Dear Reader:

Electric shock

Through the fog the truth emerges.
Secret contracts concluded by Eskom since 2007 have resulted in one-trillion-rand of Eskom revenue going to waste or being stolen.

Granting an application by the civil action group Outa, the National Energy Regulator (Nersa) has given Eskom until August 31 to provide information that the public utility company had hoped to keep secret – such as what it pays each of its coal suppliers – to support its application for yet another large electricity tariff hike in 2018.

Eskom spokesperson Khulu Phasiwe told Fin24 that they would reluctantly comply. “We have no choice. We respect the authority of the regulator, but will study the full decision to understand the full implications. 

The “full implications” of the order are obvious, says Outa’s energy head, Ted Blom. “Eskom had previously blind-sided the energy regulator by saying it was operating efficiently and warranted large tariff increases.

“But recent revelations about corruption and irregular coal contracts have shown this was patently a massive lie perpetuated from 2007 onwards. As a result, more than one trillian rand in Eskom revenue has been stolen or gone to waste,” said Blom.

To grasp the implications, see our report on the desperate state of the 569 informal settlements around Durban, on page 20. To provide shelter and sanitation for the 238,000 families that live in them would cost R45bn. The city can afford only a fraction of that. Now do the social arithmetic. With the money Eskom is estimated to have corruptly squandered over the past ten years, 20 times that number of homeless people could have been provided with a home and basic sanitation.

Dirty laundering

A July GuptaLeaks exposé showed how the Free State provincial government had picked up the tab for the “event of the millennium”, as the Gupta son’s wedding was 
described by KPMG Africa’s then-chief executive Moses Kgosana. He and three other KPMG partners attended the lavish Sun City affair.

AmaBhungane and Scorpio’s analysis of leaked emails has laid bare an intricate web of money transfers and laundering in 2013 by companies controlled by the Gupta family. KPMG were the auditors of Linkway Trading, the Gupta company that played a crucial role in allowing the diversion of a massive government subsidy earmarked for the Free State’s Vrede dairy project to pay, instead, for most of the wedding expenses – R30 million to be exact.

(The Vrede dairy herd, deprived of maintenance funding, were callously left to starve and die.)

Audit watchdog IRBA, the Independent Regulatory Board for Auditors, has started an investigation into the 2014 audit of Linkway Trading.

KPMG should have stopped working for the Gupta companies earlier than March 2016, “given the existing socio-political environment”, was the only concession Trevor Hoole, CEO of KPMG SA was prepared to make in a statement issued on August 11.

Neither a KPMG review of Gupta-owned Linkway Trading, nor the broader review into professional services rendered to the wider Gupta group had, to date, found any evidence that KPMG “in any way supported or condoned alleged tax evasion or money laundering, nor that there was any dishonesty by the teams,” he said

But, just two days later, Hoole – apparently under pressure from his international partners – changed his tune and announced that the audit company had suspended the lead audit engagement partner dealing with the Gupta businesses, and that two KPMG partners had been “relieved of their board and executive positions” pending the outcome of comprehensive reviews. None of them were named.

The final irony: on its website, KPMG describes itself as “a market leader in money laundering prevention”.

Sygnia CEO Magda Wierzycka, after learning of KPMG’s role as auditor of the Gupta companies and as authors of a SARS report that was used to engineer Pravin Gordhan’s downfall, fired KPMG as her company’s auditors: “I believe that companies that show complacency which aids and abets corruption, should be made to pay,” she told City Press.

Now turn to page 10 and see how KPMG has had it coming for a long, long time.  After that, see who sticks with KPMG – and wonder why.

The Editor

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