Eskom Holdings Soc Limited v Econ Oil & Energy (Pty) Ltd and Others (21/3970) [2021] ZAGPJHC 70; [2021] 3 All SA 857 (GJ) (29 June 2021)

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[2021] ZAGPJHC 70
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Eskom Holdings Soc Limited v Econ Oil & Energy (Pty) Ltd and Others (21/3970) [2021] ZAGPJHC 70; [2021] 3 All SA 857 (GJ) (29 June 2021)

IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
Reportable:
Yes
Of
interest to other judges: Yes
29
June 2021
Vally J
CASE
NO: 21/3970
In
the matter between:
ESKOM HOLDINGS SOC LIMITED
Applicant
and
ECON OIL & ENERGY (PTY)
LTD
First Respondent
FFS REFINERS (PTY)
LTD
Second Respondent
SASOL OIL (PTY)
LTD
Third Respondent
BRITISH PETROLEUM SOUTHERN
AFRICA (PTY) LTD
Fourth Respondent
ENGEN
PETROLEUM
LIMITED
Fifth Respondent
EXOL
OIL REFINERY (PTY)
LTD
Sixth Respondent
REFINEX
(PTY)
LTD
Seventh Respondent
NATIONAL
TREASURY
Eighth Respondent
KEVIN TRISK NO
Ninth Respondent
JUDGMENT
Vally
J
A
INTRODUCTION
[1]
Econ Oil & Energy (Pty) Ltd (Econ), the first
respondent, is firmly of the view that it holds a contract with the
applicant,
Eskom Holdings SOC Limited (Eskom). The alleged contract
is for the supply of fuel oil for a period of five years commencing 1
October 2019. The total value of the contract is approximately R8bn.
The contract is supposed to have resulted from a tender issued
by
Eskom referred to as Bid Corp 4786 (the tender). Eskom maintains that
the process adopted in executing the tender by various
committees and
individuals within Eskom was blemished by numerous irregularities,
resulting in an outcome that is unlawful. Following
the process, a
recommendation was made to its Board of Directors (Board) to award
the tender to various parties, Econ being one
of them. Only Econ
maintains that it has a valid and binding contract with Eskom. It is
Eskom’s case that as the process
and outcome of the tender is
unlawful, the decision of its Board to award the tender to various
parties should be reviewed and
set aside. It seeks, in addition, a
declarator to the effect that no binding contract was ever concluded
between itself and Econ.
The review and the declarator are the
principal issues to be addressed in this matter. There are other
issues ancillary to these,
but their outcome is contingent on the
outcome of the principal issues.
[2]
A conditional counter-application has been
brought by Econ where it seeks the following relief: (i) a declarator
that the contract
between it and Eskom subsists, (ii) that Eskom be
ordered to specifically perform its obligations in terms of the
contract and,
(iii) that a decision by the ninth respondent –
who was appointed to adjudicate on this issue - holding that such a
contract
subsists be found to be correct, and that the remedy granted
to Econ in terms of his adjudicative powers be made an order of this

court. It is patent that the conditional counter-application depends
on Econ succeeding in resisting Eskom’s case on the
two
principal issues. If not, the conditional counter-application falls
away.
B
INTERLOCUTORY APPLICATIONS
[3]
There are three interlocutory applications: two
by Eskom and one by Econ. All relate to the admission of new evidence
after pleadings
had closed. Eskom does not oppose the application of
Econ, but on the other hand Econ opposes Eskom’s applications.
