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#StateCapturInquiry Former Optimum CEO Clinton Ephron will testify on the business rescue of that mining company before it was acquired by Tegeta with #Eskom @Eskom_SA help in late 2015. Proceedings begin at 10:00.
#StateCaptureInquiry Much of the #Eskom @Eskom_SA testimony @StateCaptureCom so far repeats what was discussed in @ParliamentofRSA’s inquiry into the parastatal and allegations of corruption, fraud and state capture (see below).
#StateCaptureInquiry Ephron is, says Advocate Vincent Maleka SC, able to talk about the late 2015 meeting at the Dolder Grand Hotel in Zurich, Switzerland which then Mineral Resources Minister Mosebenzi Zwane reportedly attended with Ivan Glasenburg of Glencore.
MT: #StateCaptureInquiry Ephron has arrived at the inquiry venue. There is a bevvy of lawyers here ahead of his testimony on Optimum and, it's expected, the Zurich meeting of late 2015. One man walks in carrying a file with the name 'ZWANE' on it.
#StateCaptureInquiry Chairperson Deputy Chief Justice Raymond Zondo has arrived. Proceedings are now underway. Maleka stands. He will lead Ephron's evidence. He mentions implicated persons have been notified.
#StateCaptureInquiry "For now we have not received any indication of what potential responses might be," says Maleka. He introduces Ephron and counsel for Glencore introduces himself.
#StateCaptureInquiry Ephron takes the oath. Maleka asks Ephron if he knows of allegations of state capture in relation to Tegeta's acquisition of Optimum. He confirms.
#StateCaptureInquiry Maleka refers to the @PublicProtector's report on state capture and asks Ephron about the degree of engagement between Glencore and personnel from the the Public Protector's office.
@PublicProtector #StateCaptureInquiry Ephron says that the evidence he will give today is similar to what Glencore presented to the @PublicProtector staff during the office's investigation into state capture allegations.
@PublicProtector #StateCaptureInquiry Maleka notes that Ephron and Glencore did not make submissions to @ParliamentofRSA's Portfolio Committee on Public Enterprises (PCPE). Ephron says they were not asked to, and he understands Glencore's input to the @PublicProtector was used.
@PublicProtector @ParliamentofRSA "This is the first time you present Glencore's version in a public forum," says Maleka. Ephron confirms. They discuss Ephron's career: he says he qualified as a CA in 1993, completed articles and then joined Glencore rising the ranks for 20 years before becoming Optimum CEO.
@PublicProtector @ParliamentofRSA #StateCaptureInquiry Ephron introduces the distinction between cost plus contracts versus fixed price contracts (with annual inflation readjustments) between #Eskom and Optimum, including prior to Glencore's involvement in the mine.
@PublicProtector @ParliamentofRSA #StateCaptureInquiry Maleka asks Ephron about the "security of supply" and how this varies according to whether or not a contract is a cost plus or fixed price contract. They then speak about maximum and minimum tonnages according to different contracts.
@PublicProtector @ParliamentofRSA #StateCaptureInquiry Maleka asks Ephron if Optimum coal mine has had a long life. Ephron says yes, and refers to his statement where he refers to Optimum coal supply to #Eskom @Eskom_SA since the 1970s.
@PublicProtector @ParliamentofRSA @Eskom_SA #StateCaptureInquiry Ephron reads from his statement, "As Eskom is Optimum's primary customer [...] the coal supply of Eskom is given preference."
@PublicProtector @ParliamentofRSA @Eskom_SA #StateCaptureInquiry Maleka confirms this means that the 6.5 million tonnes minimum, additional 3 million tonnes should be given preference, #Eskom can call on Optimum's export quality coal stock to acquire those volumes of supply.
@PublicProtector @ParliamentofRSA @Eskom_SA #StateCaptureInquiry Ephron refers to the hardship clause which is inserted in a long-term contracts such as a certain contract between #Eskom and Optimum initially entered for a period of 25 years, beginning in 1993, and later extended for another 10 years.
@PublicProtector @ParliamentofRSA @Eskom_SA #StateCaptureInquiry Ephron reads from a clause on penalties, what penalties will be incurred when poor quality coal is supplied. Maleka understands the contract to say that penalties "would not result in the termination, instead Eskom will enjoy a specific contractual remedy".
@PublicProtector @ParliamentofRSA @Eskom_SA #StateCaptureInquiry Maleka asks Ephron about the point of the penalties clause in the original Optimum and Eskom contract between Trans-Natal Collieries and Eskom from the 1970s. Maleka says it seems to him this element is designed to keep the contract alive. Ephron confirms.
