A secret Eskom dossier has revealed that Eskom has been supplying
electricity to BHP Billiton at 12c a
kilowatt hour - below the cost of electricity production *1
The secret pricing deal with the multi-national company to power its
massive aluminium smelters accounted for the bulk of Eskom's R9.5
billion loss last year.
Eskom has special secret price deals with BHP Billiton and Anglo
American, which use nine percent of all electricity generated in South
This emerged during a meeting yesterday of the parliamentary portfolio
committee on public enterprises, where Eskom executives made a
presentation to MPs on the utility's controversial special pricing
While Eskom made their presentation, Democratic Alliance MP Pieter van
Dalen sat in the front row with his arm on a thick blue ring-back file,
marked in red on its spine: "SECRET/GEHEIM".
At question time, Van Dalen tapped his fingers on the file and said he
had information that Eskom was selling electricity to BHP Billiton for
12c a kw/h. This was done via Motraco, a joint venture company between
South Africa, Mozambique and Swaziland.
He added that his information was that
the company's three aluminium smelters contributed a mere 0.1 percent to
and that BHP Billiton owed
. He said Eskom's price of 12c was a case of "giving
electricity away" to BHP Billiton.
Asked by the committee chairwoman, Vytjie Mentor, about the file that he
appeared to be referring to, Van Dalen said he could not hand it over to
the committee because it was secret.
"Who made it secret?" she asked.
"Eskom itself," Van Dalen replied.
She ruled that Van Dalen was "out of order" for accepting the secret
Van Dalen said: "But if Eskom could say
whether it is a lie or the truth.
"I'm ruling you're out of order ... You should not tempt employees to
give you secret information," Mentor said.
When it was Eskom's turn to reply to a list of questions put to them by
the MPs, a sober-looking Makwana began: "I've just been informed of a
form of crime with an MP, indicating a serious leaking of information
out of our system. I will find out what I should do in that regard."
Later when ID MP Lance Greyling asked Eskom to confirm the 12c kw/h,
Makwana replied: "I would prefer to respond in writing because it is
more than face value. There are other components of value embedded in
Makwana told the committee that Eskom had reached an in principle
agreement with BHP Billiton that would release it from the long-term
tariff agreement. Attempts to renegotiate a similar contract with Anglo
American was proving more difficult.
Makwana said "95 percent of the liability" had been eradicated with the
agreement signed on March 31. Eskom hoped they would sign a binding
agreement on May 27, once it had been subject to an audit.
The special low tariffs had been
negotiated in a different era, prior to 1994, when there was a surplus
of electricity *3.
The BHP Billiton electricity contracts were to supply electricity
to its Mozal and Hillside aluminum smelters. Makwana said Eskom had been
"held to ransom" by these agreements, which linked the electricity
tariff to the aluminium price, which had dropped in the global economic
With acknowledgements to
and Cape Times.
*1 When I started
doing these calculations in March 2008, because it was so secret, I used
R0,29 per kWh as a worst case.
In reality the current price is R0,12 per kWh.
I believe it has been as low as R0,06 or R0,07 per kWh
*2 Like I was saying.
*3 This is just so much nonsense.
While it is true that these arrangements originated in the pre-1994 era,
they were renegotiated by the current government in the mid-nineties.
Indeed the following person was instrumental in re-negotiating these new
supply agreements :
Dr Xolani Humphrey Mkhwanazi
Synopsis President and Chief Operations Officer: Aluminium South Africa
at BHP Billiton;
Date of Birth 25/03/1955
Place of Birth Hlabisa, KwaZulu-Natal
Country of Residence South Africa
Nationality South African
President and Chief Operations Officer Aluminium South Africa at BHP
Chief Executive Bateman Africa (Pty) Ltd Boksburg, Gauteng 2004 2005
Chief Executive Officer National Electricity Regulator South Africa 1999
You see, he did this in 2004 as NER and then became President and Chief
Operations Officer Aluminium South Africa at BHP Billiton in 2005.
Of course it does.
And was this pre 1994?
Dr Xolani Humphrey Mkhwanazi's personal biggest ever disappointment:
- "Being accused of corruption at
the National Electricity Regulator"
And don't think for one nanosecond
that Dr Mkhwanazi did not go through the revolving door from the NER to
BHP by working at Bateman.
Although is is indicated that Mkhwanazi joined BHP in 2005, in fact he
became the Chief Operating Officer of BHP Aluminium South Africa on
2005-02-01 having been appointed by 2005-01-10.
He left the NER at the end of April 2004.
The "cooling-off" period was just 8 months - just long enough to lose
sight of this enormous conflict of interest.
Eskom and/or BHP directly owe this
country's citizens and taxpayers several tens of billions of Rands.
Indirectly, due to the loadshedding which would otherwise not have
occurred, Eskom and/or BHP owe this country's citizens and taxpayers
several hundreds of billions of Rands.
This is corruption on a grand scale - charge them.