AT THE HIGH COURT OF SOUTH AFRICA, GAUTENG DIVISION, JOHANNESBURG Case No: In the matter between: MATSHELA MOSES KOKO. Applicant and THE JUDICIAL COMMISSION OF First Respondent ENQUIRY INTO ALLEGATIONS OF STATE CAPTURE, CORRUPTION, AND FRAUD IN THE PUBLIC SECTOR, INCLUDING ORGANS OF STATE RAYMOND MNYAMEZILI MLUNGIS! ZONDO NO ‘Second Respondent FOUNDING AFFIDAVIT |, the undersigned, MATSHELA MOSES KOKO. At this moment states: ANS2 2. The facts from now on deposed to are within my knowledge, unless stated otherwise, and are correct. 3. Where | make legal submissions, | do so on the advice of my legal representatives, which | accept. The parties 4. |. am Eskom Holdings’ former Interim Group Executive. | am the applicant in this matter. | will receive service at my duly appointed attorneys of record Ndou Attorneys Inc, 127 fox and Eloff, Johannesburg 2107 Marshall town, ndou@ndouine.co.za. 6. | have, in response to the summonses issued by the Chairman of the Judicial Commission of Enquiry into Allegations of State Capture, Corruption, and Fraud in the Public Sector, including Organs of State (“the Commission”), testified before the Commission on nine occasions, December 3, 2020, December 11, 2020, January 12, 2021, March 1, 2021, May 4, 2021, March 29, 2021, May 4, 2021, May 13, 2021, May 17, 2021, and May 19, 2021 orIn response to directives issued by the Chairman of the Commission, | have delivered seven affidavits to the Commission. The first is dated September 1, 2020; the second is dated September 22, 2020; the third is dated December 1, 2020; the fourth is dated December 2, 2020; the fifth is dated April 13, 2021; the sixth is dated July 27, 2021, and the seventh affidavit is dated July 28, 2021. The first respondent is the Judicial Commission of Enquiry into Allegations of State Capture, Corruption, and Fraud in the Public Sector, including Organs of State. The Commission was established by former President Jacob Zuma, in terms of section 84(2)(f) of the Constitution of the Republic of South Africa by way of Proclamation No 3 of 2018 published in the Government Gazette on January 25, 2018 (Government No 41436). The purpose of the Commission was to investigate allegations of state capture and malfeasance. Guided by the report of the public protector, the Commission was to inquire into, make findings, report on, and make a recommendation concerning whether and to what extent and by whom attempts were made through any form of inducement of any gain whatsoever nature to influence members of the national executive office bearers and functionaries employed by or office bearers of any state institution or organ of state or directors of any boards of state-owned enterprises. oe \c4. The second respondent is Justice Raymond Mnyamazeli Mlungisi Zondo. He is officially cited as the Chairman of the Judicial Commission of Enquiry into Allegations of State Capture, Corruption, and Fraud in the Public Sector, including Organs of State (‘the Commissioner’). The Commissioner is the only member of the Commission. Background 9. 10. The Commission is the result of the State of Capture Report by the former public protector, Advocate Thuli Madonsela. The State of Capture Report was published following an investigation into allegations of improper and unethical conduct by former President Zuma and other State functionaries relating to alleged inappropriate relationships and involvement of the Gupta family in State-related matters. The State of Capture Report’s remedial actions included the appointment by the former President Zuma of a judicial commission of inquiry to take the Public Protector's investigation further, headed by a Judge nominated by the Chief Justice. The Commission conducted its investigations and held public hearings from 2018 until December 2021. | had, on nine occasions, given oral evidence before the Commission under the directive of the Commissioner. My written and oral evidence was related to the “Eskom Work Stream’ of the Commission.1. 12. 13, 14, The pattern of my appearances before the Commission has been that | was summonsed to give evidence on particular topics and was then cross- examined by the evidence leader and questioned by the Commissioner. After my testimony, the Commission's legal team and investigators in the so- called “Eskom Workstream” time and again approached persons who had already testified or may still testify to get them to controvert my evidence. | was then called back to the Commission to deal with the new allegations, hence the fact that | appeared before the Commission nine times and submitted seven affidavits. The Commission delivered its Report to the President in six instalments: Part |, Part Il, Part lil, Par IV, Volume V, and Part VI. Part | was delivered on December 31, 2021; Part Il was delivered on January 31, 2022; Part Ill was delivered on February 28, 2022; Part IV was delivered on April 31, 2022; and Part V and VI were delivered on June 22, 2022. The Commissioner submitted the amended Part V and VI reports to the President on October 12, 2022. Parts IV and VI of the Commissions are the subjects of this review application. They are in part related to the Eskom Work Stream. The Commission concluded that Eskom executives and | used our position of authority and power within Eskom to benefit the Gupta enterprise, a corrupt activity under the Prevention and Combating of Corrupt Activities Act Ee me6. No. 12 of 2004. That Brian Molefe, Anoj Sing, and | have benefited from the Guptas and Mr Salim Essa in various forms that may have constituted the criminal offence of corruption. 15. The Commission recommended that the National Prosecuting Authority consider the criminal prosecution of Mr Mboweni, Dr Nteta, Mr Roux, and me for the possible contraventions of the PFMA and policies of Eskom. Further, it recommended that law enforcement agencies consider further investigating whether the implicated parties have acted in breach of the provisions of PRECCA (sections 3 and/or section 4, section 12(1), sections 21). The purpose of t! 16. The recommendations of the Commission are neither final in character nor binding on law enforcement agencies. If the National Prosecuting Authority accepts the recommendations of the Commission and investigations are undertaken, the investigation process could exclude a determination of liability on my part. In these circumstances, the recommendations of the Commission will not be the subject of this review application, 17. The Commission did not only make recommendations. It has made findings, remarks and conclusions that cannot be said to be mere recommendations. Where the Commission has made adverse findings, remarks and nnn18. 19. 7 conclusions which are not rationally connected to the evidence before the Commission and to the power given to it for its purpose, then this Court is asked to order reviewing and setting aside such impugned findings, remarks and conclusions from the State Capture Reports. | will, where appropriate, refer to relevant documents in the Commission's Eskom Bundles. If the Commission disputes what | have to say, it will be able to do so with reference to the source documents in the Eskom Bundles. To avoid confusion the annexures referred to in this affidavit are in the same format and numbering as the annexures in the Commission's Eskom Bundle. The Eskom Bundles are part of the Record to be delivered by the respondents to the registrar of the High Court within 30 days of service of the notice of motion. The review application is based on legality and common law principles. The principle of legality and review in terms of the common law means that the test for the review is confined to whether the decision by the Commission was rational and lawful. The concept of rationality and reasonableness overlap, and rationality is an element of reasonableness. The latter is of a higher standard and requires more intense scrutiny of the Commission's decisions. The helpful test is formulated in Carephone v Marcus NO and others*" |s there a rational, objective basis justifying the connection made by * Carephone v Marcus NO and others (JA52/98) [1998] ZALAC 11 (1 September 1998) Be nine20. 2 22. 8 the Commissioner between the material adequately available to him and the conclusions that the Commission eventually arrived at? | am advised that any exercise of public power, including the conduct of a Judicial Commission, must be subject to the principle of legality. The Commission's findings, remarks and conclusions must be rationally related to the purpose for which the power was given. Otherwise, they are, in effect, arbitrary, inconsistent and unlawful In these circumstances, this Court is not called upon to evaluate the truth or not in this affidavit or to consider the justification of the contents of the State Capture Reports by the Commission in its answering testimony. Dealing with the truth or not of the facts will require the Court to determine whether disputes of fact arise, which | am advised is discouraged as a situation that may result in a review application such as the present one. However, where the Commission has made adverse findings, remarks and conclusions which are not rationally connected to the evidence before the Commission and to the power given to it for its purpose, then this Court is asked to order reviewing and setting aside of such impugned findings, remarks and conclusions from the State Capture Reports. The Commission cannot ignore the evidence in my affidavits within its terms of reference. Regrettably, the Commission has done that. In doing so, the Commission has made findings, remarks and conclusions in the State MMe23. 24. 25. 