same company that Regiments paid R84-million, and who we now know to have been little more than a Gupta money cleaner.

Joshi was already acquainted with Homix because, earlier that year, Neotel paid it a R35-million “success fee” to close a different Transnet contract, the investigators reported.

That evening and twice the following morning, a Neotel manager met with someone from Homix. The two agreed that Neotel would pay Homix 2% of the Transnet contract plus R25-million later.

Like magic, the negotiations were back on track, and the R1.8-billion contract was signed a few days later.

But again?

Two months later, Transnet had Neotel in a bind once more, and again Singh featured.

In February 2015, Neotel and Homix signed a “business consultancy agreement” to finally give effect to the promise to throw Homix its pound of flesh: R36 million, or 2% of the contract.

Neotel took so long to finalise this because, unsurprisingly, its compliance staff were unhappy with the arrangement.

Come February 25, 2015 the company had not yet paid Homix.

That same day, it so happened Singh was back at the Dubai Oberoi for another two-night stay with Tony Gupta.

Coincidentally, on that day, Transnet failed to pay Neotel for its January and February services.

This was on the “express instruction” of Singh himself, Neotel staff told the investigators – and “precisely” because Neotel had not paid Homix.

The logjam was broken when Transnet paid Neotel and Neotel paid Homix in succession – while Singh and Tony Gupta were together in Dubai.

Transnet and Neotel’s relationship evidently improved because, the following month, Transnet ordered CCTV cameras worth R505-million from Neotel.

True to the pattern, Neotel’s subcontractor on the CCTV job then funnelled R15-million to The New Age, then the Guptas’ newspaper company.

Singh’s “girlfriend”

Two unconnected people told us how, during his Transnet days, Singh travelled to Dubai with a “girlfriend” who once worked at Transnet.

We have identified a woman matching this description in the #GuptaLeaks. She is not the same person as Singh’s wife.

The leaks showed this woman was listed to attend a Gupta company year-end party in Sandton with Singh as her “partner”.

Singh, who confirmed knowing her, asked us not to name her because he was concerned about her state of mind. Having spoken to her ourselves, we agreed. She declined to comment on the substantive issues.

The #GuptaLeaks reveal that Sahara Computers employed Singh’s “girlfriend” as a project manager in January 2015.

At Sahara, the woman’s monthly salary was R50 000. This was the seventeenth highest salary of 260 employees, equalling that of her line manager – in spite of an apparently non-descript role.

Other documents in the leaks show that Sahara lent her R400 000 later that year, filling the hole between her bank loan and the price tag on her second house, a R1.36-million property in Midrand.

Such generous treatment was uncharacteristic for Sahara, a usually stingy company. The suggestion is that, for some reason, the Guptas appeared to take a particularly special interest in caring for Singh’s alleged mistress.

In an email found in the leaks, the woman wrote to her line manager on February 25 to tell him: “I will be away from office tomorrow and Friday as Mr T Gupta has requested me to go to Dubai.”

Singh was already in Dubai. When she landed there the next day, her airport pickup, accommodation and meals were charged to his room.

Singh’s total invoice was for AED 18 310 (R60 000 then). Singh was recorded as being from the Gupta company Sahara Computers, and the bill was paid for with a Gupta employee’s credit card.

Feeling loco

There was one more thing about Singh’s February 2015 Dubai trip that raises questions.

His Oberoi stay was extended for three days. During this extra time, the Guptas arranged for one of China South Rail’s vice presidents to join him there, #GuptaLeaks emails show.

At that time CSR was still paying kickbacks to Gupta-linked companies for contracts awarded by Singh’s Transnet.

The confluence of these three people, orchestrated by the Guptas, is notable.

Two weeks later, the CSR vice president, Tony Gupta and Essa, the Guptas’ partner, travelled together on a chartered flight in India.

A few days after this, an email from the CSR vice president was recirculated among senior Gupta personnel. Attached to the email was a spreadsheet that reconciled kickbacks CSR owed and had already paid to JJ Trading on the three Transnet locomotive contracts.

Not long after, Essa and CSR signed a new kickback contract. According to this, the CSR kickbacks would be diverted from JJ Trading to an Essa company in Hong Kong.

Singh declined to explain.

Ructions at Eskom

Not two weeks after Singh returned from that Dubai trip, on March 12, 2015, the Eskom board suspended its CEO, finance director and two other executives.

Eskom’s then chairman said this was to make way for an investigation into Eskom’s poor power generation performance and related problems. He said: “There is nothing sinister happening. This is a fact-finding inquiry … which will last for three months.”

But many viewed the suspensions as a sham to get executives out of the way. Indeed, three of them soon resigned. President Jacob Zuma later apologised to the former CEO.

The upshot, however, was that the way was cleared for the tag team of Brian Molefe and Anoj Singh to take over at the public power utility – where the Guptas and their associates had battled to close coal and financial contracts.

Molefe was seconded to Eskom in March 2015 as acting CEO. Singh moved across, also in an acting role, a little later – but not before another trip to the Dubai Oberoi.

An Eskom briefing?

Singh flew back to Dubai on June 11, 2015. This was his sixth trip to be arranged by the Guptas.

As usual, Tony Gupta was there.

In the circumstances, it seems reasonable to ask: Was Singh there to receive his Eskom briefing?

One month later, Singh was seconded to Eskom – and two days after that, Tony Gupta, Ajay Gupta’s son Kamal, and Jacob Zuma’s son Duduzane were all present at the Oberoi.

The Guptas and Duduzane were about to benefit hugely under the new Eskom regime.

Just two weeks later, Molefe and Ajay Gupta spoke on the phone. This was first of 78 phone interactions between Molefe and the Guptas that were reported on by the former public protector in her “State of Capture” investigation.

“Anoj’s cigarette”

In the closing months of 2015, the Gupta partner Essa founded the financial advisory firm Trillian Capital Partners.

Recall that on at least two of Singh’s trips to the Dubai Oberoi, Essa was booked in alongside him, so the two were likely acquainted.

Earlier, the Guptas had tried to buy Regiments – the company that Transnet enriched through questionable payments on Singh’s watch and which had made dubious payments to Gupta front companies.

But Eric Wood’s partners at Regiments had turned the Guptas away.

So, Wood started moving his affairs to Essa’s new group, Trillian.

The details of Wood’s transfer to Trillian are entangled in controversy. Regiments’s remaining partners have claimed that both Transnet and Eskom paid Trillian for work their company had done.

Among the disputed Transnet payments was R94-million to Trillian that December, for work allegedly done by Regiments.

Even though Singh was at Eskom by then, people close to Transnet described such payments as “the cigarette that Anoj left burning in the ashtray when he left”.

Got a light?

Over at Eskom, with Singh and Molefe in place, Wood and Essa appeared to peel open a new pack of cigarettes.

Eskom and McKinsey signed an agreement in September 2015 to work on an Eskom corporate plan. Regiments worked directly on the plan alongside McKinsey, with the intention that the former would become the latter’s supplier development partner.

It was Singh who allegedly asked Regiments to help prepare Eskom’s corporate plan, according to a recent investigation by Advocate Geoff Budlender, conducted on the Trillian chair’s instruction.

McKinsey said the Regiments supplier development contract was never formalised.

But as Wood began to split away from Regiments to establish Trillian with Essa, McKinsey followed suit. It adopted Trillian as its intended supplier development partner on another big Eskom project, “the turnaround plan”.

Eskom has said Singh was not responsible for later signing a master services agreement for this plan, but one well-placed source said he was responsible for key negotiations.

McKinsey said: “Trillian ultimately failed McKinsey’s due diligence and the consultancy terminated its discussions with Trillian in March 2016.”

Eskom has admitted that it paid Trillian, however.

Wood and his staff, whether as Regiments or Trillian, also appeared to do other work at Eskom under Singh.

For example, senior Eskom staffers told us how, after Singh arrived, he started touting Regiments’ services for various jobs.

Their standard response was: “But we’ve already done that.” Or: “But we can do that ourselves.”

Then, the staffers alleged, Singh went quiet, and they learned indirectly that he had Wood doing jobs behind their backs.