In my
judgment the opposition was well taken. The evidence that Eskom
wishes to have admitted concerns two reports, one by Mr N Cassim
SC
(Mr Cassim) and one by Mr I Semenya SC (Mr Semenya). The report by Mr
Cassim deals with a disciplinary hearing against the Chief

Procurement Officer, Mr Solly Tshitangano (Mr Tshitangano) for
misconduct relating to a number of issues, one of which concerns
the
tender and the alleged contract concluded between Eskom and Econ
after the tender was processed. At first blush it would appear
that
the contents of Mr Cassim’s report are pertinent, if not
central, to the determination of the principal issues in this
matter,
but upon further reflection it becomes clear that its value for such
determination is at best peripheral. The issues and
evidence before
Mr Cassim were not exactly the same as those before this court. His
findings have no bearing on the outcome of
this case, and it is trite
that those findings are no more than his opinions. Similarly with the
report by Mr Semenya. The issue
before him was the veracity of
certain allegations made by Mr Tshitangano against the Chief
Executive Officer of Eskom, Mr Andre
Marinus De Ruyter (Mr De
Ruyter), some of which trespass on issues raised in this matter but,
once again, the determination of
those issues by Mr Semenya has no
value for the determination of the principal issues in this matter.
Accordingly, both applications
stand to be dismissed with costs. As
for Econ’s application, it was unopposed and is therefore
granted.
C
THE MERITS OF THE CASE
(i)
Did Eskom resolve to, as a first option, purchase certain types of
fuel oil from refineries before seeking recourse to blenders?
[4]
It is
Eskom’s case that in a quest to reduce its costs of production
its Board resolved on 30 January 2019 to adopt a new
strategy for the
procurement of fuel oil. The core element of the strategy was to
procure as a first option certain types of fuel
oil directly from
refineries and not from manufacturers, blenders, distributors,
importers and wholesalers who all acquire their
fuel oil from
refineries and sell it on to Eskom.  Econ denies that Eskom
adopted the said resolution. To this end, Econ draws
succour from a
statement made by a Board member, Mr Sifiso Dabengwa, (Mr Dabengwa)
who insisted that no such resolution was ever
passed – see [37]
below
–
and
points out that Eskom is unable to furnish a written copy of the
resolution, or to show from the minutes of the meeting that
such a
resolution was passed.
[1]
In
contrast to Econ, Eskom draws on a number of facts to show that the
resolution was passed by the Board.
[5]
The facts Eskom draws attention to are:
a.
The minutes of the said Board meeting record that
Mr Tshitangano raised the issue of purchasing fuel oil from
refineries only. According
to the minute a resolution in the
following terms was adopted:
‘
[Mr Tshitangano] is
authorised to review the fuel/oil contract and take the necessary
steps including taking into consideration
… further
negotiation with the refineries.’
b.
On 1 February 2019, Mr Tshitangano, who was
present at the meeting, wrote to National Treasury reporting on the
decision of the
Board:
‘
1.   Eskom Board
held a meeting on 30 January 2019, in which a new strategy for the
procurement of fuel oil, diesel and
liquid sulphur to all Eskom’s
coal-fired Power Stations, was approved in order to save costs. The
strategy was recommended
by National Treasury on a letter dated 30
November 2018 …
2.    The Board
directed management to procure fuel oil, diesel and liquid sulphur
directly from refineries/manufacturers
and in cases where there is a
government agency, the government agency will be approached first, as
directed by paragraph 4.4.1(iii)
of “Supply Chain Management
guidelines on the implementation of the demand management”
which requires an institution
to consider optimum methods to satisfy
the need.
3.    The
refineries/manufacturers will be requested to submit proposals or
quotations using a closed bid process.
Eskom will comply with the
principles of section 217(1) of the Constitution because refineries
will compete against each other.
4.    The Board
further resolved that Bid Corp 44403 for the supply, delivery and
off-loading of heavy fuel oil (HFO)
to Eskom’s coal-fired power
stations should be cancelled due to material irregularities in the
tender process. The bid was
advertised to replace the interim
contract.
5.    National
Treasury is requested to support the implementation of the optimum
procurements approach approved
by the Board.’
c.
National Treasury responded about two weeks later
stating that:
‘
National Treasury support
the implementation of the optimum procurement approach on condition
that it is cost-effective for the
business and that refineries
compete against each other.’
d.