9. Capture Report that are not rationally connected to the evidence before the Commission. The court is requested to review and set aside such impugned findings, remarks and conclusions from the State Capture Reports. The Commission failed to consider relevant evidence and to interrogate critical persons such as Prish Govender, Johann Bester, Kiren Maharaj, Suzanne Daniels, Rishaban Moodley, and Clinton Ephron. These necessary persons were allegedly involved in the malfeasance at Eskom. Interrogating these witnesses would have weakened the Commission's narrative against me. The Commission failed to conduct the task assigned to it through its terms of reference. | am advised that this is a reviewable irregularity. The Commission accepted the evidence of the above critical witnesses as a common cause, especially when the evidence implicated me. A reasonable commission would have probed this evidence to test its veracity to ensure that the rules of law and natural justice were observed, The approach adopted by the Commission lacked rigour particularly where key witnesses testified in support of the version provided by the Commission's Legal Team and its investigators. The Commission failed to undertake a proper inquiry as required by a Judicial Commission acting reasonably within its terms and mandate. My submission is that the Commission failed to exercise its investigative powers in a manner required by law.26. 27. 28. “10 The perception throughout my appearances before the Commissioner was that the Commission's Legal Team and investigators had developed a “theory of the case,” ie., their view and interpretation of the facts and conduct that are the subject of their investigations. They then pursued and endeavoured to substantiate their performance before the Commissioner as dominus litis, much like advocates in court acting for the plaintiff in civil proceedings — that is what advocates do. In presenting evidence to the Commissioner, the Commission's Legal Team was biased to substantiate their narrative and sought to controvert any alternative narrative. As regards the Eskom work stream of the Commission, | submit that the narrative is that OCH and OCM were forced into business rescue by Mr Molefe and me, amongst others, to exert pressure on OCH and its holding entity, Glencore, to engineer a sale of OCH’s subsidiaries, including OCM, to Tegeta Exploration & Resources (Pty) Limited (‘Tegeta’), According to this narrative, the overall purpose of the alleged conspiracy was that via Tegeta, a subsidiary of Oakbay Resources & Energy Limited, an entity listed on the JSE, the Gupta family and Mr Essa would take over OCH and its subsidiaries. In return, | received gratification from the Guptas or Salim Issa. | was examined by members of the Commission's Legal Team by rule 3.2 of the Commission's rules. | did not have the privilege to be led by my legal representatives in the re-examination. The Commissioner told me that this14- would happen, but it did not. | was entitled to be heard before an adverse remark, finding, conclusion, or decision was made against me. 29. _Itis in the interests of justice to extend the principle of the rule of law and rules of natural justice even to witnesses like me who were suspected of instances of wrongdoing by the Commission and other witnesses who appeared before the Commission. 30. I raised my concerns with the Commissioner during my sixth appearance at the Commission”. CHAIRPERSON: Ja, okay all right you may start. Mr Koko, you — your facial expressions suggest to me you are asking to say something? MR KOKO: Yes Chair, CHAIRPERSON: Yes. MR KOKO: Chair | - this is my sixth time today. CHAIRPERSON: Yes. MR KOKO: And | must tell you that for the very first time | am feeling aggrieved because after the sixth occasion | have not told my story. | have submitted an affidavit to the commission. | was told on the first day that | must take it as read. By the way they look — things are going 1 do not even think that my counsel will be given an opportunity to re- examine me. 31. The Commissioner later responded as follows°, * SCC Transcripts Day 388, May 4, 2021, pp 9-10 * SCC Transcripts Day 388, May 4, 2023, pp 15-16 nonine32. 33. 12 CHAIRPERSON: To the team. So — so I thought, let me clarify that in the first place. Secondly, you will be given a chance to — to deal with the issues you want It may be that at a certain stage the commission's legal team is questioning you on certain matters and they might not cover everything that you wish to be covered. When you answer them answer them in a manner that you believe is adequate to give your side of the story. But when they are done or at a certain stage | will give you a chance to cover whatever else might not have been covered under the questioning which you think is important to place before me. So that chance will be given. So you do not need to be concerned about that. (My emphasis) MR KOKO: Thank you Chair. CHAIRPERSON: And if you want to expose any witnesses who have lied here, do that it is important — okay. MR KOKO: Chair thank you very much | really appreciate that. CHAIRPERSON: Yes. The Commissioner promised to give me a chance to cover whatever else that might not have been covered by the Commission's Legal Team under the questioning, which | thought was essential to the Commission's terms of reference. This opportunity was not given. Instead, the Commissioner directed me to submit a sixth affidavit, which | did on July 27, 2021. The purpose of the sixth affidavit was to provide written responses to matters that the Commission wanted to raise with me but could not do so due to time constraints and to allow me to deal with issues | tried to present in reply by way of an affidavit. | understood at the time that the Commission was inspired by the notion that | should be afforded a chance to participate in the decisions that will affect rite13. me and be allowed to influence the result of its adverse findings, remarks and conclusions against me when it requested me to submit the sixth affidavit to deal with issues that | tried to present in the reply but could not do so because the Commission ran out of time. 34. In his report, the Commissioner comments on my sixth affidavit’, “The affidavit runs up to 173 pages, excluding the annexures. Due to the enormity of the affidavit, the methodology ultimately adopted in this analysis was to approach Mr Koko's averments on a theme basis by commenting on related paragraphs collectively, as opposed to ad seriatim. However, the issues regarding the suspension of the Eskom executives are not addressed as a specific theme in this analysis.” 35. The Commission made adverse findings, remarks and conclusions that affected me without reading my affidavit in full. It turns out that the Commission failed to consider substantial evidence in my sixth affidavit, which is relevant to the terms of reference assigned to the Commission. There is no merit in the argument that my testimony runs up to 173 pages, excluding the annexures, and it had to be read on a theme basis instead of ad seriatim or in total. The Commission failed to observe the audi alteram partem rule. The exercise of public power by the Commission must comply with the audi alteram partem rule. If it does not, it falls short of the standards demanded by section 33 of the Constitution for such action. “SCC Report IV Volume 4 paras 2371-237314. 36. By not reading my affidavit in full, the Commission failed to ensure that | was procedurally fairly treated as required by section 33 of the Constitution Section 33 of the Constitution imposes a duty on the state to give effect to lawful, reasonable and procedurally fair administrative action. Administrative action can be equated to conduct that adversely affects an individual's rights. 37. | emphasise that it is the Commission that directed me to submit a sixth affidavit to provide written responses to matters that the Commission wanted to raise with me but could not do so due to time constraints and to allow me to deal with issues | tried to present in reply but could not do so because the Commission ran out of time. | understood my sixth affidavit to be complying with the audi rule. The Commission was obliged to read my sixth affidavit in total and consider the evidence to ensure that the rules of law and natural justice were observed as provided in section 33 of the Constitution. The Commission failed to consider relevant evidence within its terms of reference that Glencore acquired OCH and OCM without a comprehensive due diligenc 38. Glencore, a multinational company with headquarters in Switzerland, acquired a majority stake in Optimum Coal Holding (OCH), alongside other parties, including Mr Ramaphosa's company Lexshell 849 (Pty) Limited, which acquired the remaining minority stake on March 26, 2012. OCH was rahe-15- the holding company of Optimum Coal Mine (OCM), which supplied coal to Eskom since 1970°. 39. Glencore acquired OCH and OCM within a year after OCM and Eskom had, during 2011, in an arbitration process, achieved an agreement anew on the base price of coal to be supplied to Hendrina for the remainder of the 50- year coal supply agreement, i.e., until the end of 2018. The base price was, in terms of the Coal Supply Agreement (CSA), subject to escalations based on the provisions of Schedules 3 and 4 of the CSA®. 40. | dismissed Glencore’s submission that, when it acquired OCH and OCM, it only had publicly available information regarding the CSA between the OCM and Eskom. | dealt with this topic in my 6th affidavit dated July 27, 2021, paragraphs 195 to 200 a1 The Commission did not read these paragraphs in my sixth affidavit. For this reason, the Commission decided that the CEO of Glencore's coal interests in South Africa from 2013 to 2017, Mr Ephron, adequately addressed this topic during his evidence before the Commission on June 10, 2021, as in his second supplementary affidavit’. This is patently false. The evidence before the Commission is to the contrary. The decision by the Commission is * Eskom Bundle 15C p. 1598 Eskom Bundle 15C, pp. 1715-1721 ? Judicial Commission of inquiry into Capture Report: Part IV Vol. 4: The Capture of Eskom, paras 2451-2452 ont42. 