In December 2015, Singh introduced Wood to Eskom’s insurers, who were covering a blown boiler, and Wood and his staff apparently advised Eskom on this project.

But some McKinsey staff appeared to feel that Wood and his colleagues were simply along for the ride or an “unwanted piece of baggage”, as one Trillian executive described it to Budlender.

For example, the Trillian executive recounted how, in a meeting, a McKinsey employee said: “Regardless of the [Trillian] resources allocated to projects, Trillian will still get their 30%”, and: “It doesn’t really matter as long as you get your percentage.”

Budlender concluded: “The Eskom contract price included 30% for Trillian, which from those [McKinsey] representatives’ point of view served little purpose other than to provide a substantial financial benefit to Trillian and its shareholders — and presumably to induce Eskom to award the contract to McKinsey”.

McKinsey replied that it took “supplier development and professional standards seriously, and that it would only ever consider entering into a supplier development partnership which would achieve impact and value for its clients, and build local capabilities in parallel”.

“Singh’s got our back”

Budlender also described an encounter between Wood and a Trillian executive, as recounted by her. She had fretted because a McKinsey due diligence concluded that Trillian was too politically exposed because of Essa’s relationship with the Guptas.

Budlender reported: “[She] said that she discussed this with Dr Wood in April 2016. He said that she was not to worry, as he would discuss the matter with Mr Anoj Singh of Eskom. He said that Trillian had responded to an Eskom request for proposals, and Mr Singh would appoint Trillian through that process.

“The obvious question which arises is how [Wood] could be so confident that Eskom would appoint Trillian.”

Eskom has admitted to paying R495-million to Trillian without contracts. We understand the true figure to be nearly R600-million.

Trillian has denied wrongdoing and said it “delivered a high standard of work to its clients”.

Optimum circumstances

Another well-told story, involving Singh and the Guptas, is how, over 2015 and early 2016, Eskom sandwiched Glencore, the owner of Optimum Coal Holdings, between a gigantic fine for poor quality coal and a tough negotiating position on Optimum’s coal prices – all while the Guptas tried to buy Optimum’s mine and related assets.

The former public protector chronicled this in her “State of Capture” report.

She showed how Eskom CEO Molefe and mines minister Mosebenzi Zwane were in close contact with the Guptas while putting the squeeze on Glencore.

Singh showed his hand a few times.

He provided a boost to the Gupta balance sheets when, late in December 2015 – when most of his staffers were on holiday – he arranged a R1.6-billion Eskom guarantee against the Guptas’ future coal supplies.

An insider explained to us that it was not unusual for Eskom to give such guarantees to help establish new mines and therefore secure future coal supplies.

What was questionable in this case (aside from Singh’s close and beneficial relationship with the Guptas), was that Optimum was already up and running. No capital investment was necessary to secure its coal supplies, they said.

Singh reaches out again

In “State of Capture”, the public protector analysed bank records and alleged that Trillian ultimately contributed R235-million towards the Guptas’ Optimum purchase consideration. Trillian denied this, although a recent report suggested a financial regulator has corroborated the public protector’s finding.

Much of Trillian’s money was presumably derived from Eskom and Transnet payments, made under Singh’s watch. But at least one invoice, for R30.6-million, was sent directly to Singh on April 14, 2016 – the same day that the Guptas’ Tegeta Exploration and Resources had to pay R2.1-billion for Optimum.

The Guptas were struggling to come up with the cash, so this payment may have been urgent for them.

The invoice was stamped “paid” on the same day that Singh received it.

At the same time, the Guptas were battling to come up with the last R600-million they needed to close the deal.

The banks would not help, and Eskom’s board tender committee held an eleventh-hour meeting and agreed that Eskom would prepay the Guptas R659-million for coal to be provided in the future.

Singh’s job included making sure the Guptas’ coal was not overpriced. Treasury investigators have complained that it was and that Singh failed to do a proper due-diligence, while accepting gifts from the Guptas in the form of the Oberoi stays.

In a recent report, they said an investigation was needed into whether Singh accepted “gratuities” to improperly influence his decisions.

The Guptas immediately used Eskom’s cash to buy Optimum.

Eskom has countered that the coal was fairly priced, that it was supplied and that Tegeta offered shares as security.

Eskom also said it urgently needed the coal to avert load shedding – yet, just two weeks earlier, public enterprises minister Lynne Brown told parliament: “Load shedding has become a thing of the past… The group chief executive officer, Brian Molefe, has assured me that there is no prognosis for load shedding over the winter months,”

Singh and the “state capture year-end party”

In December and January 2015, the Guptas invited a long list of officials, politicians and fixers to join them at the Oberoi.

Over a few weeks, they were joined by Duduzane Zuma, former finance minister Des van Rooyen (he had been appointed and fired a few days before arriving in Dubai), Free State Premier Ace Magashule’s sons, arms deal and Gupta fixer Fana Hlongwana, then deputy minister of public service and administration Ayanda Dlodlo (Hlongwana paid for himself and Dlodlo), public enterprises minister Lynne Brown’s allegedly powerful personal assistant, Denel chairman Dan Mantsha and Eskom’s group executive for generation, Matshela Koko.

Sars commissioner Tom Moyane also happened to be in town, according to news reports. But this was purely coincidental, he said.

Singh was there too.

Most of the people listed have been linked to benefits that the Guptas and their partners derived from the state.

And given that President Jacob Zuma had just attempted (but failed) to install a Gupta friend to the finance ministry, it is tempting to view the Oberoi gathering as a “state capture year-end party” – albeit with the finance minister glitch.

Singh’s attendance was significant given the events then playing out at Eskom involving Regiments, Trillian and the Optimum coal deal.

“The overlord”

On the morning after Eskom’s results presentation in July this year, Singh appeared on the TV talk showMorning Live.

The host, Peter Ndoro, asked Singh about his relationship with the Guptas and his trips to Dubai.

Singh ducked: “As I indicated yesterday, there is a document that I am currently preparing that will reveal the nature of the trips…”

Ndoro interrupted: “But Anoj, this isn’t brain surgery. You either went or you didn’t. Did you go?”

“No. I mean, yes, I did.”

“Did the Guptas pay for it?”

“No they didn’t.”

“But they didn’t give you any gifts whatsoever?”

“No.”

“So what is your relationship with the Guptas?”

“Well I think it’s like any other South African business person. I know them. I’ve been with them. I’ve met them, by and large as a result of the The New Age breakfasts, so ja.”

“So nothing unusual is going to come up in these emails to suggest that an impropriety or a relationship that is inappropriate between someone who is doing work for Transnet and then the CFO… Because you should have distanced yourself a little bit more once they had contracts with you, right?”

Anoj blinked hard, then screwed up his face thoughtfully: “Well if you look at the Transnet environment, I don’t think there was any contracts with Sahara that Transnet had entered into.”

Nobody said there were.

Singh continued: “Maybe on the Eskom side a bit more diligence would have been required. And the emails currently paint a relatively… a picture, and I think that’s the reason for the document being prepared to give perspective in terms of what the actual reality was.”

By then, Singh looked as if he felt a little hot under the collar.

Leaked emails show beyond doubt that Gupta employees arranged seven bookings at the Oberoi for Singh. They received his invoices, haggled over his rates and, in four cases, we have evidence that they paid using company credit cards.

The invoices included Singh’s numerous massages, airport limo pickups, meals and his alleged mistress’s charges, in one instance.

Once, an Oberoi staffer wrote to a Gupta employee: “Please note that with approval of Mr Gupta we also charged the credit card which you provided to us for Mr Singh charges.”

On another occasion, one Gupta employee told another to “please swipe the card for all charges” against Singh’s expenses.

And after another trip, a Gupta employee sent Singh’s Oberoi bill to Tony Gupta who responded: “Ok.”

In response to our long list of written questions, Singh conceded that, “with regard to procurement, the buck does stop with me”.

And: “With the benefit of hindsight and new facts (assuming they are correct) – presented by amaBhungane and other journalists – which I was not aware of at the time, these transactions could look suspicious and may very well be irregular,” he said.

But he thinks journalists are treating him unfairly.