@PublicProtector @ParliamentofRSA @Eskom_SA #StateCaptureInquiry Maleka asks Ephron about the Richards Bay Coal Terminal (RBCT). This will become important, says Maleka, because the asset of value Optimum Coal Terminal, which held a 9.5% stake in RBCT, becomes important later on.
@PublicProtector @ParliamentofRSA @Eskom_SA "The key thing is that it [the RBCT stake] is inextricably linked to the mine [...] if you do have a mine and you have export coal, then it's worth a significant amount of money," says Ephron. He;s highlighted the need for rail infrastructure to transport coal to the terminal.
@PublicProtector @ParliamentofRSA @Eskom_SA #StateCaptureInquiry Maleka and Ephron discuss Glencore's "arrival on the pitch" and various stakeholders in the Optimum acquisition, noting one company linked to now President Cyril Ramaphosa had a 9.64% stake which was sold in May 2014 when Ramaphosa returned to politics.
@PublicProtector @ParliamentofRSA @Eskom_SA #StateCaptureInquiry Proceedings resume. Below from @Fin24 are details of Ramaphosa's prior interest in Optimum coal through Lexshell which he sold to Pembani when he returned to politics.…
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry It is important to note the story shared above is from 2011. In another @Fin24 story from 2016, details of the Lexshell disposal of its Optimum stake to Pembani and Ramaphosa's shareholding are discussed.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry For more details on Ramaphosa's prior involvement in Optimum and disposal of the 9.64% Lexshell stake, see the following @Fin24 article from 2016.…
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Ephron has raised a point on the sizing of coal, and told the commission that as the Optimum site expanded the size of coal lumps diminished affecting how easy (or not) it was to handle coal from around 2013 but, says Ephron, the intrinsic value didn't change
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry By July 2014 this had become a problem, says Ephron, especially due to changes in commodity prices and concerns over coal exports being decreasingly unable to cancel out risk.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Ephron speaks of arbitration between Optimum (when owned by Glencore) and Eskom over the hardship clause. Ephron emphasizes the arbitration was only about the hardship clause and didn''t concern penalties whatsoever.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Ephron moves on from the 2014 arbitration (later dropped) to penalties and answers Maleka saying that penalties were an "ongoing thing" distinct from the arbitration. He says the penalties related to the size of the coal lumps (which had diminished) and ash.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Maleka asks if Glencore paid penalties to Eskom. Ephron eventually confirms, indicates that is part and parcel of the work of mining. Maleka then asks about why #Eskom initiated discussions with Glencore over Optimum in light of penalties, a hardship problem.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Ephron speaks of a decision to close the open cast section at Optimum in order to reduce costs. He says they then focused on providing coal to #Eskom (and not exporting coal).
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #stateCaptureInquiry Ephron speaks of a R480 million cash injection from Glencore. Maleka raises a R2.5 billion facility with a consortium of banks. Ephron says, as he remembers it, by the time Glencore gave Optimum a cash injection the R2.5 billion facility had been exhausted.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Ephron mentions Basis Point Capital (BSP) and says it was appointed, paid for by Eskom. Maleka asks Ephron if he knows people associated with the company and Ephron says he does not. If you search BSP you will find some interesting reports on the late CEO.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry When Glencore acquired Optimum in 2012 the head of coal Tor Peterson said, “South Africa is an important producer to supply the growing Chinese and Indian markets, so we are delighted to add to our business in the country, with Ramaphosa as our partner."
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry The Executive Procurement Committee of #Eskom had reportedly approved a changed version of the contract between Eskom and Optimum in early 2015. Ephron says, "Mr Johann Bester [of Eskom] advised me [...] it may have been telephonically. I don't recall."
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry This relates specifically to a fourth addendum to the Coal Supply Agreememt (CSA) between Eskom and Optimum in 2015. Ephron indicates Bester gave him the impression the approval needed to be passed by the ExCo at #Eskom @Eskom_SA too.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Ephron says he met with Brian Molefe on 18 May 2015 after repeated attempts to meet with him. Maleka asks about the discussion.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Ephron says of Molefe, "He said to me that Eskom would not be amending the terms of the CSA and that it would continue to enforce its rights in terms of the contract and no amendments would be considered until the end of the contract."
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Maleka asks how Ephron felt after the apparent sudden change of heart by Eskom. "Devastated," says Ephron. Zondo confirms there had been optimism about the fourth addendum before the change of guard at Eskom in early 2015. Zondo adjourns for lunch.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Proceedings resume. "We'd been down a long [road] of negotiation with Eskom and there was a significant amount of history regarding the negotiation," says Ephron.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Ephron says that Glencore thought they had resolved the Optimum saga, they thought a resolution had been achieved only to find they were stonewalled in 2015. He reads from a letter of 22 May 2015 to Molefe following the meeting at Megawatt Park.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry In the letter there is reference to ongoing negotiations for two years and a warning that shareholders could withdraw financial support based on the #Eskom position, this could compel the company to enter either business rescue or liquidation status.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 We had a meeting which was myself, it was Glencore's Group CEO Mr Ivan Glasenburg and Mr Molefe accompanied by a number of personnel from Eskom," says Ephron of a meeting on 11 June 2015. "Once again it was the same response: Eskom wasn't willing to negotiate."