43. -16- irrational and unlawful. It stands to be reviewed and set aside because it is inconsistent with the evidence before the Commission. The evidence before the Commission is that Glencore and its partners took control of OCH and OCM on March 26, 2012. By October 2011, Glencore was already a minority shareholder of OCH. Clause 25.5 of the CSA expressly specifies that confidential information can be made available to shareholders. See “MMK100", OCM CSA clause 25.5°. This clause applied to OCH arising from the Second Addendum to the OCM and Eskom CSA. See “MMK101", Eskom Bundle 15C, page 1751, clause 2.1 and 2.2. There is no rationale why Glencore could not have had confidential information about OCM by at least October 2011. This is all in my sixth affidavit. The Commission did not read it, or it simply ignored the evidence. Mr Ephron’s submission to the Commission was that®, “...The opportunity to acquire OCH arose in H1 2011. Prior to the consortium's acquisition, OCH had been listed on the Johannesburg Stock Exchange in March 2010. There was therefore, a reasonable amount of recent publicly available information regarding OCH and OCM. The consortium was concerned that if it approached the OCH Board to request the Board to conduct a due diligence, that would have compelled OCH as a listed company to publish a cautionary announcement to the market which may have resulted in an increase in the share price of OCH. The consortium also understood that it was competing with various other potential purchasers to acquire control of OCH and therefore took the strategic decision to rely on publicly * Eskom bundle 15C page 1684, * Judicial Commission of Inquiry into Capture Report: Part IV Vol. 4, para 245244. 7- available information and effect its acquisition through a series of transactions with OCH shareholders on the stock exchange without the involvement of OCH. Accordingly, while the consortium did comprehensively consider the then publicly available information, the consortium was not able to undertake a comprehensive due diligence exercise on all aspects of OCH's business as it did not have access to information from OCH and OCM. In particular, Glencore only had publicly available information regarding the CSA and, accordingly, it only knew the duration, volume to be supplied and price per tonne provided by the CSA. Glencore did not, for example, know how any price-adjustment mechanisms in the CSA worked. It was only after the consortium acquired control of OCH that it became aware of the various hardship provisions included in the CSA ....” This is patent nonsense. Considering that Glencore acquired its interests in OCH in phases, first obtaining 31.2% in October of 2011 for US$382 million’, and then, after obtaining regulatory approval, paying the equivalent amount to acquire “an additional interest’ on March 26, 2012, to bring its total interest to 59.7%, Glencore would in 2011 already have known of the then-recent settlement that had been reached between Eskom and OCM."" As a one-third shareholder in OCH, it would, during 2011, if not earlier, have obtained the CSA® and its then (two) addenda and known precisely what the CSA with Eskom specified +See the Glencore prospectus, document MMK95, EB15C, p 1590. Because it had acquired a majority stake, it then had to make a mandatory offer to the minorities, which would have increased its stake further, "In terms of the Third Addendum to the OCM CSA, EB15C, pp. 1780- 1795. % See "MMK100", OCM CSA clause 25.5, EB15C p 1684. This clause applied to OCH arising from the Second Addendum to the OCM CSA, ‘MMK101", EB15C, p1751, clause 2.1 and 2.2 ere nye18- The Commission failed to consider Clause 25.5 of the OCM CSA, which expressly specified that the CSA could be made available to shareholders, which included Glencore as of October 2011, The OCM CSA falls within the terms of reference of the Commission. Clause 25.5 of the OCM CSA was referred to in my sixth affidavit. Glencore’s highly skilled lawyers, accountants, and coal mining experts would have had no difficulty understanding the CSA nor obtaining access to all relevant information after October 2011 and before March 26, 2012. 48. Mr Ephron’s story is simply false, a lie, and the Commission failed to probe this lie because doing so would have disturbed their preferred narrative. If Mr Ephron’s story were true, Glencore would, no doubt, have dismissed him for incompetence, along with other of his colleagues also involved in the acquisition process. Moreover, it is not as if the provisions applied to the OCM CSA were foreign to Glencore's people. The tenor of the various clauses of the contract about quality and penalties are practically standard across the Eskom-tied coal industry. 47. The evidence before the Commission shows that Glencore was the author of its misery. | cannot be blamed for Eskom’s decision not to agree to OCM and Glencore’s demand, request, or proposal for an increase in the coal price because of the hardship Glencore claims they were going through. Glencore found itself in a consequence that flowed from their decision to take over OCM and OCH without having done proper due diligence, at least from Rt mine48, -19- October 2011, when they were a minority shareholder. Had they done appropriate due diligence from October 2011, they would have known that there was a reasonable likelihood or possibility of challenges because of the escalation clause in the contract. They would have stayed away or negotiated something to avoid this situation. They ought to have done this before they acquired an additional 28% stake in OCH between October 2011 and March 26, 2012. Glencore, despite the allegedly unpalatable CSA, acquired OCH and OCM, investing substantial sums of money. The only reason could have been that it believed it would readily be able to get Eskom to agree to higher coal prices. Glencore must have thought it had a card up its sleeve. It appointed Mr Ramaphosa as the chairman of OCH. Mr Ramaphosa was then a National Executive Committee member and the former Secretary General of the ANC. A politically connected personality with enormous influence. The Commission failed to consider relevant evidence within its terms of reference that OCM delivered a hardship notice on July 3, 2013. The hardship 49. as fraudulent and bound to fz For unexplained reasons and not investigated by the Commission, Eskom. did not deduct coal penalties from OCM’s remuneration from the time of Glencore’s takeover on March 26, 2012. In the period after March 26, 2012, from the time of Glencore's takeover, Eskom did not apply coal quality Er ee50. 51 °MMK107", -20- penalties relating to non-compliant coal supplied to Hendrina by OCM by the CSA. Eskom did not deduct the penalties from the sums payable to OCM for coal delivered. On July 3, 2013, OCM, now under Glencore’s control, delivered a hardship notice under the Hardship Clause of the OCM CSA." The essence of the information was that the escalation factors in the CSA did not adequately reflect rising costs since 2006. The notice completely ignored that Eskom and OCM had, in terms of the Second Addendum as recently as April 12, 2011, only 27 months earlier, agreed on a new base price. The relevant terms of the Second Addendum expressly state that, 3.4 Quality of Coal 3.4.1 It is specifically recorded that, save as recorded in clause 3.3, there will be no change in the penalty, premium and rejection regime which will continue to be of force and effect on the same basis as set out in the CSA. 3.4.2 The Parties specifically agree and record that the spreadsheet in respect of the qualities of coal sold and delivered by Optimum Colliery to Eskom exchanged between the Parties on a daily basis will constitute ongoing compliance with the revisions of clause 9.6 of the CSA. 3.4.3. Eskom will be entitled to offset any amounts due in respect of any penalties in respect of the quality of coal sold and delivered by Optimum Colliery to Eskom (including, without limitation, in respect of Al) against the amount due to Optimum Colliery for 'skom Bundle 15C, pp 1814 — 1824.$2. 53. -21- and in respect of the purchase price of such coal; it being specifically recorded that Eskom will in writing advise Optimum Colliery monthly in arrears of the manner in which such penalties will have been calculated, and Eskom will deliver to Optimum Colliery, together with the details of such calculation the laboratory relevant results in respect of the coal in question in support of such calculation. 3. 5 Price of Goal 3.5.1 The price payable to Optimum Colliery for coal sold and delivered to Eskom in terms of the CSA will be R 115.00 per tonne on the basis As of April 12, 2011, there was no dispute between Eskom and OCM relating to penalty claims. There was also no dispute related to the price payable to OCM for coal sold and delivered to Eskom, and finally, there was no dispute related to the price escalation clauses in the CSA. The Commission ignored this critical evidence that was adequately presented in my sixth affidavit and was relevant to its terms of reference. The evidence before the Commission shows that OCM is prima facie guilty of fraud because it sought to induce Eskom on July 3, 2013, to act to Eskom’s enormous financial prejudice, representing that the escalation factors in the CSA did not adequately reflect rising costs since 2006 and well-knowing that such representation was false. Eskom and OCM had, in terms of the Second Addendum of April 12, 2011, settled the hardship claim related to the purchasing price of coal sold by OCM to Eskom. For ennnie54, 55. 56. -22- unexplained reasons, the Commission failed to consider the evidence and to probe the apparent fraudulent hardship claim of OCM of July 3, 2013. OCM had to show in their hardship claim on July 3, 2013, that “relevant circumstances” had arisen since April 12, 2011, and that these “relevant circumstances” were outside the control of OCM and could not have been anticipated by Glencore when they acquired OCH and OCM on March 26, 2012; that these “relevant circumstances” resulted in the condition of hardship for OCM. What is interesting is that “relevant circumstances” may not in clause 27.2 of the CSA include any circumstances resulting in OCM being unable to sell coal in the export market. In these circumstances, OCM' i substantial price increase if the matter went to arbitration was negligible. | repeat that the evidence before the Commission is that Glencore was the author of its misery. The hardship claim of OCM of July 3, 2013, was fraudulent and was bound to fail. This evidence is dealt with in paragraphs 208 to 210 of my sixth affidavit. Commission did not read these paragraphs or consider the evidence because it would disturb their preferred narrative that OCH was forced into hardship so that it could be sold to Tegeta. In return, | would receive gratification. The arbitration agreement between the parties was signed on December 12, 2013. Advocate Cedric Puckrin SC was appointed the arbitrator to adjudicate ofc57. 