“What has been distressing for me,” he said, “are speculative reports about my role in alleged corruption, concluded through largely speculative reporting written in a pointed way to substantiate the ‘state capture’ narrative. As if to say that I am some overlord that wields a magic pen and blank a cheque book at will.”

We could not have phrased it better.

* This story was edited after publication to correct the circumstances of McKinsey’s relationship with Regiments and Trillian at Eskom and to include extended comment from McKinsey.

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With €22-billion (about R330-billion) in revenue last year, German software multinational SAP should have all the expertise it needs to close major deals.

Instead, the #GuptaLeaks and related information show, the world’s third largest software company is not above calling in help from the politically connected, risking contravention of international anti-bribery laws.

AmaBhungane and Scorpio can reveal that in August 2015, SAP signed a “sales commission agreement” with a small Gupta-controlled company that specialises in selling 3D printers.

The terms suggest a thinly disguised kickback arrangement: If the Gupta company were the “effective cause” of SAP landing a Transnet contract worth R100-million or more, it would get 10%.

In the year to follow, SAP paid the company, CAD House, a whopping R99.9-million, suggesting SAP used the Gupta influence network to drive sales of a billion rand to Transnet and other state-owned companies.

SAP denies it paid kickbacks or was party to laundering the payments, arguing that CAD House had “the necessary skills in terms of positioning our solution” and was paid a sales commission for acting as “an extension of the sales force”.

But there are factors suggesting that SAP’s denial does not hold water: There is no evidence that CAD House had any experience marketing or selling SAP software. And CAD House appears to have been used as a front, both to distance the transaction from the Guptas and to launder the proceeds to them.

Neither CAD House nor the Gupta family responded to detailed questions.

Strategic customer

In 2014, Transnet was considered so key to SAP’s business that it was defined as a “strategic customer” – a designation given to just 300 out of 197,000 SAP customers worldwide, according to an SAP presentation found in the #GuptaLeaks.

Despite its special relationship, SAP was seemingly having trouble closing deals with Transnet and turned to the Guptas for help, the trove shows.

CAD House, which specialises in selling 3D printers, is not widely known to be part of the Gupta empire. At the time it was, on paper, half owned by Santosh Choubey, a key Gupta lieutenant employed by their Sahara Systems.

Minutes and other #GuptaLeaks records show, however, that CAD House was managed as a subsidiary of the Sahara group – indicating that beneficial ownership rested with the Guptas themselves.

In an interview, SAP South Africa chief financial officer Deena Pillay claimed that CAD House was no different to other sales agents SAP uses. “They’re small guys who would go out there, identify business and come to SAP with that opportunity. It’s a lever available to SAP to sell its software… We’ve got a sales force that we employ, so these are the agents on the ground… They are an extension of the sales force.”

In SAP’s world, commission agreements are not unusual. Except in this case Transnet was already a client of SAP and the commission agreement with CAD House made it clear SAP was not so much hiring a sales agent to market a product to Transnet as a fixer to clinch the deal.

The commission agreement was signed on 20 August 2015 by Pillay and another senior SAP executive. It promised CAD House 10% if CAD House was the “effective cause” of Transnet signing a R100-million-plus deal with SAP.

CAD House’s “main purpose”, it specified, “is to assist [SAP] in obtaining Customer consent to the Customer Contract and Customer’s requisite signatures to such agreement”.

Due diligence

SAP’s Pillay told us that an “external reputable company” did a “rigorous due diligence” on CAD House before the agreement was signed. Pillay’s colleague Candice Govender, who is SAP South Africa head of legal, confirmed that SAP was aware CAD House was connected to Sahara, but found “no red flags”.

Yet, by the time SAP signed the commission agreement in August 2015, the red flags were in plain sight.

Three weeks earlier, amaBhungane and the Mail & Guardian had revealed how telecoms firm Neotel agreed to pay letterbox company Homix R104-million in what were also termed “commissions” – clearly kickbacks – to land Transnet contracts.

Our exposé at the time showed that a Gupta man was behind Homix. Immediately after the exposé, Neotel’s chief executive and chief financial officers went on “special leave”, ultimately to lose their jobs.

• Read ‘Kickback’ scandal engulfs Transnet here

Two possibilities present themselves: Either SAP ignored the obvious red flags about the Guptas’ alleged involvement as fixers at Transnet, or it signed up for exactly the same service.

In a settlement with the US Securities and Exchange Commission last year, SAP agreed to pay a $3.9-million fine after a senior SAP official paid bribes for state business in Panama via a local partner.

The SEC had jurisdiction because of SAP’s secondary listing on the New York Stock Exchange.

The road to closure

Even for questionable commission agreements, 10% appears to be high. One industry insider put the usual “fixer” fee at closer to two or three percent. With the Neotel deals, Homix was to receive roughly 5% of the roughly R2-billion Transnet contract value.

But SAP not only wanted a Transnet deal worth a minimum of R100-million, it wanted it signed within just one month.

In an attached timeline of deliverables, referred to in the commission agreement as the “Road to Closure”, CAD House and Choubey were expected to secure a meeting with Transnet chief financial officer Garry Pita within just three days to “position the financial benefit” of SAP’s proposal.

After that it was not a sales effort, but one simply of getting Pita and Transnet to give the necessary approvals. The timeline provided that Pita would have the required R100-million-plus “budget reallocated for capital approval” only a week later.

By 21 September 2015, a month after SAP signed the commission agreement, CAD House was expected to “fast-track and attempt to obtain contract signature” from Pita and Transnet’s chief information officer – although it had leeway until the end of December still to qualify for the commission.

While there is scant information in the agreement about how CAD House would work such a miracle, the agreement – in common with many commission contracts – contained extensive anti-bribery clauses, making CAD House promise that it would not pay any money in turn to government, state-owned company or party officials.

But the circumstances suggest this was little more than a fig leaf.

Fronting for the Guptas

The evidence suggests that CAD House was interposed as a front to avoid exactly the kind of red flags that the Guptas as politically connected persons would have raised during a due diligence.

For a company with a turnover of less than R20-million and struggling to make any profit at all, the prospect of millions in commission should have been a major development.

Yet, #GuptaLeaks minutes of monthly CAD House meetings straddling the date of the commission agreement make no mention of the expected windfall. The meetings, at Gupta holding company Oakbay Investment’s Sandton offices, were attended by both Sahara and CAD House officials and discussed revenue-generating proposals for the latter.

A CAD House budget signed off in February 2016 – six months after the commission agreement was signed and shortly before SAP’s payments were to start rolling in – made no mention of the income either.

As we shall see, this was with good reason: SAP’s payments were not to stay with CAD House, but flow straight out to other Gupta companies.

Although SAP vehemently defended the decision to hire CAD House, Pillay and Govender seemed unable to explain why a company that sells 3D printers was an ideal partner for a complex software deal.

“We were doing a proof of concept and CAD House was an existing vendor at Transnet and we were looking at doing 3D models for these guys to show them the value and the benefit of using our solution,” Pillay told us.

When pushed for further detail of what SAP product required it to be modeled in 3D, Pillay said: “[The deal] was about Transnet in terms of the rail infrastructure, the way the operations work, the yards, the trains – all of that these guys were able to do the necessary 3D modelling as well as being able to position the SAP solution.”

When we pointed out that CAD House’s speciality is selling printers that make physical 3D models, Govender deflected: “At the end of the day they [CAD House] were vetted internally and externally; SAP was happy that they added value; [Transnet] was happy that they added value… Look, you have the CFO and SAP head of legal in front of you… If you need more technical detail you don’t have the right people in front of you.”

There are compelling reasons to be sceptical of SAP’s explanation:

One, Pillay signed the commission agreement on behalf of SAP and would surely have been privy to why SAP was giving away 10% of a minimum R100-million deal.

Two, If SAP honestly did want plastic models of its software solution it could have bought them at a fraction of the cost.

And three, despite Pillay maintaining that SAP engaged CAD House because of its “existing relationship [and] understanding the processes within Transnet”, Transnet denied it had any relationship with CAD House whatsoever.