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptueInquiry Maleka asks why Molefe wouldn't engage on the substance of Optimum's presentations and Ephron said, "I don't know. I can't speculate."
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Maleka highlights that Molefe's power is not private power, says Ephron is telling the inquiry that Molefe was refusing to consider an amendment to a contract between Eskom and Optimum under Glencore without engaging on the merits. Ephron confirms.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry "It was a stonewall discussion, Deputy Chief Justice. It wasn't a negotiation it was a position," says Ephron of the changed view expressed by Molefe regarding addendum four.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Zondo asks if they asked Molefe "why Eskom was so against the agreement" and Ephron says they did ask certain people at Eskom, who "were as perplexed as we were" and some were suspended afterward.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry "The power station was designed for this coal," says Ephron of Hendrina. "We knew that it would be a huge problem if the mine did not continue and the mine could not continue after 2018. "
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry "It should never be a just in time situation [...] purchasing of coal should never be just in time. There's no excuse for that," says Ephron. He's said that Eskom negotiates the renewal of contracts well in advance, it is not unusual.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Maleka refers to paragraph 19 of former Mineral Resources Minister Ngoako Ramatlhodi's written statement. Ramatlhodi asserted Molefe suspended the Optimum contract and Molefe gave the reason that Eskom was owed R2 billion by Glencore.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Molefe was refusing to meet with Glencore to resolve the issue, Ramatlhodi says he met with Molefe to persuade Molefe to meet with Glencore; the same evening Molefe phoned Ramatlhodi to say Dr Ben Ngubane wanted to meet Ramatlhodi.
[NOTE] My cell phone’s signal failed so there is a good chunk of Ephron’s testimony I have not been able to share live. Alas. Alack.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 Maleka cited Ramatlhodi on a meeting with Ngubane around September 2015 during which Ramatlhodi says Ngubane instructed him to retract all Glencore-owned mining licenses and give Ngubane an answer during that meeting as Ngubane said he needed to tell the President that day.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCapatureInquiry Ephron has been talking about the negotiations while Optimum was under the control of BRPs in 2015. He's described a Megawatt Park meeting with himself, Molefe and Matshela Koko which Ephron says "wasn't very pleasant".
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 During this meeting, says Ephron, Eskom instructed Glencore to resume coal supply to Hendrina. By this time it had halted as the mine was in business rescue. Maleka suggests this meeting undermined legal process, but Ephron says the BRPs knew about it, he spoke to them afterward.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Ephron says after the meeting he consulted with the BRPS and Glasenburg of Glencore; they agreed to resume providing coal to Hendrina on a short-term basis at R150 per tonne on condition Eskom pay weekly. Then he raises the second purchase offer from Oakbay.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Maleka asks Ephron about the mention in his statement of then President Jacob Zuma's appointment of Mosebenzi Zwane as Mineral Resources Minister on 22 September 2015. It is, indicates Ephron, included as part of the sequence of events, a statement of fact.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Ephron describes input from two third parties to the proposed purchase of Optimum from Glencore to Oakbay. The Deputy Director General of Mineral Resources told Ephron it would make more sense to sell more than the mine (so, other assets like the RBCT stake).
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Now on to the Zurich, Switzerland meeting. Ephron testifies Zwane's office contacted Glasenburg's office in Switzerland to invite Glasenburg to a meeting. "This is what I am told is 100% accurate," says Ephron.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Ephron then deals with a different meeting in which he and Ajay Gupta were present. During that meeting, says Ephron, he told Gupta that the R1 billion offer from Oakbay to buy all Optimum's assets (including the RBCT stake and Koornfontein) was refused.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Maleka moves on to the Section 54 notices issued to Glencore which were "unduly harsh and disproportionate" and "frivolous" before Maleka highlights one notice related to an incident with a truck, yet called for the halting of underground operations.
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 Ephron says it would have been very unusual for the inspectors to work over the weekend. Maleka has highlighted they were issued on a Saturday. "At the time we thought it was a clear warning shot from the DMR [...] to our mind it implied we needed to support the Optimum sale."
@PublicProtector @ParliamentofRSA @Eskom_SA @Fin24 #StateCaptureInquiry Zondo adjourns for five minutes. Today's proceedings will resume and continue until about 16:35.