58. -23- the hardship dispute. The arbitration process had to be concluded within 90 days, that is, by April 2014. The hardship claim of OCM was not resolved by April 2014 and within the 90 days prescribed period. As of May 31, 2014, the penalties accrued against OCM amounted to R1 589 816 477, of which only R158 386 758 had been set off against payments to OCM."* This could not have occurred without the connivance of the senior Eskom executives who were charged with the administration of the CSA. Once again, the Commission failed to investigate this with an open and enquiring mind because it would disturb their narrative. | am advised that this is a reviewable irregularity. Glencore acquired OCH and OCM despite the unpalatable CSA because it did not do proper due diligence. Clause 25.5 of the OCM CSA expressly specified that confidential information could be made available to shareholders, which included Glenoore as of October 2011. The evidence before the Commission is undisputed that there was no dispute related to the price payable to OCM for coal sold and delivered to Eskom as of April 12, 2011; there was also no dispute related to the price escalation clauses in the CSA. For these reasons, OCM could not show in their hardship claim on July 3, 2013, that “relevant circumstances" had arisen since April 12, 2014, and the “relevant circumstances” could not have been anticipated by Glencore See par 7.5 of the affidavit of Mr Snagar, Eskom Bundle 15, p 136, at the foot of the page.-24- when they acquired OCH and OCM. The hardship claim of July 3, 2013, was bound to fail. If the Commission considered this evidence, it might not have concluded that OCM was forced into hardship conditions so it could be sold to Tegeta. This shows that the Commission was biased The Commission failed to consider relevant evidence within its terms of reference that an irregular and unlawful Cooperation Agreement with OCM was fies that were not enforced since March 26, concluded to cover up the penal 2042, and to suspend the arbitration agreement of December 12, 2013. 59. The hardship claim of OCM was not resolved through arbitration by April 2014 and within the 90 days prescribed period. Eskom Executives allegedly bidding for OCM instead concluded a Cooperation Agreement with OCM on May 23, 2014, to stop the arbitration process without the authority from the Eskom board. 60. The Cooperation Agreement was irregular and unlawful and occurred to conceal that Eskom Executives had, since Glencore took over OCM on March 26, 2012, failed to levy R1.43 billion penalties against OCM by the CSA. It was a stratagem to cover up the penalties that were not enforced since March 26, 2012, and an attempt to resolve the hardship claim of OCM via the back door.61. 62. 63. -25- The Cooperation Agreement” specified a negotiation process directed at addressing and settling outstanding issues relating to OCM's alleged hardship arising from the fixed price to which it had agreed (as recently as 2011) to supply coal to Hendrina power station in terms of the CSA. The agreement also contemplated negotiating penalties that Eskom sought to impose arising from sub-specification coal that OCM had been delivering over an extended period since 2012 when Glencore took over. In terms of the Cooperation Agreement, which | contend is irregular and unlawful, Eskom undertook that it would suspend all penalties from May 1, 2014, until the termination of the settlement process that the agreement envisaged that applied to OCM in terms of the Hendrina CSA. The Agreement established a timetable that posited that the issues it identified would be susceptible to resolution by no later than March 31, 2015. The Cooperation Agreement was concluded to, among other things, suspend the arbitration agreement of December 12, 2013. Eskom’s Delegation of Authority Framework is straightforward: the Co-operation Agreement had to have been approved by the original authority that approved the CSA before it could be implemented. | dealt with this evidence in paragraphs 201 to 213 and again in paragraphs 226 to 231 of my sixth affidavit. The Commission failed to probe this point because ® MMI 8, Eskom bundle 15 pp 24~ 28, oct64. -26- probing it would further disturb their narrative that OCM was forced into hardship conditions so that it was sold to Tegeta. | will deal with this later. The Commission relied upon the affidavit of Ms Maharaj, which was not made available to me, to make the following findings about the Cooperation Agreement'®, 2453. 2454, 2456. Mr Koko made wide-ranging allegations that are not necessarily relevant to an investigation into state capture. He stated, amongst others, that Ms Maharaj had no authority to conclude the Cooperation Agreement between Eskom and OCM, entered into in May 2014. The Eskom Procurement and Supply Chain_Management Procedure, however, indicates otherwise, and, in any event, the Cooperation Agreement was only to allow for negotiations for the conclusion of the Fourth Addendum to the Coal Supply Agreement. Any revision or change to the terms of the Coal Supply Agreement was subject to Board approval (clause 5.12 of the Cooperation Agreement). The Cooperation Agreement, which proposed specific changes to the Coal Supply Agreement, ultimately served before the Board on 23 April 2015 for consideration and approval, but the Board referred it to the newly seconded Acting Group CEO, Mr Brian Molefe, who subsequently decided to terminate the Cooperation Agreement. (My emphasis) Clause 2.5.4 of the Eskom Procurement and Supply Management Procedure provided 2.5.4 Divisional Executive: Primary Energy The executive delegated by the Eskom Board and appointed to lead and manage the procurement _of_all_primary energy within Eskom. For the purposes of this Procedure, any reference to the Divisional Executive: Primary Energy is specific to all primary energy-related procurement and/or disposals. The Divisional Executive: Primary Energy may, at his/her discretion, nominate any other general or senior managers “SCC Report Part IV Volume 4 pp 1027-1028 par 2453-245565. 66. 67. -27- to fulfil any of the roles and responsibilities set out herein on his/her behalf.” (My emphasis) The evidence before the Commission is clear and unambiguous that Ms Maharaj did not have a written delegated authority to conclude the Cooperation Agreement from the Delegated Approval Authority that approved the CSA. The Commission ignored the evidence because it was biased. The Eskom board commissioned Ms Maharaj to lead and manage the procurement of all primary energy within Eskom subject to the delegation principles and conditions as amended from time to time and the applicable policies and quidelines. The evidence before the Commission shows that in concluding the Cooperation Agreement, Ms Maharaj did not comply with relevant policies and guidelines. Regrettably, the Commission failed to investigate compliance with applicable policies and guidelines. It was within the Commission's terms of reference to investigate this, and it failed to do so. The Eskom Delegation of authority policy forms part of the approved procurement framework. The core principle is that individual employees may be permitted by a written delegation of authority from a delegated procurement and tender committee to bind Eskom by modifying the terms and conditions of contracts with suppliers, including CSAs. ie anny-28- 68. Eskom Delegation of Authority Framework provides specific conditions for the entire delegation of authority. It expressly states that", “3. Except for procurement matters, an authorised delegee is entitled at its discretion to make any decision without the need for a recommendation from any party.” (My emphasis) 69. The procurement matter in this instance is the Cooperation Agreement which suspended the arbitration process and all penalties that applied to OCM in terms of the Hendrina CSA from May 31, 2014, until the termination of the negotiation and settlement process the agreement envisaged. The authorised delegee is Ms Maharaj, the Divisional Executive: Primary Energy. 70. Ms Maharaj had no discretion to conclude the Cooperation Agreement without a written recommendation from the contract manager or the delegated and accredited procurement practitioner. Such a recommendation is not before the Commission. The Commission failed to enquire about the appropriate advice that Maharaj relied on. The Commissioner does not even know who recommended that Ms Maharaj conclude the Cooperation Agreement that, in my evidence, was a stratagem to cover up the penalties that were not enforced during the period since March 26, 2012, and an attempt to resolve the hardship claim of OCM via the back door. The Commission’s decision that Ms Maharaj acted procedurally and lawfully * Eskom Delegation of Authority Frame, unique identifier 240-62072907, page 22 of 41. This document is with the Commission, and itis part of Ms Danie'’s disciplinary bundle. Ce nnn71. 