Pita, the Transnet chief financial officer and “Road to Closure” target of SAP and CAD House’s lobbying efforts, wrote in reply to our questions: “According to our records, Transnet has not conducted business with CAD House. I have never heard of CAD House or dealt with them, nor have I had any discussions with a Mr Choubey about them.

“I have never been approached by CAD House or Mr Choubey to discuss Transnet’s contract with SAP or SAP’s services and products. I have not met with any third party to discuss contracts between Transnet and SAP.”

All in all, a more plausible explanation for the payments to CAD House may be that SAP willingly entered into a kickback agreement where both parties knew the Guptas, not CAD House, were to receive SAP’s millions and use their politically-derived influence to secure business for SAP. This is supported by what happened in the run-up to the deal.

The start of a beautiful friendship

The #GuptaLeaks show that Lawrence Kandaswami, SAP South Africa’s managing director, was the software multinational’s key contact with the Guptas.

As far back as 2014, when he was still SAP’s account director responsible for Transnet, Kandaswami exchanged emails with Choubey, who used his Sahara Systems email address.

At the time, SAP was trying to close a separate deal with Transnet to buy SAP Hana, a database management product.

A day after meeting with Transnet, Kandaswami forwarded Choubey the SAP presentation marked “strictly confidential”, detailing the proposed deal.

Kandaswami’s message read: “This is to prompt movement on the opportunity.” Choubey immediately forwarded the email to Salim Essa, with a note saying: “Sir – FYI – Supporting for Hana from SAP.”

Essa, a key Gupta lieutenant, has often been the family’s most direct point of contact at Transnet and Eskom.

The #GuptaLeaks do not show what Essa did after receiving Kandaswami’s email but Transnet confirmed that it agreed to go ahead with the proposed SAP Hana deal in late 2014.

By February 2015, Kandaswami had been promoted to SAP South Africa’s head of public sector, according to his LinkedIn profile. Both Transnet and Eskom’s accounts were now under his purview.

There are indications that a similar role was played at Eskom too.

On 17 February 2016, the #GuptaLeaks show, Choubey scheduled a meeting between Sahara and SAP. Two weeks later, on 2 March, Kandaswami emailed Eskom chief financial officer Anoj Singh, head of procurement Edwin Mabelane and head of generation Matshela Koko about an urgent deal for Eskom to acquire SAP Hana.

The offer would expire, he warned, at the end of March unless Eskom seized the opportunity.

In a pattern that has now become familiar, Kandaswami almost immediately forwarded this email to Choubey, who forwarded it to one of the Gupta brothers’ adult children.

Eskom spokesperson Khulu Phasiwe confirmed that Eskom signed two contracts with SAP during 2015 and 2016, but declined to provide any further detail, citing a confidentiality agreement signed with SAP.

Shortly after these exchanges took place, Kandaswami was promoted to managing director for SAP South Africa.

R99.9m payday

Following the signing of the Transnet commission agreement, the money started flowing to CAD House – and straight out again.

The first SAP payment we know about landed in CAD House’s bank account in April 2016. The R17-million did not stay there long; on the same day R2-million was transferred out to Sahara Computers and R2.3-million to an obscure Eastern Cape company whose owner we have been unable to trace.

Within five days another R10-million was transferred out: R9-million to Sahara Computers and a million to Baroda, the Guptas’ bank of choice.

A similar pattern was repeated that July when R9.2-million came in from SAP. Within two days, R7.7-million bounced to Sahara Systems and R1.1-million to the Eastern Cape company.

In December that year, a massive R73.7-million rolled in from SAP. Within a fortnight, R71.1-million had gone out to three companies in the Sahara orbit: Cutting Edge, Futureteq and Sahara Systems.

All in all, we identified R99.9-million in SAP payments of which only R5.7-million did not flow straight out.

The amount appears not to relate only to the R100-million minimum Transnet contract that was the subject of the commission agreement we know about. Pillay and Govender confirmed that SAP paid CAD House in respect of “other customers” too, but refused to give details, citing client confidentiality.

This pattern, of money being cycled through Gupta-controlled accounts at a rate that defies all commercial reason, has become familiar through the #GuptaLeaks.

When we put it to SAP that it may have become party to a money laundering scheme by contracting with CAD House, Govender objected strongly, saying: “We are not aware of any payments being made to Sahara or anybody else. Our contract is with CAD House.”

Pillay added: “What the partner does with their money I have no control over. If you say these guys pass the money up the line, I have no control over that, I have no visibility over that.”

SAP may end up having to explain that to the Securities and Exchange Commission too, which will have SAP on a watch list after last year’s settlement over bribery in Panama. In that matter, the SEC found that SAP “failed to devise and maintain an adequate system of internal accounting controls” to prevent bribery.

Transnet did not respond to questions other than to mirror Pita’s comments, saying it had “never conducted any business with CAD House. The company is not aware of CAD House’s involvement with SAP or Mr Choubey”.

Detailed questions were sent to SAP’s Kandaswami and Sahara’s Choubey, but neither responded.

In a written statement, Govender said: “SAP is dedicated to conducting every aspect of our business responsibly and in accordance with the highest legal standards… With regard to CAD House and SAP SA Business Development Partners in general, please note that any selected SMMEs and/or partners are verified, both in terms of SAP’s rigorous internal forensic procedure as well as by an independent forensic law firm.”

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In 2015, as Brian Molefe and his key lieutenant Anoj Singh moved across to Eskom, the Guptas turned their attention to the power utility’s R40-billion primary energy budget.

The feast was about to begin.

May 2014-September 2014: The Negotiations

To understand how the Guptas captured Eskom, one needs to go back to May 2014, when a company called Goldridge came looking for an Eskom coal contract.

At the time, the Guptas were well-known, having landed both literally and in the public discourse at Waterkloof airforce base in 2013. However, the Guptas’ fledgling mining companies, Goldridge and Tegeta, were still unknown entities.

Minutes from the meeting held at Megawatt Park on May 9 2014 show that there was some confusion about who actually owned their Brakfontein coal mine – Tegeta or another Gupta-owned mining company, Goldridge. It was Tegeta.

It was Ayanda Nteta, now Eskom’s acting head of fuel sourcing, who pointed out during that first meeting that “Eskom prefers dealing with companies that are 50%+1 black-owned” which Tegeta was not.

At the time, almost 50% of Tegeta was owned by Oakbay Investments, and indirectly Gupta brothers Atul and Ajay and their wives Chetali and Shivani.

Another 21.5% was owned by Bhatia International, a controversial Indian coal company that only a few months before had been charged by India’s Central Bureau of Investigations with allegedly supplying substandard quality coal to India’s version of Eskom, complete with forged lab results.

Only the remaining 30%, held by Aerohaven Trading and Oakbay chief executive Ronica Ragavan, was considered black-owned.

Throughout 2014, Eskom officials did not seem overly interested in the coal resources Tegeta had to offer, as minutes of various Eskom meetings reveal. Goldridge had offered the same resource to Eskom in 2012, which Eskom declined.

Still Eskom’s coal procurement officials agreed to play along and do another round of tests. The results were not promising: only a small seam of coal from Brakfontein mine known as “seam 4 lower” was considered suitable.

At a meeting in September 2014, Tegeta “asked if there is any way Eskom can accommodate them as they are only looking to supply [a] small amount of coal” from their stockpile.

Nteta responded that “the power stations that could potentially take coal from Brakfontein have all their needs met for this financial year”. Tegeta persisted, asking about “the possibility of moving some coal in the interim”. Eskom did not budge.

But the Guptas were not going to take no for an answer.

November 2014-January 2015: Enter the Gupta-controlled Board

AmaBhungane understands from sources familiar with the negotiations that Eskom’s coal procurement officials held out as long as they could, but by January 2015, they were receiving pressure “from above” to sign a contract with the Gupta-owned mine.

By this point, Eskom also had a new board. In December 2014, public enterprises minister Lynne Brown replaced eight members of Eskom’s board.

Six out of the eight new appointees – Ben Ngubane, Mark Pamensky, Nazia Carrim, Maria Cassim, Devapushupum Naidoo and Romeo Khumalo – were either family of or had business ties to the Guptas and their business partners, according to the Public Protector’s report.

