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Former Eskom CEO Andre de Ruyter detailed the modus operandi of a major syndicate operating at Eskom’s power plants – the fuel oil syndicate – which cost the utility and South Africa R1.2 billion and more over several years.
This was one of the snippets shared by De Ruyter in his new book, Truth to Power: My Three Years Inside Eskom.
De Ruyter described how he realised that aside from neglected equipment, ageing power stations and an eroded skills base, Eskom was crippled by corruption on a staggering scale.
One example of this corruption, and the extent of such, is the fuel syndicate which operated at Tutuka power station in 2021, and likely at others as well, according to De Ruyter’s account.
The operations of this fuel syndicate partly stemmed from issues related to another scheme which cost Eskom even more money – the theft of coal.
For years, and specifically in 2022, good-quality coal needed to generate electricity at the coal-fired plants was being replaced by poor-quality ‘discard coal’.
“The good coal would be certified at the mine, but along the way, the truck stops at a discard site, and its original load was either wholly or partially replaced by the low-quality stuff,” explained De Ruyter. The truck driver would subsequently be paid R5,000 per load for his part in the scheme.
To put the impact this had on Eskom into perspective, ideally, Eskom shouldn’t burn any coal with a calorific value below 18 megajoules per kilogram, and sometimes the coal quality wouldn’t even be half of that, with the number dipping as low as seven or eight at some power plants.
“We were trying to burn rocks,” said De Ruyter.
This resulted in broken mills, boiler tubes springing leaks because the hard, rocky ‘coal’ erodes them much faster, and the variable heat value subjected the boiler to thermal stress, causing metal fatigue. This would then cost millions to repair.
“To get the poor-quality coal burning, the power stations needed huge amounts of fuel oil, which created another target for corruption,” he said.
Fuel oil syndicate
Fuel oil is used to get the coal in the boilers burning again after an outage or plant trip – known as “putting fires in”. In some instances, where coal quality is particularly poor, operators add fuel oil to boost combustion.
“One single power station, Tutuka, was burning around 43% of all the fuel oil purchased by Eskom – purchasing 36 deliveries of fuel oil per day,” noted De Ruyter.
However, even with the number of trips at Tutuka and its poor coal quality, it was impossible that one power station out of fifteen could legitimately be burning nearly half of all Eskom’s fuel oil purchases, he added.
The breakthrough came to light on 21 April 2021, when De Ruyter and Eskom COO Jan Oberholzer appointed a new station manager, Sello Mametja, at Tutuka – who discovered the station was being robbed blind by a fuel oil syndicate.
An investigation conducted by Mametja and the review of CCTV footage revealed that the suppliers of the oil had been indulging in “round-tripping”.
“The fuel tankers would drive over the weighbridge but never offload their cargo. The driver would collect a delivery note, exit the gate, drive around for a bit, and return later – meaning the supplier would get paid for both deliveries, including for the fuel oil that was never delivered,” said De Ruyter.
These suppliers would collect R100 million a month, equating to R1.2 billion annually, added De Ruyter.
“At R100 million a month, Tutuka’s fuel oil bill was sickening if you thought about what it implied: for years, this was the amount that had flowed out of Eskom and into the corrupt coffers,” he said.
Adding to the concern of this realisation is that this kind of corruption requires the collusion of a whole chain of power station workers – from the security guards to the weighbridge operator to the supply chain worker – they all have to be in on the scheme.
He further explained that not all of the criminal groups were as brazen and greedy as the Tutuka swindlers.
“Some suppliers at other stations would deliver 25,000 kgs of fuel oil but only offload 20,000 – the remaining 5,000 would be resold to Eskom later, adding a juicy profit margin to the supplier’s operations,” he said.
Additionally, this was not the only dodgy activity going on at the power station, and it had been going on for several years. Add this to the fact that Eskom has 14 other coal-fired stations, none of which were 100% untainted, and you start to get a sense of the scale of the corruption, De Rutyer added.
The breakthrough led to the suspension of 20 Eskom officials, while two were arrested for fraud, theft, and corruption.
Sometime later, De Ruyter said on a site visit, it come to light that Tutuka station only needed around six deliveries of fuel oil per day compared to the previous management, who had signed a contract for 36 deliveries per day during the time of the scheme.
“If you consider the effect load shedding and higher electricity prices have on the economy and the consumer, the cost to the country of this type of embedded criminality in Eskom is truly incalculable,” said De Ruyter.
“The scale of the rot is deeper and more systemic than many people realise – myself prime among them,” the former CEO said.
Read: Ramaphosa more of a ‘country-club manager’ than a president, says De Ruyter
English (US)