72. -29- when she concluded the Cooperation Agreement is inconsistent with the objective evidence before the Commission and is irrational and inconsistent with the facts before the Commission. The decision is irrational and grossly unreasonable. It warrants the inference that the Commission was biased and failed to apply its mind when it concluded that Ms Maharaj had the powers to conclude the Cooperation Agreement without a written recommendation from the contract manager of the CSA or the delegated and accredited procurement practitioner. It gets worse because Eskom Procurement and Supply Chain Management Procedure 32-1034 prescribes the steps that Ms Maharaj should have followed in suspending the penalty clauses in the CSA and the arbitration agreement of December 12, 2013. She should have complied with the defined process, and she failed to do that. The Commissioner, the ‘Commission's legal team, and investigators conveniently looked the other way because Ms Maharaj was a crucial witness in their narrative. The Eskom Procurement and Supply Chain Management Procedure 32-1034 expressly states that", “It must be noted that there is a difference between Eskom’s internal governance process to authorise a modification [to the CSA] and the contractual process to effect a change to the Works Information or Employer's Requirements/Specification, terms and conditions of contract. Eskom's internal governance process must first be followed “Eskom Bundle 15 pp 691-69273. 74. 75. -30- via_a formal modification process before changes to the Works Jnformation _or Employers _Requirements/Specification, including formation _or Employers _Requirements/Specification, antities and/or de: an_be given effect to as compensation events or variation orders.” (My emphasis) Effectively, a formal internal governance process to suspend the arbitration process and the penalty clauses in the CSA should have been concluded first before the Cooperation Agreement stopped the terms and conditions of the CSA, albeit temporarily, until the termination of the negotiation and settlement process. The Commission should have investigated why this did not happen. | testified that the Commission failed to investigate because the Commission was biased against me and in favour of Glencore. Ms Maharaj should have followed the internal governance process detailed in paragraph 3.6.7 of Eskom Procurement and Supply Chain Management Procedure 32-1034" to conclude the Cooperation Agreement. The evidence before the Commission shows that she failed to do so. The Commission ignored it. The Contract Manager triggers the internal governance process. The Procurement Practitioner, the Contract Manager, and, if required, the cross- functional team complete the Commercial Transaction Approval Form, clearly stipulating the reasons for the Cooperation Agreement. The Procurement Practitioner arranges for the Commercial Transaction Approval Form to be placed on the agenda of the Board Tender Committee. Requests Eskom Bundle 15 p 691 gh fe mn —76. -31- in this regard must always be addressed to the Delegated Approval Authority that approved the CSA. The Divisional Executive: Primary Energy is not the Delegated Approval Authority that approved CSA. The Delegated Approval Authority that approved the CSA is the board. The Commission ignored this critical evidence and concluded that the Cooperation Agreement was regular and lawful. The decision by the Commission that Ms Maharaj had the requisite authority to sign the Cooperation Agreement on behalf of Eskom is irrational and unlawful and should be reviewed and set aside. | mention again that the Commission did not grant me the right to reply to Ms Maharaj's affidavit. The Commission relied on Ms. Maharaj averments that, “on July 21, 2014, she was wrongfully and unfairly suspended by Mr Koko”, The Commission relied on Ms. Maharaj averments without giving me the right of reply. The exercise of public power by the Commission must comply with the audi alteram partem rule. If it does not, it falls short of the standards demanded by section 33 of the Constitution for such action. The Commission failed to consider relevant evidence within its terms of reference that my team and | took the necessary steps to resolve the hardship claim of OCM under Glencore. Eskom and OCM needed each other to survive. 77. The evidence before the Commission shows that in my capacity as Group Executive: Commercial, | supported the submission drafted by Mr Bester, 2°SCC Report Part IV Volume 4 pp 846-847 par 1943 er cone78. 79. -32- which served before the BTC on August 12, 2044, to address the condition of hardship experienced by OCM under Glencore®". | dealt with this evidence in paragraphs 215 to 224 of my sixth affidavit. Commission did not consider the evidence because it did not want to disturb the preferred narrative that my team and | did nothing to address the hardship claim of OCH under Glencore. Still, we were quick to rescue OCM under Tegeta. The Commission was biased Mr Bester did not inform me or the BTC that the massive penalties had not been deducted from payments to OCM since March 26, 2012, nor that the so-called Cooperation Agreement had been concluded. No reference to these critical matters appears in the submission. The Commission is aware of this omission by Mr Bester. The Commission failed to investigate this misrepresentation because it was biased in favour of Mr Bester. The Commission did not want to disturb the false narrative that my team and | did nothing to get OCM under Glencore out of the conditions of hardship but went the extra mile to rescue OCM under Tegeta. The submission document to the Board Tender Committee (BTC) meeting of August 12, 2014, referred to a proposal that OCM had made to Eskom for an increase of the base price per tonne for coal delivered to the Hendrina Power Station ("Hendrina’) from the then-current agreed base price of 2" Eskom Bundle 18, pp 353 - 357.80. 81 82. -33- R154,40/tonne to a base price of R285,00/tonne for the remaining contract period of the CSA, i.e., until the end of 2018. Based on this submission, the BTC on August 12, 2014, mandated Eskom’s negotiation team to negotiate a new coal base price with OCM of R190,90/tonne as the “aspirational base price” and R296,30/tonne as the “real base price” for the remainder of the CSA contract period, This is referred to in paragraph 293 of my main affidavit.22 Relevant in this regard is that Eskom's negotiation team, in terms of the mandate from the BTC given on August 12, 2014, would have been able to accept OCM's base price offer of R285/tonne without even negotiating it down. However, the negotiation team led by Mr Bester returned in the new year to recommend to the BTC and the Board that Eskom should agree to a base price of R442,00/tonne that they had negotiated, nearly three times the base price obtained at the time, way outside the terms of their mandate. The Commission made a bizarre decision. It made the following findings”®. 2458. Mr Koko said that Eskom board had agreed to meet OCM's request for a coal price of R285/ton that had been made before he (Mr Koko) approached the Board Tender Committee on 12 August 2014. However, this is not true, as there is no evidence of such a proposal by OCM, nor was there any approval by the Board Tender Committee of a price of R285/ton. The Board % Main affidavit, par 293, Eskom Bundle 15, p 083, SCC Report Part IV Volume 4 pp 1028-1029-34- Tender Committee did not resolve that any set price be negotiated. (my emphasis} 2460. The Board Tender Committee resolution was for Eskom PED to negotiate with OCM to secure coal supply to Hendrina Power Station, and, to that end and in order to ascertain the financial viability of the mine, experts were engaged, namely Nedbank and Basis Point, to conduct a financial assessment of the mine. 83. The resolution of the BTC, read together with the submission that served before the BTC of August 12, 2014, was very clear. That, Eskom's negotiation team was mandated to negotiate a new coal base price with OCM of R190,90/tonne as the “aspirational base price” and R296,30/tonne as the “real base price" for the remainder of the CSA contract period. This evidence is before the Commission. | confirm that Mr Bester and | attended the BTC meeting on August 12, 2014. 84, In terms of document “MMKS50,"* the PED, under the signature of Mr Johann Bester, Mr Edwin Mabelane, and Mr Vusi Mboweni submitted to BTC on April 15, 2016 (and to the entire Board on 23 April 2015) a mandate to agree on a new base price with OCM 85. Messrs Bester, Mabelane, and Mboweni expressly told the BTC on April 15, 2015 (and the entire Board on April 23, 2015) that the “...PED's mandate was to negotiate a real base of R296/ton (August 2014 money values) for a 2 Eskom Bundle 15, pp 785-796 mone-35- CV of 22.8Md/kg on a Dry Basis.’ | fail to see how the Commission missed this undisputed fact. The only inference is that this evidence was not consistent with their narrative. The Commission ignored the relevant facts to protect its narrative. Messrs Bester, Mabelane, and Mboweni also told the BTC on April 15, 2015 (and the entire Board on April 23, 2015) in no uncertain terms what the mandate of BTC on August 12, 2014, was and the progress of negotiations using this table”. 