On January 23 2015, Tegeta came with a new offer. Although Eskom tests found that Brakfontein’s blended product (seam 4 upper and lower) was unsuitable, Tegeta offered to supply the blended product at R15/GJ.

Eskom told Tegeta that the price was too high and to come back with a new offer.
Instead of lowering their price, Tegeta came back a week later with reasons why it needed a higher price.

Minutes from the meeting show that Tegeta’s chief executive Ravindra Nath told Eskom “they have increased their BBBEE ownership and a higher price would be needed to finance the BBBEE partners”.

This was not true – Tegeta only acquired new black shareholders six months later when Salim Essa and Duduzane Zuma were brought on board. Minutes show that Nath also tried to argue that “changes in environmental law as well as royalties justified the need for a higher price”.

Eventually, Eskom agreed to accept Tegeta’s offer to supply 65,000 tons per month of blended coal for five years at R13.50/GJ, roughly R277/ton.

It is unlikely that Eskom officials were aware that around the same time, questions about Brakfontein’s coal were being raised in court.

As part of a case brought by a former mining contractor against Goldridge, an expert geology report was submitted to court that concluded that “…Brakfontein coal deposit could never support a mine of economic importance”.

“Theoretically the poor quality [coal] can be mixed with another coal supply source to produce an acceptable Eskom quality coal feed, but [this] is a pipe dream,” geologist Gerhard Esterhuizen wrote in his report.

The pipe dream was about to be put to the test.

February 2015-March 2015: The Guptas demand more

The Guptas had finally been promised their first Eskom coal contract, but it is apparent they were not satisfied with their relatively modest contract of 65,000 tons/month.

Just four days after Eskom relented and agreed to take Brakfontein’s coal, Tegeta’s chief executive wrote back to Eskom’s general manager of fuel sourcing, Johann Bester, with a new request:

• Increase the amount of coal supplied from 65,000 tons a month to 100,000 tons a month, starting in October,
• Increase the contract from five years to 10 years, and
• Allow Tegeta a grace period of three years before it needed to become 50%+1 black-owned.

Minutes show that during negotiations, Eskom had requested first right of refusal to coal from the as-yet-unopened part of the coal mine known as Brakfontein Extension.  Tegeta was now seeking to convert Eskom’s first-right-of-refusal into a cold, hard contract.

Bester sat on the request for a few days and then wrote back on February 12:

• Eskom would still only agree to take 65,000 tons a month; come October Tegeta could offer Eskom another 35,000 tons a month from Brakfontein Extension, but it would be up to Eskom to decide if it wanted or needed the coal.
• Eskom would still only agree to a contract of five years but there would be an option to extend for another five years when the contract ran out.
• On the BEE requirements, Eskom would agree to a grace period, as it had done with other suppliers, provided that Tegeta remained 50%+1 black-owned for rest of the contract.

Considering that Tegeta’s first coal contract was still not signed – a contract that was awarded without a competitive bidding process – this was an unusually generous concession from Eskom.Tegeta was not happy though.

Nath immediately forwarded Eskom’s letter to Tony Gupta and Salim Essa, saying:

I am not very happy with the wording “Eskom shall [have] an option to enter into an offtake agreement for the additional coal”. Further, ‘option to extend for further five years’. This shows that there is no commitment on the part of Eskom.

It is worth taking a minute to consider this – Tegeta had already used their connections to pressure Eskom to take low quality coal. Now, by refusing to more than triple the contract from roughly R1-billion to R3.8-billion on the basis of a single letter, Eskom was deemed to be showing “no commitment”.

Commitment to what, exactly?

The reply that came from Gupta and Essa is not included in the #GuptaLeaks. But the following day, an emboldened Tegeta wrote back, this time to Nteta, who reported to Bester.

“Kindly recollect our discussions in which I mentioned that we want a 10 years’ contract to satisfy our funders as the loan period is going to be more than 7 years… for the sustainability of the mines we request you to kindly consider the following changes favourably.”

Nath included his proposed changes to the wording of the contract, which would include a 10-year contract and a guaranteed 100,000 tons a month, starting in October.

At this stage, there’s clear evidence that Eskom was aware that Tegeta’s Brakfontein coal mine did not represent the best value-for-money for Majuba power station.

A list of coal suppliers disclosed in the unredacted version of the Denton’s Report shows that in 2015, Majuba power station had seven suppliers – Tegeta delivered the lowest quality coal yet commanded the highest rand per gigajoule rate.

For example, while Tegeta scored R13.50 per GJ, another Delmas-based mine, Kuyasa Mining, was paid R10.41 per GJ. And while Kuyasa as well as four other Majuba suppliers reached Eskom’s target of being 50%+1 black-owned, Tegeta had still not concluded their promised BEE deal.

It is not clear from the #GuptaLeaks what happened over the next two weeks, but on March 9, Eskom relented – Nteta wrote back to Tegeta confirming that Eskom would take 113,000 tons of coal from Brakfontein, starting in October 2015.

The following day, Eskom and Tegeta signed the Brakfontein contract worth R3.8-billion over 10 years.

An unexplained footnote to this saga is that the day after the Brakfontein contract was signed, Eskom’s board suspended four senior executives, including chief executive Tshediso Matona and Matshela Koko, group executive for commercial and technology.

Of the four suspended, only Koko would eventually be reinstated.

March 2015: Problems emerge

Tegeta was due to start delivering coal on 1 April 2015, provided that its coal first passed a combustion test at Eskom’s Research, Testing and Development lab in Germiston – this was not as simple as it sounds since Tegeta’s blended coal had failed to pass two previous tests.

The results of the combustion test, conducted by Eskom’s special-purpose built lab, were delivered two days after the contract was signed. The report, which forms part of an ongoing investigation by Treasury, concluded that Brakfontein’s coal was “not suitable for all power stations”.

Of the 14 power stations in Eskom’s fleet, the coal was considered “not acceptable” for 10, while four were considered “marginal”. Majuba, where Brakfontein’s coal was contracted to go, was one of the power stations marked “not acceptable”.

In particular, the report warned that Tegeta’s plan to blend higher and lower quality coal was risky, saying: “…producing a consistent blend … is difficult to maintain. This can result [in] producing a blend with a hardgrove [index] which is worse than the one analysed, and also surpassing the … ash and CV rejection limit.”

In other words, the coal from Brakfontein mine was too marginal, the risk of the coal quality dipping below the rejection limit on a regular basis too high.

At this point, Eskom should have told Tegeta the deal was off. Instead, Eskom ignored its own technical experts and okayed Tegeta to start delivering coal to Majuba.

March 2015: Ben’s Board

By this point, the Guptas were also starting to throw their weight around with the Eskom board.

On March 19, Nazeem Howa, then-chief executive of Oakbay Investments, sent Salim Essa a statement that he had drafted for the Eskom board to send out announcing that it had decided to relieve chairman Zola Tsotsi of his duties.

In the email Howa refers to the statement as “a first draft”, saying to Essa: “Let me have your thoughts and I will work to polish further.”

Although Tsotsi would only step down two weeks later, it appears the Guptas were not only given advanced warning that the Eskom chairman would resign, but had taken the liberty of drafting a statement for the new chairman, Ben Ngubane.

On Thursday, Tsotsi said he was “not surprised” that the Guptas were privy to information about his removal:

“I suspected my removal was orchestrated by them. In fact, the Guptas told me a couple of weeks before, at the State of the Nation Address [February 12], that if I would not co-operate with them that they will see to it that I am removed as they were the ones who made sure that I was retained as chairman.”

Tsotsi said that at the time he was not aware that his replacement, Ngubane, and several members of the Eskom board had connections to the Guptas.

The #GuptaLeaks show that Ngubane and Essa were already well-acquainted, being business partners in Gade Oil and Gas, a company that tried to gain oil concessions in Central African Republic in 2013.

Two weeks later, the day after Tsotsi resigned, Howa sent Essa an “amended version of the statement for Ngubane, “for your approval”.

The statement that Ngubane released on behalf of the Eskom board later that day differs substantially from Howa’s final draft, but Howa’s fingerprints are clear in a few of his sentences that survived.