On 7
February 2020, long after the tender was already awarded to Econ and
others, the Interim Group Executive: Legal and Compliance
officer of
Eskom Mr Bartlett Hewu (Mr Hewu) made reference to this decision when
he compiled a memorandum for the Board on 7 February
2020.
[2]
He wrote:
’
5.
The Board, at its subsequent meeting held on 30 January 2019,
approved a new strategy for the procurement
of fuel oil by Eskom for
all its coal-fired power stations directly from the refineries as a
cost saving measure.
…
19.     If
Eskom were to proceed with the conclusion of the contracts with
successful bidders under the circumstances,
it will be in defiance of
the Board Strategy and thus will result in the exclusion (for 5
years) of other suppliers such as BP
and Engen who have the product
at competitive prices.’
It has to be borne
in mind that he was addressing the very Board that is supposed to
have adopted the resolution.
e.
Mr Tshitangano and Mr Hewu have both provided
sworn testimony – in the form of confirmatory affidavits –
to this effect,
which is not refuted but instead is only met with a
bare denial by Econ. In fact, Mr Tshitangano avers in his affidavit
that he
was present at the Board meeting of 30 January 2019, and that
the decision was indeed passed. Hence his letter to the National
Treasury.
f.
In addition there is sworn testimony from a Mr
Calib Cassim (Mr C Cassim), the Chief Financial Officer of Eskom, who
says that he
was present at the Board meeting of 30 January 2019
where ‘a new strategy for the procurement of, amongst others,
fuel oil
for Eskom’s coal fired power stations was approved in
order to save costs. In terms of this new strategy, the board had
decided
to procure fuel oil from the refineries.’
[6]
There are other facts that also bear reference on
this issue. They are:
a.
The tender document is crafted in a manner that
gives priority to refineries over blenders;
b.
The employees who assessed the bids operated on
the basis that the resolution was passed.
[7]
The
denial by Econ is supported only by the statement made by Mr Dabengwa
that no such resolution had been passed. On the other
hand, the facts
set out in [5] and [6] above, are more detailed and at least
supported by the minute of the relevant Board meeting,
even though it
is not as explicit on this issue as it could have been. At the very
least though, it records that Mr Tshitangano
should explore the
possibility of sourcing fuel oil from the refineries in a manner that
does not compromise the efficiency or
security of the supply. And two
days later Mr Tshitangano sought National Treasury’s approval
to proceed with this mandate,
which he characterised as being a ‘new
strategy for the procurement of fuel oil’. The resolution, his
letter, National
Treasury’s response, the conduct of the
employees during the process of executing the bids and finally Mr
Hewu’s memorandum
are all primary facts. By dint of inferential
reasoning they allow for the drawing of a conclusion as to the
existence or otherwise
of another secondary fact:
[3]
that the resolution as claimed by Eskom had been passed by the Board
on 30 January 2019.  Put differently, on the established
facts
the most probable inference to be drawn is that a resolution to the
effect claimed by Eskom was passed by the Board on 30
January 2019.
And, so I hold.
[8]
This fact must bear weight when scrutinising the
outcome of the tender.
(ii)
Should the decision to award the tender to Econ, FFS and Sasol be
reviewed and set aside?
[9]
The tender trailed the resolution. It was a
closed tender issued on
24 May 2019. It was
issued to seven refineries and four pre-qualified blenders and
manufacturers for the supply, delivery and off-loading
of fuel oil
for a period of five years. The total value of the tender was more
than R14bn. The tender invited the participants
to supply, deliver
and off-load fuel ‘to all Eskom’s coal fired power
stations on an “as and when” basis
for a period of five
years’. The tender identified three different grades of fuel
oil that were required,
viz
,
Grade 1, Grade 2 and Grade 3. A specific grade was identified for a
specific power station. Importantly the tender document identified
a
hierarchy of bidders with refineries placed on top and blenders below
that. The tender was to be evaluated in three stages as
follows:
(i)
Stage 1: Basic Compliance;
(ii)
Stage 2: Mandatory tender returnables; and
lastly,
(iii)
Stage
3
[4]
: The scoring system would
be that outlined in the Regulations made in terms of the Preferential
Procurement Policy Framework Act,
2000 (the PPPFA), where the total
would be 100 points and the lowest acceptable tender would score 90
points, while the remaining
10 points would be awarded for ‘specific
goals’ which include contracting with persons who ‘were
historically
disadvantaged’ by being unfairly discriminated
against on the basis of ‘race, gender or disability’.