2, APPROVED MANDATE PARAMETERS AND NEGOTIATION RESULTS “The table below reflects the approved mandate parameters and the progress of negotiations ‘are discussed below. proved Mandate Objectives | —____Reaults Achieved) Foal Base: R296.20/0n (R14.28/64) ihleved: Radation (R20-66763) Aspirin Base: R790,90/0n (Ra.2016)) Negotiated Savings : None | ‘The price “negotiators. outcome | Real and aspiration volves based on a CV | discussed in secon 3 of hs report of | 2075Ming Ae Received (AR), ‘equivalent to a GV of 22 Mg on & Ory Negotlated Terms and Condlions: TED ‘ther Negotiated Mandate Objectives: 4. RFT Iesued to the mavot and resule Secure cos! supply to Hendtina forthe | icussod in ecto 28 of a oper ‘period poston Jd pro ceanse CONTROLLED DISCLOSURE TE—GoupTecmiogy & Commerc. ESKOM-15-788 u27-MMK-784 25 Eskom Bundle 15, p 794 * Eskom Bundle 15 p 787-36- 86. The negotiation team that the BTC appointed on August 12, 2014, is known to the Commission””. ESKOMA5-788 u27-MMK-784 MMK 50 PAGE 634 87. This negotiation team was clear about its mandate, and if the Commission needed clarification, it ought to have requested a statement from another negotiation team member. Instead, the Commission preferred the version of Mr Bester, who lied under oath, and the Commission was not bothered * Eskom Bundle 15 p 788-37- because it was biased. Given the evidence at its disposal, the Commission ought to have known that Ms Bester was lying under oath. 88. To remove any doubts, | include the signature page of the submission to the BTC on April 15, 2015 (and to the entire Board on April 23, 2015)"*. This evidence is before the Commission. KOM 15-795, arn 782 ** Eskom Bundle 15 p 796-38- 89. | cannot fathom, given what Messrs Bester, Mabelane, and Mboweni presented in writing to the BTC on April 15, 2015 (and the entire Board on 23 April 2015), that the Commission allowed Mr Bester to lie under oath and he got away with it. | submit that the Commission was biased against me, or the Commissioner did not read my sixth affidavit, which he directed me to submit. Either way, the Commission failed to conduct the assigned task through its terms of reference concerning the OCM matter. In its report, the Commission says”, 2464. Insofar as Mr Koko said that OCM had made a proposal for a coal price of R285/ton, Mr Johann Bester, in his last affidavit to the Commission, responded as follows: “No! No! No! If there was a firm offer on the table for R285 per tonne at the lower quality, then the team would have asked the Board for a mandate “TO CONCLUDE”. Instead, the team asked for a ‘Mandate to NEGOTIATE but NOT CONCLUDE”. The team further asked for a mandate to issue an open market enquiry. Why? Because we were also tasked to secure coal for the life of the power station, i.e., for the “period post-2018." Is it possible Mr Koko still does not understand the Board submission, or is he trying to mislead?” 90. The response from Mr Bester indicates that he was determined to hide the truth. The Commission saw nothing wrong. His misleading evidence was ® SCC Report Part IV Volume 4 p1031 By Nn91 92. -39- crucial to the Commission's narrative that Tegeta was favoured, and Glencore was the victim. The decision by the Commission that the BTC did not resolve on August 12, 2014, that any set price of coal to Eskom be negotiated with OCM is not based on the relevant facts before the Commission. The decision by the Commission is based on a material mistake of facts or bias and stands to be reviewed and set aside. What is even more strange is the decision by the Commission that there is no evidence that OCM requested a coal price of R285/ton before | approached the BTC on August 12, 2014. Mr Ephron told the commission, “There is no such offer, and there is no such counteroffer.” The Commission failed to probe Mr Ephron further. Mr Ephron lied under oath when he said,2° ADV SELEKA SC: When Mr Koko was here, he drew the Chairperson’s attention to the — to the minutes of a meeting where a team that was negotiating with you — the group of Eskom negotiating with you was coming back to the BTC — the Board Tender Committee with a report that they have dealt with you. You have offered OCM an amount of, | think it was R268.00[R285] per ton to continue supplying to Eskom and he said that they were prepared as the BTC to counteroffer on that and give you OCM R296.00 per ton. But the team that was negotiating instead of concluding the agreement with you to increase the price of coal to R296.00, meaning higher than what you even had offered they decided to invoke aspects to determine your financial position ~ OCM's financial position. Do you have any recollection of that offer you had made to Eskom? *° SCC Transcripts, Day 408, June 10, 2021, pp 84-85 Y t Ove-40- MR EPHRON: No, there is no such offer, and there is no such counteroffer. | do not know — I have no idea what you are talking about. So, the last offer we made to Eskom was paragraph — one second - on the 30th of June 2015, paragraph 38, which was the final proposal. We — we never received a counter proposal from Eskom but remember we ~ before this - before this date, the 30th of June, we already had negotiated prices and under the 10 Cooperation Agreement, and we had already negotiated the terms of the Fourth Addendum which was never signed. But we still made a further reduction on the 30th of June for the final proposal which is under C - CE8 we do not have to go to it, but it was R300.00 per ton. We never received a response to this — to this offer. So, | am— I really do not know about any counter proposal or any proposal ever made to Glencore or OCM. 93. On October 25, 2020, | emailed the Commission's secretary and the evidence leader, attaching a letter requesting documentation. My request included the proposal to Eskom from OCM to increase the coal purchase price from “the current R154.40/onne (after quality price adjustment) to R285/tonne (excluding escalations) for the remaining contract period”.® | received no response from the Commission and found it necessary after listening to Mr Ephron’s evidence on June 10, 2021, to request the documents again, as well as the audio recording of the BTC’s meeting on August 12, 2014.7 94, On June 14, 2021, the evidence leader acknowledged receipt of my email. After a further request for the documents and the audio recording from my attorneys on June 17, 2021, and on June 18, 2021, | received a response * For reasons | cannot explain, the letter is dated November 5, 2020. Regarding my email records, 1 despatched the letter on October 25, 2020. * My email again got the date wrong, referring to Mr Ephron’s testimony on May 10, 2021, instead of June 10, 2021. A copy of my email of October 25, with the attachment, is part of the accompanying bundle marked "MMK138". My email of June 13, 2021, is *MMK139" By MVM95. 96. “At regarding document “MMK4140" in my sixth affidavit. Paragraphs 3.1 to 3.4 responded to my request. Regarding my request for the proposal made by Glencore or OCM to Eskom to increase the coal purchase price to R285,00/tonne, the letter recorded that the Commission had been unable to. obtain any formal proposal in that regard. The letter, however, went on to state that, “We were, however, able to obtain consolidated draft minutes of meetings that took place between representatives of Eskom and Glencore wherein mention is made of indicative costs provided by OCM to the value of 285.00 per ton”. That document accompanied the letter, marked “A3". It is document “MMK141". The minutes are “Notes of exploratory discussions, Eskom- Optimum,” which are recorded to have occurred on 1, 2, and 10 June 2014. Mr Ephron is recorded as having attended the meetings with the purpose of “exploratory discussion for the settlement of disputes and security of coal for Hendrina Power Station.” In section 4 of the minutes, it is recorded that, During the 1/2 June meeting, Optimum proposed a pricing method of cost for 2015 and 2018 and cost plus a 20-25% margin from 2019- 2021. + Optimum then provided indicative costs of R285/tonne for the period 2015 to 2018 and R375/tonne (plus a 20-25% margin) for 2019-2023". The reference to “indicative costs” refers to the cost to Eskom, ie., the purchase price or the base price of the coal to Eskom.-42- 97. _ Ins far as “indicative costs” are consent, the Commission irrationally and unreasonably concluded that | “..omitted to mention that external experts, Nedbank and Basis Point, whom Eskom appointed to verify the production costs of OCM, confirmed that OCM was selling at a loss and required an adjustment [of the base price] to a higher price." This conclusion is irrational and unreasonable because the evidence before the Commission that is undisputed is that Mr Bester was uncomfortable with my delving into the Nedbank and Basis Point reports. According to his affidavit and testimony before the Commission, this caused him to resign from Eskom™. 98. What is even more damning is the report that was authored by Mr Bester on October 27, 2014, after Ms Maharaj concluded the Cooperation Agreement. The Commission failed to consider this report. | received the report from Mr Mboweni. Mr Bester wrote in the report®, “In a financial due diligence conducted by NedCapital/Basis Points, the recommended price based on mining costs for the current specification is R210/ton to meet the current contractual specification.” (My emphasis) 99. Based on a 20-25% margin, which OCM had agreed for coal supplied after 2018, the price until that time would come to R262/tonne; instead, Messrs °° SCC Report Part & Volume IV par 2461, See Mr Bester’s affidavit in paragraph 6 in Eskom Bundle 18, at p 022. ° See in this regard the letter dated October 27, 2014, that appears in EB1B on pp 115-118 on page 117, in the ‘middle of the page. Mr Bester, who was the author of this document, confirmed that the mining costs as at ‘mid-2014, i.e., OCM break-even point, established by the financial due diligence conducted by Nedbank Capital/Basis Points, was R210 per tonne. er mnie100. 101 -43- Bester, Mabelane, and Mboweni took to the BTC on April 15, 2015 (and the entire Board on April 23, 2015) a new base price of R442/tonne. Shockingly, the Commission saw nothing wrong with the process. The only explanation is that the Commission was biased and did not want to disturb its narrative. The Commission also wanted to cover up the fact that Mr Bester lied about the financial due diligence conducted by NedCapital/Basis Points. This lie is exactly what caused Mr Bester to resign. He was caught, and he ran instead of taking accountability. This evidence is in my sixth affidavit, which the Commissioner should have considered. Mr Bester's October 27, 2014, report fell within the Commission's terms and references. | submit that the Commission did not evaluate Mr Bester's October 27, 2014, report and did not probe him specifically about the statements in the report because the Commission was biased against me. The Commission was determined to make Mr Bester a credible witness when he was not. Without Mr Bester, the Commission’s narrative would not stand. The Commission's decision that there is no evidence that OCM requested a base price of R285/ton before | approached the BTC on August 12, 2014, is inconsistent with the evidence before the Commission. It is irrational and unreasonable. It stands to be reviewed and set aside. oe mmcThe Commission failed to consider relevant evidence within its terms of reference that the Eskom board acted rationally and prudently when it sent back the submission of Messrs Bester, Mabelane, and Mboweni on April 23, 2015, to the new Chief Executive (Mr Molefe) to consider. 