One of Howa’s phrases that did not make it into the final statement was that the board “will not tolerate incompetence, tardiness, any dereliction of duty from any member of the Eskom team, saying:

“We know that there is no alternative but to implement several radical solutions.”

Things were about to get a lot more radical at Eskom.

April 2015-June 2015: Enter Molefe and Singh

With Eskom chief executive Tshediso Matona on suspension, Minister Brown announced that she would be moving Transnet chief executive Brian Molefe across to Eskom. Coming with him would be Transnet chief financial officer Anoj Singh.

Invoices show that Singh had already made four trips to Dubai by this point, where he stayed in the luxury Oberoi Hotel, enjoyed spa treatments and was chauffeured around in a limo – all paid for by the Guptas’ Sahara Computers.

Although there’s no record of Molefe visiting the Guptas in Dubai, the Public Protector’s State of Capture report detailed 58 phone calls between Molefe and Ajay Gupta starting soon after Molefe joined Eskom.

The arrival of Molefe and Singh at Eskom ushered in a new era for the Guptas’ mining ambitions.

When Tegeta started delivering coal to Eskom’s Majuba power station in April 2015 production was slow – just 54,041 tons in the first month – but deliveries soon ramped up and by July, Tegeta was delivering and being paid for more than 100,000 tons; far more than the 65,000 tons Eskom agreed to take for the first six months of the contract.

Considering that Tegeta had scored a 10-year contract without participating in a competitive bidding process, this was a major triumph.

But Tegeta now wanted more.

In a new proposal sent to Eskom in June, Tegeta proposed that come October, its mine would deliver 200,000 tons of coal to Eskom, up from the already inflated 113,000 tons agreed to in the contract.

Eskom agreed, provided that Tegeta’s coal passed the required qualify tests. However, as production volumes increased at Brakfontein mine so too did the problems.

A technical report commissioned by Treasury and based on documents from Eskom shows that in August 2015, 34% of Tegeta’s stockpiles were rejected because the quality did not meet Eskom’s specifications.

Eskom insists it did not pay Tegeta for stockpiles that were rejected, but the records provided to Treasury show that Tegeta was still paid for well over 65,000 tons of coal it was contracted to deliver – R35.3m for 122,617 tons in July, R33.2m for 112,207 tons in August, R42m for 139,386 tons in September.

August 2015: Problems emerge

By the end of August 2015, Eskom could not ignore the problems with Tegeta’s coal.

On August 31, Koko – who had recently been reinstated to his position as group executive of technology and commercial – suspended Tegeta’s contract as well as two independent laboratories that were testing Tegeta’s coal.

The suspension of its contract came at an inopportune time for Tegeta. Just three days before Tegeta had written to Eskom with yet another offer, this time to supply an additional 150,000 tons of coal a month – Tegeta would source the coal from other mines and blend it, not as a middleman per se, but a “value-adding trader”.

For most junior coal suppliers, the suspension of a coal contract would be a major crisis. Tegeta seemed undeterred. On September 4, Tegeta increased their offer to supply coal as a value-adding trader to 200,000 tons.

At the same time, Nath wrote back to Koko explaining that despite accredited independent laboratories rejecting numerous samples of being too high in sulphur, Tegeta’s own in-house tests found the sulphur levels to be acceptable.

There is no indication in the #GuptaLeaks that Tegeta sent the result of the in-house tests to Eskom. Despite this, Nath’s letter seems to have sufficed. The following day, Koko lifted Tegeta’s suspension “whilst [Eskom] continues its investigation”.

Koko would later claim in an interview that their investigation found that one of the labs was at fault, saying: “…We had conclusive proof that this lab was fabricating results … that is why we suspended them,” Koko told Carte Blanche in June 2016.

However, an October 2015 report by Dr Chris van Alphen, Eskom’s chief adviser on coal quality, lays the blame squarely on Tegeta and its apparent inability to produce a consistent blend of coal.

According to a technical report prepared for Treasury’s investigation, when three labs analysed what were supposed to be identical samples of Brakfontein’s coal from August 2015, the results varied so dramatically that one technician remarked: “They do not look like the same coals never mind the same samples.”

For Tegeta it was business as usual, but the episode also resulted in four Eskom employees being suspended including Dr Mark van der Riet, Eskom’s most senior coal scientist who was tasked with investigating the discrepancies in Brakfontein’s coal qualities.

Almost two years later, Van der Riet remains on suspension. After Van der Riet and his union representative approached the Labour Court, Eskom finally agreed to hold an internal disciplinary hearing later this month.

“If Mark’s matter is such a serious matter why has it taken more than a year for Eskom to deal with it? Eskom seems to be using delaying tactics, hoping the employee will eventually resign,” Numsa’s Bonny Nyangwa said on Wednesday.

Eskom’s official line is that Van der Riet’s 22-month suspension is not linked to his role in investigating Brakfontein’s coal qualities.

Nyangwa disputes this, and confirmed that Eskom added new charges against Van der Riet earlier this month: breaching Eskom’s confidentiality policy by allegedly forwarding information about the Brakfontein investigation to his personal email address.

September 2015: Tegeta ups the game

Even after Tegeta’s contract was reinstated, Brakfontein’s coal continued to periodically fail lab tests, according to Treasury’s technical report.

In September 2015, for instance, 38% of Tegeta’s stockpiles were rejected, most for having excessively high sulphur levels, the cause of toxic sulphur dioxide air pollution.

There’s no evidence that Eskom was deeply concerned by this development. Instead, starting October, Tegeta increased deliveries to Majuba power station to more than 200,000 tons a month.

Keep in mind that this was during summer, when Eskom’s coal requirements have always been lower. Despite this, Tegeta was now delivering three times what was originally agreed to in the January 2015 negotiations with Eskom.

For the next several months, Tegeta reaped the rewards despite there being no evidence that any other mines were given an opportunity to bid to supply extra coal to Majuba.

At the same time Tegeta was also pushing Eskom to agree to their long-standing proposal to become a “value-adding trader”. Finally, at the end of September, Eskom official Thabani Mashego pushed back.

In a tone that the Guptas must have been unused to hearing, Mashego told Tegeta chief executive Ravindra Nath in an email:

“Eskom will be going out on open enquiry to fulfil their coal shortfall requirements going forward. Tegeta is therefore advised to respond to such enquiries, which will be advertised in the print media and the Eskom Tender Bulletin shortly.”

Nath wrote back the next day, essentially instructing Eskom to sign the contract.

“[W]e have to advise that on the basis of the letter and the subsequent meeting thereafter we have already tied up the coal offtake and it is not possible to come out of it. We therefore request you to arrange for the contract in this regard.”

It is not clear whether Eskom capitulated and signed this contract – this is one of the many questions that Eskom chose not to answer. Either way, Tegeta did not need this off-take agreement – it was about to become a major coal supplier to Eskom.

April 2015-December 2015: Next Target: Optimum

It is worth taking a step back for a minute to understand how the Glencore-owned Optimum coal mine became a target in Tegeta’s rapidly expanding coal empire.

Hidden in the #GuptaLeaks is a letter addressed to Glencore’s chief executive Clinton Ephron. Dated April 13, the letter was from Dam Capital, representing the little-known Endulwini Consortium, and contained an offer to buy Optimum Coal as well as Optimum’s Richards Bay export allocation for $200-milllion.

“We have commenced putting together a consortium of South African investors, led by Black people, with an established presence in the mining industry,” the letter reads, “[t]he identity of whom will be disclosed as we reach an agreement that the assets are available for sale.”

No more is heard from Endulwini or Dam Capital in the cache of leaked emails, and it is not clear if the Guptas were the anonymous investors referred to in the letter.

What we do know from the Public Protector’s report is that in July, Glencore received an almost identical offer to buy Optimum Coal from KPMG representing an anonymous client.

When Glencore questioned KPMG it discovered the bid had come from Oakbay.

Glencore refuses to comment on the Dam Capital offer, and we know from the Public Protector’s report that it rejected the similar overtures by KPMG.