This is
referred to as the 90/10 points scoring system.
[10]
The tender document repeats Regulation 7 of the
Regulations proclaimed in terms of the PPPFA (Regulations). The
relevant portions
of  Regulation 7 are:
‘
7
90/10 preference point system for acquisition of goods or services
with Rand value above R50 million
(1)   The following formula
must be used to calculate the points out of 90 for price in respect
of a tender with a Rand value
above R50 million, inclusive of all
applicable taxes: Where Ps = 90(1 - (Pt – Pmin/Pmin)) Ps =
Points scored for price of
tender under consideration; Pt = Price of
tender under consideration; and Pmin = Price of lowest acceptable
tender.
…
(8)   Subject to
subregulation (9) and regulation 11, the contract must be awarded to
the tenderer scoring the highest
points.
(9)   (a) If the price
offered by a tenderer scoring the highest points is not
market-related, the organ of state may
not award the contract to that
tenderer.
(b) The organs of state may-
(i) negotiate a market-related
price with the tenderer scoring the highest points or cancel the
tender;
(ii) if the tenderer does not
agree to a market-related price, negotiate a market-related price
with the tenderer scoring the second
highest points or cancel the
tender;
(iii) if the tenderer scoring the
second highest points does not agree to a market-related price,
negotiate a market-related price
with the tenderer scoring the third
highest points or cancel the tender.
(c) If a market-related price is
not agreed as envisaged in paragraph (b)(iii), the organ of state
must cancel the tender’
[11]
These were the principles by which the tender
would be implemented. By including them in the tender documents
Eskom, while alerting
all the tenderers to them, committed itself to
upholding them. More importantly, in terms of the provisions of the
PPPFA and the
Regulations they are the peremptory requirements by
which the tender was to be effected.
[12]
Bids were received from Econ, FFS Refineries
(Pty) Ltd (FFS), the second respondent, Sasol Oil (Pty) Ltd (Sasol),
the third respondent,
British Petroleum Southern Africa (Pty) Ltd
(BP), the fourth respondent, Engen Petroleum Limited (Engen), the
fifth respondent,
Exol Oil Refinery (Pty) Ltd (Exol), the sixth
respondent, and Refinex (Pty) Ltd (Refinex), the seventh respondent.
[13]
Evaluation of the bids commenced with a review on
paper by the Chief Engineering Advisor of Eskom of the technical
submissions by
the bidders. On 28 June 2019 he issued a letter
explaining his findings: noting that a peremptory requirement for the
supply was
that the successful bidder must not be an intermediary but
an original refiner or manufacturer of the fuel supplied, he
concluded
that Econ and FFS should be allowed to go to the next phase
of the evaluation only once Econ provided a ‘manufacturing
certificate’,
and that while Exol and Refinex met the
requirement of being an original manufacturer their fuel had to be
evaluated for compatibility
with Eskom’s system before they
should be allowed to proceed to the next phase.
[14]
The next phase of the evaluation involved an
assessment of the financial components of the respective bids by the
Corporate Finance
Division of Eskom (Corporate Finance). One of its
senior managers reported on 5 July 2019 on this aspect. He recorded
that Corporate
Finance discovered that while a technical evaluation
was done for some of the suppliers, a technical evaluation was still
required
for the major refineries, as well as the blenders which are
also manufacturers, in order to ensure that all the tenderers
remained
technically compliant. Without this it was impossible to
undertake a price comparison exercise. He concluded the report :
‘
Based on our work
described in this report, the information provided to us and from a
financial point of view, we are unable to
recommend the most
cost-effective supplier and comment on the reasonableness of the
prices submitted as the tenders [sic] are not
on a comparable basis.