102. As referred to in my main affidavit, if Eskom had agreed to the negotiation team’s proposal, it would cost Eskom more than R5.5 billion per year extra This appears from the submission that served before the BTC on April 15, 2015, that later, on April 23, 2015, served before the entire Board. Messrs Bester, Mboweni, and Mabelane computed the extra cost of coal from Hendrina at R442/tonne as R5.5 billion per year extra®®, This extra cost per year was not in the budget PED had intended to negotiate a real base of R296.30/ton with Optimum based on the fact that the Eskom product should be cross subsidised by the export product and hence should be supplied at marginal cost or at @ subsidised price, which was the original basis for allowing the mine to convert from being a cost plus mine only supplying Eskom, to a dual product mine with more than 50% of its volume being sold to the export market. According to Optimum the price required to cover costs to break even to meet the current CSA qualities (except for Al and sizing) on the Eskom contract needs to increase significantly. Eskom's assessments of Optimum’s proposed costs indicate that if agreed to will cost Eskom R65.5billion, at 5.5Mt per annum, for the remainder of the current CSA. * Main affidavit, par 294 Eskom Board 15, p 084-45- 103. Having considered all relevant issues, the BTC decided whether the negotiation team's April 15, 2015, proposal was in Eskom's best interests. There were only six courses of action open in terms of Eskom Delegation of Authority Framework, and the BTC had to choose only one”: 103.1 Approve the negotiation team's proposal as submitted 103.2 Approve the recommendation conditionally 103.3 Approve an alternative proposal as submitted — there was none 103.4 Approve an alternative recommendation conditionally-there was none 103.5 Support the proposal and refer it to a higher level; or 103.6 Reject the recommendation. 104. — According to the Eskom Delegation of Authority Policy, the delegation to the BTC is up to the budgeted amount. The R85.5 billion per annum extra was not budgeted for. The budgeted proposal approved on August 12, 2014, was to increase the coal purchase price from the current R154.40/tonne (after quality price adjustment) to R296/tonne (excluding escalations) for_the remaining contract period. 105. Instead, the negotiation team came back with a proposal to increase the coal purchase price from “the current R154.40/tonne (after quality price *” Eskom Supply Chain and Procurement Procedure 32-1034, MMK 49, Eskom Bundle 15 p 624106. 107. -46- adjustment) to R442/tonne (excluding escalations) for the remaining contract period”. This was outside the BTC authority, so the BTC referred the Proposal to the board on April 23, 2015. On April 23, 2015, the board rejected the negotiation team’s proposal. The new CEO was tasked to relook at the OCM proposal. This is procedural and regular. It follows Eskom Procurement and Supply Chain Procedure 32-1034. This notwithstanding, the Commission concluded that ‘it is not an accepted business practice at Eskom that any transaction adjudication is referred to an individual (Mr Molefe) for decision-making®.” The evidence before the Commission shows that Eskom did not approve the OCM transaction that Mr Bester and his team adjudicated. In other words, it was rejected in compliance with Eskom Supply Chain and Procurement Procedure 32-1034, in Eskom Bundle 15 p 624. The board resolution of April 23, 2015, expressly say so™. Resolved that: 1. the Referral from the Board Tender Committee for approval of the mandate to ‘conclude negotiations with Optimum Coal Mine for Coal Supply to Hendrina Power Station is not approved: and 2. the mandate should be referred to the Acting Chief Executive before being tabled at Board for approval. °* SCC Report Part IV Volume 3 p723 par 1608.3. » Extract from the Eskom board meeting of April 23, 2015-47- 108. _ This is yet another statement by the Commission that is not connected to the evidence before it for its purpose. The statement is irrational and must be reviewed and set aside. The Commission failed to consider relevant evidence within its terms of referenc it_ the Cooperation Agreement was termin: based on legal advice and to prevent losses of approximately R2,5 million of the penalty claim per day, translating to about R50 million per month on average. 109. The evidence before the Commission shows that Eskom terminated the Cooperation Agreement by a letter delivered to OCM on June 22, 2015. During his oral evidence, Mr Molefe confirmed what was stated in the letter, ie., that Eskom terminated the Cooperation Agreement because of its constrained financial position. 110. The letter MMK 11 had the effect of reinstating the operation of the provisions of the CSA and its addenda, including those relating to price adjustments, i.e., penalties, for sub-specification coal. It also restarted the arbitration process shelved in April/May 2014. A hearing was scheduled for the period 16-27 May 2016. “© MMK 11, | was not part of it. was on suspension at the time. | was sitting athome.411 112. 113, 114. 116. -48- | testified that Glencore, instead of taking the arbitration process and its Pending “hardship claim” to the end, put OCH and OCM in business rescue to strongarm Eskom. The business proceedings commenced on August 4, 2015; OCH and OCM were under the management control of the business rescue practitioners (BRPs) Glencore's tactic failed because Mr Molefe and | refused to yield to it. The situation was eventually resolved by OCH's sale of its subsidiaries, including OCM, to Tegeta, who agreed to honour the pricing arrangements that were agreed to in 2011 and to proceed to arbitration regarding Eskom's penalties claim. CDH acting on Eskom’s behalf, issued the letter of demand to OCM on July 16, 2015."" It specified Eskom’s claim for penalties in the CSA as a claim for nearly R2.18 billion. Paragraph 3 of the letter recorded that, “In the event that Optimum disputes the aforementioned claim, we submit that this letter shall constitute a referral of the dispute to arbitration as contemplated in clause 6.3 of the First Addendum’. In his affidavit to the Commission, Mr Moodley of CDH confirms that in sending the letter of demand of July 16, 2015, Eskom, principally “!MIMK 13, bundle pp 42 — 43,116. -49- represented by Mr Molefe, acted at the time on legal advice. That legal advice included, as referred to in paragraphs 45.5 and 45.11 of Mr Moodley’s affidavit to the Commission, that prescription would mean a loss of approximately R2,5 million of the claim per day, translating to about R50 million per month on average. CDH cautioned that "this potentially would have a PFMA implication for Eskom." This puts the lie to the suggestions made in the media and before the Commission that Mr Molefe was eventually brought into Eskom as part of an overall scheme to benefit Tegeta and the Guptas. Despite the overwhelming evidence before the Commission, the Commissioner concluded that’, 155.2. In April 2015, Mr Brian Molefe was seconded from Transnet to Eskom in April 2015 as Acting Group CEO; 155.3. Mr Molefe immediately set about scuppering advanced settlement negotiations between Eskom and Glencore over penalties claim by Eskom against OCM, The finding that Eskom, principally represented by Mr Molefe, “set about ‘scuppering advanced settlement negotiations between Eskom and Glencore over penalties claim by Eskom against OCM" is not supported by the evidence before the Commission. The decision is irrational and reviewable. It must be reviewed and set aside. SSC Report Part VI Volume 3, p 834-50- 117. The directors of OCH and OCM had placed the companies in business rescue because they wanted the OCM CSA cancelled. Mr Glasenberg confirmed this in his affidavit.“? 29.1 as aware fhe board of OCH and OCMs decison to place these eres ro business rescue ant was acoranay im greerent tn ns econ 30. wae thought hat busines eecue would not en re-confir 6 Eskom the de franca ‘ostenn which OCM and OCH were the time ut woul ko ge the GRP of OCM ‘and OCH an epporunty to renegotiate the CSA wit Eskom 31.We were ato of he vew hat perhape the BRPs woud be Bt ate te rapt wih €shom than Glancore and OCM were. | lo undertond tha the BPs had ome to ‘suspend or cancel onerous contacts which woul poantiay enale OCM to r-negtte "he CSA wi Eskom. Mr Glasenberg was the Chief Executive of Glencore, and he occupied this position from 2002 until June 2021 118. According to Mr Glasenberg, Glencore understood that the BRPs had the power to suspend or cancel the onerous contracts, potentially enabling the OCM to renegotiate the CSA with Eskom. This is, in part or whole, the reason why OCH and OCM were placed under business rescue proceedings. This notwithstanding, the Commission says in its report that, “Mr Koko stated that the Board of OCH/OCM placed the companies in business rescue because they wanted to cance! the Coal Supply Glasenberg, paragraphs 29-31, Eskom Bundle 18 p 362.168. “SCC Report Part IV Volume 4, p1029 par 2461 peti.119. 120. 51 Agreement. However, he omitted to mention that external experts, Nedbank and Basis Point, who were appointed by Eskom to verify the production costs of OCM, confirmed that OCM was selling at a loss and required an adjustment to a higher price.” The above conclusion indicates that the Commission ignored the evidence of Mr Glasenberg and the evidence on October 27, 2014, report compiled by Mr Bester. | earlier dealt with Mr Bester's October 27, 2014, report. The evidence falls within the terms of references of the Commission. The Commission might have reached a different conclusion had it considered the evidence. At our first formal meeting with the BRPs, Messrs Marsden and Van den Steen, on August 17, 2015, they informed us that unless Eskom agreed to a calculated coal price of R513/tonne and waived the R2.18 billion penalties claimed in terms of the letter of demand of July 16, 2015, they intended to suspend the CSA and eventually approach the courts for an order to cancel the CSA. The BRPs stated that Eskom's agreement had to be concluded in terms of the proposed Addendum 4 to the CSA negotiated under the Co- operation Agreement.