Soon though, Glencore was facing new problems from Eskom as newly appointed Eskom chief executive Brian Molefe took a hardline approach, refusing to renegotiate the price Eskom paid for Optimum’s coal.

At R150/ton Optimum was sinking deeper and deeper into financial trouble. In August, Glencore placed the mine in business rescue in a bid to stave off liquidation, but Molefe remained unmoved.

Instead it is alleged that Molefe and Eskom chairman Ben Ngubane tried to persuade mines’ minister Ngoako Ramatlhodi to cancel Glencore’s other mining rights in a bid to force Glencore to capitulate.

On August 7, after Optimum’s mining licence was briefly suspended and then reinstated by the Department of Mineral Resources, a Gupta lieutenant, Ashu Chawla, received an email from someone only identified as “Business Man” using the email address “infoportal1@zoho.com”.

Attached to the email was a letter Optimum’s business rescue practitioners had sent to Eskom’s senior executives regarding Optimum’s mining right suspension.

The letter itself is not particularly explosive, but what is apparent is that someone with access to confidential information in Eskom was leaking it to the Guptas.

“Business Man” features in the #GuptaLeaks again in November when Matshela Koko forwarded two emails from his private Yahoo email address to “Business Man”, both containing confidential Eskom information.

In one, Koko asks “Business Man” to pass the Eskom documents on to “the Boss” – the email was then forwarded to “Western”, another anonymous email address that appears to be a proxy for one of the Gupta brothers.

In the second email Koko passed on a sensitive legal opinion exposing how weak Eskom’s position was in their ongoing battle with Optimum Coal. Again, “Business Man” and “Western” passed these on to Chawla.

A day later, Koko sent a particularly vitriolic letter to the business rescue practitioners, threatening to review all of Glencore’s other Eskom contracts – it is not clear how, but the #GuptaLeaks show that Tony Gupta was given an advanced copy of Koko’s letter.

A few days later, the business rescue practitioners signed a term sheet with the Guptas, formally entering negotiations to sell Optimum Coal.

We can also see from the #GuptaLeaks that on December 2, when mines minister Mosebenzi Zwane failed to board his official flight from Zurich to Dubai, he was allegedly on board the Guptas’ Bombardier jet, ZS-OAK, along with Tony Gupta and Salim Essa.

The former Public Protector’s report concluded that Zwane had played a central role during the negotiations in Zurich where Glencore agreed to sell Optimum to the Guptas.

What her report was unable to explain however was how the minister got from Zurich to Dubai – from the #GuptaLeaks we now have evidence that Zwane spent the next two days in India with the Guptas before flying back to Dubai and catching his official flight back to Johannesburg.

December 2015: The R1.68-billion prepayment

By early December, the Guptas were finally about to get their hands on Optimum Coal.

Thanks to Koko, insisting at the last minute that Glencore sell the entire Optimum Coal Holdings portfolio, Tegeta would not only be buying the loss-making Optimum Coal Mine, but also Koornfontein Mines and a 5.5m-ton/year export allocation at Richard’s Bay.

Tegeta now needed to find a way to pay for it. The problem was that Tegeta would not be paying the R2.15-billion purchase price to Glencore, but to a consortium of three banks which had loaned money to Glencore during a period of several years.

On December 8, Tegeta chief executive Ravindra Nath met with First National Bank, Investec and Rand Merchant Bank and put a proposal on the table: Tegeta would settle an undisclosed portion of the debt now and the rest would be paid to banks in 11 monthly instalments.

The banks politely but firmly declined and told Tegeta they wanted the full debt settled.

Around the same time, Tegeta also called a meeting with Koko. We know about this meeting because it is referred to in a letter sent to Koko on December 9 and disclosed in the #GuptaLeaks.

Based on the letter we can deduce that Eskom agreed in principle to give Tegeta a massive R1.68-billion upfront payment for future coal deliveries from Optimum Coal.

It appears from the #GuptaLeaks that Tegeta wanted to use their yet-to-be acquired mine to secure a sizeable chunk of money from Eskom – money that could then be used to pay the purchase price of Optimum.

Tegeta appears to have been so confident of receiving the payment that Koko was requested “to kindly send us a written confirmation regarding the payment for supply of coal amounting to R1,680,000,000 (Rand one billion six hundred and eighty million)”.

Nath finished off his letter by attaching the Guptas’ lawyers bank details to the bottom of the page.

It is not clear from the #GuptaLeaks if Tegeta received the R1.68-billion prepayment it requested. On the same day Koko received the prepayment request, Zuma fired Nhlanhla Nene as finance minister, triggering the political equivalent of a nuclear bomb ripping through the markets.

By Monday 14 December, sanity had prevailed and the Guptas’ hand-picked finance minister Des van Rooyen was shifted out of Treasury.

It is possible that the entrance of Pravin Gordhan as finance minister put any plans of a R1.68-billion prepayment on hold. But the Optimum deal was by no means off the table.

On December 16, Eskom CFO Anoj Singh flew to Dubai – the trip, paid for by the Guptas, cost AED20454 (R71,610). In January, Koko followed suit, staying at the Oberoi Hotel for two nights at the Guptas’ expense.

The #GuptaLeaks provide no detail on whether Singh or Koko met with the Guptas during this time or what they spoke about if they did. However, based on the largesse that was about to flow in the Guptas’ direction, we should be deeply concerned by meetings such as these.

January 2016: A red-carpet welcome

Although Tegeta would only formally take ownership of Optimum Coal in April, from January 1, Tegeta was running the mine for its own profit or loss.

Tegeta was now supplying Majuba power station from their Brakfontein mine, Hendrina power station from Optimum, and Komati power station from Koornfontein mine.

The great mystery of the Guptas’ bid to grab Optimum was how they planned to turn a mine that was haemorrhaging R100-million a month and turn it into a profitable venture.

The assumption was that Eskom’s reluctance to renegotiate the price of R150/ton that Optimum received would fall away as soon as the Guptas took over the mine.

But Eskom’s refusal to renegotiate the price had become such a cornerstone of Eskom’s fight with Glencore that there was no way to change the price now.

The dilemma was quickly solved because by January, Eskom had conveniently cleared the way for Optimum to start supplying coal to Arnot power station in Mpumalanga.

In 2015, Eskom had taken the decision not to renew Exxaro’s cost-plus contract to supply Arnot as the price Eskom paid for the coal had become unsustainably high, sometimes exceeding R1,000/ton.

That decision may have made financial sense. What made less sense was Eskom’s decision to terminate a second Arnot contract, this time with Mafube, a joint venture between Exxaro and Anglo American that mines coal just north of the N12 highway and supplies it via a long conveyor belt system to Arnot power station.

Eskom’s Denton’s report shows that in July 2015, Mafube provided the cheapest coal on Eskom’s books at a fixed price of R132/ton. The coal was not great quality, but since 2004 the mine had delivered 1.18m tons a year to Arnot power station.

According to Denton’s report the contract was due to run until the end of 2023. Exxaro’s spokesperson Mzila Mthenjane will only say that the contract came to an end.

However, Exxaro’s own annual report refers to “Eskom’s decision to terminate the Mafube supply agreement”, and according to a source familiar with the operations, the contract was cancelled without reason in December 2015.

By the end of January, a steady stream of 30-ton coal trucks was running from Optimum mine to Arnot power station roughly 60km away.

And while Optimum received R150/ton for coal delivered to Hendrina power station, Optimum scored R470/ton for coal delivered to Arnot power station, excluding transport costs. The cost of transporting the coal – another R60/ton or R1,800/truck – was paid by Eskom.

Eskom maintains that the coal delivered to Arnot justified a higher price on the basis that the coal had a lower abrasiveness index – this version is disputed by numerous sources familiar with the on-the-ground operations.

Later, when demand for coal at Arnot rose, and Optimum no longer had enough coal to supply both contracts, Eskom appears to have obligingly reduced the amount of coal Optimum was required to deliver to Hendrina power station, freeing up additional coal for the more lucrative Arnot contract.

