Karpowership SA has fired back at claims that its potential R225-billion power supply deal with Eskom is tainted by corruption.

Explosive allegations were made by DNG Power Holdings, a rival bidder in the government’s Risk Mitigation Independent Power Producer Procurement Programme (RMI4P), in a court application filed last month.

DNG chief executive Aldworth Mbalati alleged that the tender had been manipulated to favour Karpowership, and that he had been the victim of a shakedown by senior government officials and a businessman associated with Minister of Mineral Resources and Energy Gwede Mantashe.

The tender was issued and adjudicated by Mantashe’s department, which selected Karpowership as preferred bidder for the lion’s share of 2 000MW to be supplied to Eskom.

But in a 59-page affidavit filed with the Pretoria high court last week, Karpowership business development director Mehmet Katmer turns the allegations on DNG: “DNG takes the opportunity of repeatedly making utterances of corruption surrounding the tender process … only because it was not appointed a Preferred Bidder. Yet, on its version it was aware of facts pertaining to this alleged corruption as far back as July 2020 — some 10 months ago and did nothing until its bid was disqualified.”

In his original affidavit, Mbalati alleged that he was approached by “a businessman with close ties to [Mantashe]” in July last year. The businessman told him the RMI4P tender would soon be released and that DNG “should be assisted by certain undisclosed parties should it wish to be a preferred bidder and ultimately be awarded the tender”. The businessman, he said, offered to “facilitate the relationship”.

Read — Powerships: Losing bidder claims ‘blatant corruption’, fingers Mantashe ‘associate’

This was followed, Mbalati said, by a meeting in a Pretoria restaurant in October with two senior officials from the department. One of the officials allegedly asked how he could “help” DNG’s bid, and when Mbalati declined, said: “One thing you must understand is that there is a system in this country and if you don’t work in accordance with that system you will fail, even if your project is the best.”

Mbalati alleged that when Mantashe named the preferred bidders in March, and DNG learnt it had been disqualified, the associate asked if he had “learned [his] lesson”.

In his answer, Karpowership’s Katmer states: “DNG claims that during these encounters, it was invited to unlawfully collude with state officials and their associates, who had fixed the outcome of the tender. DNG maintains that it refused to engage with these corrupt individuals and, as a consequence, its bid was disqualified.

“The apparent implication is that the successful bidders, who were appointed Preferred Bidders, accepted the invitation and unlawfully colluded with corrupt state officials. This implication is false, insofar as it relates to Karpowership.”

The main principal’s wife

The most direct evidence Mbalati had put forward to implicate Karpowership was a forwarded SMS that read: “We’ve got some intel from the main principal’ wife that our requested extension has been under consideration & they my may afford bidders a 3week delay in submission & it should be announced imminently.”

Mbalati claimed that a representative of Karpowership had approached Mantashe’s wife, Nolwandle, with a request to extend a key deadline, set for 30 October 2020. He further alleged that this had given Karpowership a critical advantage as it knew the extension would be granted whereas other bidders were kept in the dark and rushed to reach the deadline.

The extension was granted, as the message predicted, but Karpowership has now told the court that it did not take advantage of the extension and filed the required documents on 30 October like everyone else. “The date and time of Karpowership’s submission … ought to be recorded in the Department’s online portal’s logbook,” Katmer states.

Without this piece of evidence, DNG may struggle to make the case that the whole tender was tainted by corruption.

Nolwandle Mantashe previously told amaBhungane she did not “have a clue of the extension you talking about” and had not been approached by anyone about it. (Read Nolwandle Mantashe’s full response.)

Katmer states that Karpowership’s lawyers had requested a copy of the unredacted SMS, but that Mbalati refused to provide it.

He adds: “I cannot comment on whether the engagements between DNG and the state officials and [the businessman allegedly associated with Mantashe] occurred as described. Before reading the founding affidavit, I had no knowledge of such engagements.

“I am, however, concerned by DNG’s lack of action in relation to the allegations of corruption… DNG is only now in the process of finalising a criminal complaint against the alleged perpetrators. “DNG, he says, “sat idle awaiting the outcome of the bid process and only when its bid failed, it decided to raise these issues”.

If the events had in fact occurred, he argues, “DNG would have immediately spoken out”.

Shifting the goalposts

Throughout his affidavit, Mbalati alleged that numerous tweaks were made to the tender through a series of “briefing notes”, changes that shifted the goalposts for rival bidders and ensured Karpowership’s success.

AmaBhungane’s own investigation concluded that rules were set so as to exclude renewable energy projects and then further revised in ways that appeared to have benefitted Karpowership’s proposal to provide 1 220MW of gas-fired electricity.

Read
*Powerships: How the multi-billion-rand tender was (legally) rigged
*Powerships: How the tender kneecapped renewables and favoured gas

But Katmer criticises some of the examples that Mbalati used to demonstrate undue influence. “DNG’s narrative simply does not withstand scrutiny.”

In one example, Mbalati told the court that last-minute changes to local content requirements had weeded out the competition as many bidders who were unable to meet the strict 40% local content rule had already decided not to compete.

Katmer challenges this, saying that the option to obtain an exemption from the 40% rule was available to all bidders equally.

“Karpowership lawfully applied for, and was granted, an exemption of this kind by the [Department of Trade, Industry and Competition],” he states.

In another example, DNG had submitted to court that it understood that Karpowership had failed to put up a bid guarantee from a South African bank – a requirement of the tender which should have led to Karpowership being disqualified. Karpowership responded by providing the court with three bid guarantees from Investec, totaling R183-million.

The department is entitled to call in the guarantee if it turns out that bidders breached any law or if bidders file a non-compliant bid.

On this and other points, Katmer argues that Karpowership submitted a fully compliant bid, and won simply because it offered a more competitive price.

Putting lipstick on a pig

Karpowership also takes issue with Mbalati’s plea that the court puts DNG on the preferred bidder list.

DNG’s application had two parts: Part A sought to interdict the department from concluding any final agreements with the preferred bidders, while Part B made the unusual request for the court to order that DNG’s disqualification be set aside and that it be named a preferred bidder in Karpowership’s stead.

Katmer challenges the legal inconsistency in DNG’s plea, arguing that since DNG contends that the tender process as a whole was tainted by corruption, it should have asked the court to “declare the process as a whole invalid”.

Instead, “DNG opportunistically seeks an order substituting it as a preferred bidder”.

“This relief is incongruous with the claims made, and moral position adopted, by DNG in the founding affidavit,” Katmer argues.

No admissible evidence

Karpowership has challenged DNG to put up more evidence, failing which it has asked the court to “censure” DNG’s “reckless and manifestly unsubstantiated allegations” with a “punitive costs order”.

“[T]he more serious the allegation made by a litigant, the more cogent will be the evidence required. But that is where DNG’s application is sorely lacking. It constantly ascribes corrupt conduct to the respondents without any admissible evidence.”

DNG is scheduled to file a supplementary affidavit before 9 June. The case itself will only be heard in July, precipitously close to the deadline for the RMI4P’s financial close at the end of that month.

If Karpowership concludes a contract with government, it will start supplying 1 220 MW of power from five powerships moored in Richards Bay, Saldanha and Coega. The contract, estimated to be worth R225-billion, will run for 20 years at least.