“® The BRPs conveyed that, unless Eskom agreed to these demands, they would recommend that OCM and OCH be liquidated, OCM raised its base price from R285/tonne to R442/tonne, and by the time BRPs were appointed, their base price had increased to R513/tonne. “8 The draft addendum was presented to the BTC and the entire Board on 15 April 2015 and 23 April 2015, respectively, and was not approved.-52- 121. As | have referred to already, OCM would break even at a coal price of R210/tonne, as confirmed by Nedbank and Basis Point Capital and documented in the report of Mr Bester dated October 27, 2014. Although OCM had proposed that the price be increased to R285/tonne, and Eskom was willing to pay R296/tonne, Mr Bester and his team returned to the BTC with a cost of R442 per tonne, which was later increased by the BRPs, who demanded R513 per tonne. 122. _ Eskom would never pay OCM a base price of R442/tonne. That would have cost Eskom more than R5.5 billion per year extra. Eskom did not have that amount of money. The base price of R513/tonne would cost Eskom R6 billion per year extra. 123. The Commission ignored this critical evidence. Instead, the Commission concluded that Eskom did not agree to a base price of R442/tonne and later R513/tonne because Mr Koko and Mr Molefe, among others, wanted to force Glencore to sell OCH assets to Tegeta. This conclusion is irrational and unreasonable, given the evidence before the Commission and should be reviewed and set aside. 124. Glencore's tactic failed because Mr Molefe and | refused to yield to it Relevant in this regard is that Mr Molefe and |, in terms of the mandate from the BTC given on August 12, 2014, would have been able to accept OCM's base price offer of R285/tonne without even negotiating it down plus MMe-53- escalation and take the dispute about the R2.18 billion penalties claim to arbitration. The BRPs refused to change their minds or to come to an agreement. They would not budge. Instead, they exited the CSA on August 20, 2015. 125. | have already mentioned that the situation was eventually resolved by OCH's sale of its subsidiaries, including OCM, to Tegeta, who agreed to honour the pricing arrangements that were agreed to in 2011 and to proceed to arbitration regarding Eskom's penalties. In paragraph 78 of his affidavit, Mr Glasenberg stated on July 9, 2022, that Glencore entered a transaction with Tegeta that made commercial sense“®. Mr Glasenberg makes perfect sense, but the Commission fails to see this point because it is biased. 126. Tegeta would later experience conditions of hardship. Their hardship claim was dealt with within the BTC resolution of August 12, 2014. In other words, Tegeta was not favoured. OCM under Glencore was subjected to the exact BTC resolution of August 12, 2014. The Commission failed to consider relevant evidence within its terms of reference that OCM did not have the option to suspend the CSA and stop the coal supply to Eskom. Parties had to find their remedies within the four corners of the CSA, with arbitration being the eventual dispute resolution mechanis! * Eskom Bundle 18, p352.175127. 128. 129. 54 On August 20, 2015, the business rescue practitioners suspended the CSA. They stopped the coal supply to Eskom while electricity blackouts were happening, which cost R98 billion to the RSA economy for the 2015 calendar year*”. | testified at the Commission that this was an act of provocation and a kick in the face by OCM/OCH/Glencore. It severely damaged the relationship between Eskom management and OCM/OCH/Glencore. In his affidavit to the Commission, Mr Marsden stated that OCM/OCH/Glencore suspended the CSA and stopped the coal supply to Eskom because they, “hoped that by suspending the supply of coal to Eskom, Eskom would accept the severity of OCM’s financial position...”. As confirmed by Mr Marsden’s version, Eskom wanted to arbitrate, and the business rescue practitioners and OCM/OCH/Glencore did not wish to arbitrate, At this time, OCM's negotiating position was for a price of R300/tonne on September 17, 2015, for the remaining period of the CSA, but subject to Eskom waiving its penalties claim.* We rejected this proposal because Eskom was not waiving its penalties claim without an arbitration proceeding “7 1 325GWh of energy had not been available to the country due to load-shedding in 2015 at a cost to the economy of R74/kwh. “In terms of MMK 6 in Eskom Bundle 15 pp 169-171, er mene-55- 130. As I have testified before the Commission, the design of the CSA between Eskom and OCM, similarly to other coal supply agreements, contemplated that coal supply will, even if disputes arise, continue without interruption, The arrangements reflect that cessation of supply would not occur under any circumstances. The underlying premise of the agreements, including the OCM CSA, is that parties will find their remedies within the four corners of the agreement, with arbitration's eventual dispute resolution mechanism. 131. The long-term historical CSAs did not contemplate a business rescue process such as under the Companies Act, 2008, arising from alleged hardship. Most agreements were concluded long before the Companies Act of 2008. Hardship was catered for in the CSAs. 132, My testimony in this regard was placed before Mr Ephron‘. The Commission had hoped that Mr Ephron would controvert my testimony, but he did not. INQUIRY ADJOURNS INQUIRY RESUMES CHAIRPERSON: Okay, let us continue, Mr Seleka. ADV SELEKA SC: Thank you, Chair. Mr Ephron, if | understand you correctly, you are saying OCM did have the option to exit the coal supply agreement? MR EPHRON: No, not at all. * SCC Transcripts, Day 408, June 10, 2021, pp 57 - 58 ni133. 134, 136. -56- ADV SELEKA SC: So, it did not have the option to exit the coal supply agreement or to terminate it? MR EPHRON: No, it did not have that option. ADV SELEKA SC: Okay, well, because....[intervene] MR EPHRON: Sorry, did | not - what - did | not indicate that there was no option to exit? | mean, what | mentioned earlier was that | do not know of any agreements that allow you just to exit; if you want to exit, maybe there are. The evidence before the Commission that OCM did not have the option to exit the CSA and that parties had to find their remedies within the four corners of the CSA, with arbitration's eventual dispute resolution mechanism, is not disputed; yet the Commission ignored it. | dealt with this evidence in paragraph 314 of my sixth affidavit. The Commission has no discretion to ignore this evidence because it is within the Commission's terms of reference. The Commission was biased, and | submit that it failed to execute its task within its terms of reference. This is a reviewable irregularity. The viable solution for Eskom at the time would have been to take over the mining right from OCM and to appoint a contract miner to mine coal on behalf of Eskom. The CSA afforded Eskom the right to acquire the mining venture of OCM on terms regulated by the CSA. | made this proposal to Eskom. Eskom could not pursue the above option because of an opinion given by advocates Lideritz SC and Linda. The CSA had been suspended by the Sy Mn-5T- business rescue proceedings initiated by Glencore via the BRPs, and so too Eskom’s contractual right to acquire the mine. Placing OCH/OCM under business rescue and suspending the CSA was a stratagem by Glencore/OCHIOCM to stop Eskom from acquiring OCM mining rights on terms regulated by the CSA and to strongarm Eskom to conclude addendum 4. The finding that the “contractual situation with OCM had changed as of December 1, 2015” is not rationally connected to the evidence before the Commission. It should be reviewed and set aside 136. 137. Eskom met with Mr Ephron on September 3, 2015, after the BRPs stopped the coal supply from OCM on August 20, 2015. The abruptly halted coal supply in this manner was unprecedented in the history of Eskom. Mr Molefe, at the outset of the meeting with Mr Ephron, expressed his disappointment with the attitude and approach exhibited by the BRPs. He stated that the CSA provided for dispute resolution, and those procedures should be followed on an expedited basis. | added that the cessation of coal supply in this manner was unprecedented and that we at Eskom found it unacceptable, considering the existence of the dispute resolution mechanisms in the CSA MNVe.-58- 138. Mr Ephron did raise that arbitration takes time, and we countered that an arbitration agreement had already been concluded on December 12, 2013, nearly two years previously, and that it should not be problematic to expedite matters. 139. _ Regarding Eskom's pending penalties claim, we conveyed to Mr Ephron that Eskom regarded itself as entitled to the penalties claims and would persist in claiming them, if necessary, through arbitration, with or without OCM's hardship claim. We treated Tegeta no differently. We followed the arbitration process with Tegeta and settled the penalties claim following the legal advice from CDH. Regrettably, the legal advice from CDH was flawed. We cannot be blamed for that. The Commission failed to probe CDH on their bad legal advice. In this regard, the Commission could not conduct the task assigned to it through its terms of reference. | will deal with this later. 140. The background, apart from the arbitration agreement, was that Eskom's board had, on August 12, 2014, given a mandate for OCM’s hardship claim to be resolved at a price per tonne of R296/tonne exceeding what OCM had demanded at the time, i.e., R285/tonne. | confronted Mr Ephron with the fact that nearly two years had passed during which it should have been possible to resolve the hardship dispute by arbitration and that Eskom’s board had agreed to meet OCM's request for a coal price of R285/tonne that had been made before | approached the BTC on August 12, 2014 (as recorded in the £r- nye