January 2016-February 2016: Brakfontein goes on sale

Around the same time, Tegeta announced it would sell Brakfontein mine with its Eskom contract to Shiva Uranium, a subsidiary of the Guptas’ listed company Oakbay Resources and Energy – Tegeta would transfer Brakfontein and all its contracts to Shiva and in exchange Tegeta would receive shares in Shiva worth R2.1-billion.

On February 24, Oakbay’s shareholders approved the deal, and Brakfontein became part of the newly formed Shiva Coal. However, even though the mine changed hands, Eskom kept paying Tegeta for the coal.

AmaBhungane discovered this after submitting a PAIA request to Eskom for a list of Eskom’s coal suppliers and their percentage of black ownership – the list we received in March this year did not include Oakbay or Shiva.

In terms of the Public Finance Management Act, Eskom has to pay the rightful owner of the coal it receives. However, Eskom’s own records show that Tegeta continued to receive payments for Brakfontein’s coal for months after the mine was sold.

Sources say that as of last month Tegeta was still receiving the payments for Brakfontein’s coal.

When we queried this with Eskom in a meeting in April, Ayanda Nteta, the outspoken executive from the 2014 meetings, told us: “In terms of Brakfontein, my understanding is that Shiva Uranium has bought in shares in terms of Brakfontein so there was a flow through… The contract we have is with Tegeta, that’s why … Shiva wouldn’t be listed.”

In fact, Shiva did not buy the shares in Brakfontein or Tegeta. Instead the circular is explicit that Shiva bought the mine with its contract. Shiva is now the rightful owner of the coal, but instead Eskom is continuing to pay Tegeta.

“We will look into that. Our legal people understand in terms of the flow through and who bought the shares,” Nteta said.

Eskom has failed to respond to any follow-up questions on the issue. Questions were also sent to Oakbay Resources & Energy two weeks ago – chairman George van der Merwe responded last week confirming that Shiva had bought the Brakfontein mine with its contract but offered no explanation for why Tegeta was still being paid.

February 2016: Briefly empowered, always empowered

It is hard to imagine why a JSE-listed company like Oakbay would allow Eskom to pay another company for its coal. The answer may lie in Eskom’s requirement that its coal suppliers be 50%+1 black-owned.

“We have a shareholder compact which targets us to spend at least 40% of our total procurement on black suppliers. Coal being the biggest commodity, the more we can do it on coal the easier it gets,” Edwin Mabelane, Eskom’s head of procurement, told amaBhungane.

When the original Brakfontein contract was signed in 2015, it contained a suspensive condition – Tegeta needed to reach Eskom’s black empowerment target of 50%+1 by 2018 and remain empowered for the rest of the contract.

“In terms of [Tegeta’s] contract, they were given a certain period; we said to them, ‘You have a [10-year] contract, you need to move to black-owned within a certain amount of time,’” Nteta confirmed.

In November 2015, just before Tegeta bought Optimum Coal, Tegeta reached that target when Duduzane Zuma and Salim Essa became shareholders through Elgasolve and Mabengela Investments respectively.

As a result, Tegeta’s black-owned shareholders own 775 shares versus the 774 shares held by Oakbay and several off-shore companies – through a byzantine share structure the majority of control still rests with members of the Gupta family and two Gupta-controlled companies registered in Dubai.

However, this raises an interesting question: if Shiva takes possession of the contract as it is legally entitled to do, would Shiva be required to become 50%+1 black-owned by next year?

And if Shiva failed to become majority black-owned, would Eskom be entitled to cancel the contract even though it is still scheduled to run until 2025?

In other words, for the Brakfontein contract, does once empowered (albeit briefly) mean always empowered?

Currently, Shiva is 41% black-owned thanks to Tegeta and another Duduzane Zuma-owned company, Islandsite Investments 255. However, due to the complicated share structure, more than 50% of the Shiva is owned by members of the Gupta family.

April 2016: Eskom asks Treasury for even more

It has been well-established that throughout 2016, Tegeta raked in almost R1-billion from their “emergency” contract supplying coal to Arnot power station.

Unfortunately, the #GuptaLeaks provide no further detail on the Guptas’ dealings with Eskom beyond the early negotiations in 2016.

In April 2016, Eskom delivered on part of the prepayment Koko promised when, in a late-night special tender committee meeting, Eskom agreed to prepay Tegeta R587-million for coal. Eskom’s decision came just hours after the consortium of banks refused to provide Tegeta with a R600-million bridging loan.

In August, Treasury refused Eskom’s request to extend Tegeta’s contract to supply Arnot power station by another R855-million over six months.

However, Treasury gave conditional approval to Eskom to sign a R7-billion expansion to the Koornfontein contract to supply Komati power station for the next seven years, provided that there were no other potential suppliers. Eskom appears to have ignored this condition and handed the contract to Tegeta two weeks later.

By this point, Brakfontein’s deliveries to Majuba power station were back down to the contractual 113,000 tons of coal a month.

A few days later, Eskom returned to Treasury with a new request – Brakfontein had more coal to offer and Eskom wanted to extend the contract by another R2.9-billion.

During the interview in April this year, Eskom explained that the request for a R2.9-billion expansion of the Brakfontein contract was as a result of Eskom’s earlier agreement from June 2015 to increase deliveries to Majuba power station to 200,000 tons of coal a month.

“What Eskom decided to do was [to be] more proactive – because actually it was agreed on prior and we should have just continued – we opted to inform National Treasury to say, ‘By the way we were supposed to get [a certain number of tons] and this [additional amount] was supposed to kick in in October. We would like to now exercise this requirement,’” Nteta said.

What Eskom was asking for was to increase the already inflated contract from R3.8-billion to R6.7-billion. Treasury baulked and told Eskom it could not support Eskom’s decision to take further coal from Brakfontein until the year-long Treasury investigation was completed.

2017: Eskom on the ropes

We’re now in mid-2017 and the empire that the Guptas built at Eskom is crumbling.
Brian Molefe has been removed as chief executive, Matshela Koko is under investigation and unlikely to return to his position as acting chief executive.

Meanwhile both Parliament and Treasury are demanding answers to know why Eskom rolled out red-carpet treatment for the Guptas.

By our calculation the Guptas have received contracts worth R11.7-billion from Eskom for coal alone.

None of these contracts was awarded as the outcome of a competitive bidding process, and the R11.7-billion does not include the contracts that Tegeta inherited when it bought Optimum Coal, nor does it include invoices totalling R419-million for management consulting and advisory services delivered to Eskom by Trillian Capital Partners, a company majority owned by Salim Essa.

Last week, we wrote to Eskom asking how it planned to deal with allegations contained in the #GuptaLeaks considering that Eskom’s former chief executive (Molefe), Eskom’s former acting chief executive (Koko), Eskom’s chief financial officer (Singh), Eskom’s chairman (Ngubane) and half of Eskom’s board were named and potentially implicated by the emails.

Eskom chose not to respond to the three pages of questions we sent; instead spokesperson Khulu Phasiwe said Eskom supports minister Lynne Brown’s decision to institute an investigation via the Special Investigating Unit into all the allegations against Eskom and will fully co-operate with the investigation.

“As you may be aware, the Minister of Public Enterprises Lynne Brown said … that she is in the process of instituting an inquiry into these allegations with the aim of getting to the bottom of these matters once and for all.

Eskom supports the establishment of this enquiry, and will co-operate with the investigators once that process gets underway.

In addition, the National Treasury has also been investigating these contracts since July 2015, and as the Treasury has informed Scopa … it is happy with the level of co-operation it is getting from Eskom in getting to the bottom of these allegations.”

The Gupta family’s lawyer did not respond to similarly detailed questions, but told amaBhungane that the Guptas could not comment on the #GuptaLeaks until they had a copy of the leaks in their possession.

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In a scheme so audacious and lucrative that it puts the notorious arms deal to shame, they:

• Entered kickback agreements totalling R5.3-billion with the Chinese manufacturer that became Transnet’s favourite locomotive supplier;
• Influenced procurement processes through their associates at Transnet;
• Are pocketing R10-million from each R50-million locomotive that Transnet is buying.
  

This story presents the most direct evidence yet of the Guptas and their associates amassing fortunes offshore by tolling contracts at state-owned entities they control.