#StateCaptureInquiry Proceedings have resumed. Ephron refers to example in his statement of instances used as grounds for Section 25 notices against Glencore, issued by DMR in the latter part of 2015 and, on his version, based on frivolous reasons.
#StateCaptureInquiry Ephron has told Zondo that these notices (when duly imposed) perform an important function and safety is important but suggests in these cases they were applied by DMR as a form of pressure regarding the sale to Optimum.
[CORRECTION] These are Section 54 notices not Section 25 notices. My apologies for the error.

#StateCaptureInquiry Ephron refers to the cessation date for the CSA in December 2015 and Glencore deciding to, basically, take a certain fee on the chin. “A very tough decision,” says Ephron. Maleka returns to the Zurich meeting.
Maleka refers to two dates: 1 and 2 December 2015. “This was advised to me by Mr Glasenburg. This is the meeting I was not present at,” says Ephron. “A meeting was held [...] at the Dolder Hotel in Zurich. I understand that the meeting was also attended by Mr Salim Essa.”
#StateCaptureInquiry Ephron says Glasenburg was told when he asked about Essa’s status that Essa was an advisor to Zwane. He reports Zwane saying to Glasenburg that Zwane “was sure” Glencore and the Guptas could reach an agreement on Optimum. Ephron reiterates he was not there.
#StateCaptureInquiry Ephron says he understands from Glasenburg that he relayed to Zwane that Glencore was willing to sell Optimum but at a reasonable price and the R1 billion offer from Oakbay for all the Optimum assets was not acceptable to Glencore.
#StateCaptureInquiry Bear in mind this is information Glasenburg related to Ephron. “This meeting was set up a week before,” says Ephron. He’s testified it was initiated by Zwane’s office. Maleka moves on to the meeting of 2 December at the same hotel at which Ephron was present.
#StateCaptureInquiry Ephron says this meeting was, he understands, called by Rajesh “Tony” Gupta. Ephron says he flew to Zurich, Switzerland at Glasenburg’s request. Maleka notes Ephron told another Gupta brother the R1 billion offer was dissatisfactory to Glencore.
#StateCapatureInquiry Ephron says that Zwane, Essa, Gupta, Glasenburg and Ephron attended the first part of the meeting in the morning of 2 December 2015 in Zurich, Switzerland at the Dolder. He says it was not clear at first if Essa was there for Zwane or the Guptas (touché).
[JUST IN] #StateCaptureInquiry Glencore’s Ephron has *under oath* testified on a 2015 meeting in Zurich, Switzerland at which he says Zwane, Rajesh “Tony” Gupta, Essa, Glasenburg and Ephron himself were present. This is HUGE. Zwane has long denied the meeting ever occurred.
#StateCaptureInquiry “Mr T Gupta also spoke about the rehabilitation trust funds,” says Ephron reading from his statement. “He request that OCM concert the rehabilitation funds into cash equivalents.” Glencore saw no issue then. “I still agree with it now,” says Ephron.
#StateCaptureInquiry “It is absolutely critical that the cash stays in the trust,” says Ephron. Maleka pushes back and say there is a lot of concern about the use or misuse of trust funds for Koornfontein and Optimum, and had to go to court to halt the cash being moved out.
#StateCaptureInquiry Ephron reads from his statement where Glencore justifies its decision to sell Optimum to Oakbay (at about two-and-a-half times the R1 billion offer) arguing the offer discussed in Zurich was commercially viable.
Ephron concedes there was pressure on Glencore, if there had been negotiations on the CSA from 2015 things could’ve been different but, in effect, at the end of the day there was a commercially viable offer on the table. I’d add Glencore was under pressure from Eskom and the DMR.
#StateCaptureInquiry “We were suspicious of them at the time,” says Ephron of the third parties to the Optimum sale. He says after the ‘State of Capture’ report release, they could “join the dots” in hindsight.
#StateCaptureInquiry Maleka asks Ephron what is his view of things. “I think it is unfair for me to speculate her. I don’t think it is my place to do that. It is my place to give you objective answers,” says Ephron. “Above my pay grade,” he late adds.
#StateCaptureInquiry “Oakbay received all the assets. Oakbay bought all the assets of OCM in the end,” says Ephron. Maleka asks about the status of the RBCT status currently. Ephron dealt with Optimum coal mine’s status earlier. He understands “zero” coal is supplied to Eskom.
#StateCaptureInquiry Zondo thanks Ephron, says for now he is excused. He could be called to come back. Maleka announces some addenda and says they will be processed. Tomorrow, Trevor Manuel will testify on Fikile Mbalula’s comments in an NEC. General Nyanda will speak, too.
#StateCaptureInquiry Zondo adjourns. Proceedings resume at 10:00 tomorrow.
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