We therefore recommend that the
issues indicated in the [report] be clarified to enable [Corporate
Finance] to do a proper financial
evaluation.’
[15]
The report is unambiguous. There was no ‘proper
financial evaluation’ of the various bids received. Already at
this
stage the impossibility of complying with s 2 of the PPPFA was
highlighted. Instead of addressing this issue the employees of Eskom

proceeded with the process of awarding the intended contracts.
Thirteen days later, on 18 July 2019, an employee of Eskom compiled
a
report which was signed by senior employees and was sent to the
chairperson of the Executive Tender Committee (ETC), seeking
a
mandate to conclude contracts for a period of five years with Sasol,
BP and Econ. Sasol and BP are refineries, whereas Econ is
a blender.
The mandate they sought was as follows:
Fuel Oil Type
Stations
Supplier
5 Years total
Grade 1
Three power stations
Sasol
R3 377 812 077.51
Grade 3
Nine power stations
Sasol
R7 466 916 883.50
Grade 3
Three power stations
BP
R2 737
447 269.33
Grade 2
Hendrina power station
Econ
R
853 155 374.40
Total
R14 435 331 604.74
[16]
The reason given for recommending Econ be
awarded a contract for Hendrina was that none of the refineries had
tendered to supply
fuel oil to that power station.
[17]
Having regard to the bids, the ETC came to the
conclusion that Sasol was the cheapest supplier of Grade 1 fuel oil
to three power
stations and the cheapest supplier of Grade 3 fuel oil
to nine power stations; BP was the cheapest supplier of Grade 3 fuel
oil
to three power stations; and finally that Econ was the cheapest
non-refinery supplier of fuel oil to the Hendrina power station.

Sasol should - if the mandate was accepted - receive contracts worth
R10 844 728 961.50 in return for supplying
fuel oil to
twelve power stations, BP should receive contracts worth R2 737
447 269.33 in return for supplying fuel oil
to three power
stations and Econ should receive only one contract to supply fuel oil
to one power station to the value of R 853 155 374.40.
The
total value of the contracts would be R14 435 331 604.74.
This conclusion is problematic as it is pertinently
recorded that the
outcome is based on the fact that there was ‘no proper
financial evaluation’ of the bids.
[18]
The report made it explicit that should a mandate
be received then ‘(t)he NEC/Bespoke contract conditions will be
negotiated
with all the recommended tenderers.’ This aspect is
relevant for determination of whether a contract between Eskom and
Econ
was eventually concluded. It is dealt with in greater detail
below.
[19]
On 22
July 2019 the ETC met. It recommended that negotiations with the
winning bidders proceed.
[5]
Notwithstanding that there was ‘no proper financial evaluation’
of the bids, this would only have been necessary if
the winning bids
were not market related. Sub-regulation 7(9) of the Regulations says
that if the winning bid’s price is
not ‘market related’
Eskom must either negotiate with the said bidder regarding the market
related price or cancel
the tender. Should it adopt the former
approach and the said bidder is willing to supply the fuel oil at a
market related price
it should be awarded the tender, but if it is
unwilling to do so then Eskom could either cancel the tender or
negotiate with the
second highest scoring tenderer over the market
related price and repeat the process. If that fails then it should go
to the third
highest bidder and repeat the process. If that fails to
secure a positive response, it should cancel the tender.
[20]
Thus, if that is what was envisaged by the
negotiations there would be no problem. And, if the prices of the
winning bidders were
already market related then the outcome should
have been brought before the Board, and if the Board accepted it then
it would have
acted consistently with its decision to, as a first
option, seek to purchase directly from refineries. This was not done,
and instead
the ETC asked for a mandate to commence negotiations with
individual bidders and, at the same time, said that the process of
comparing
the prices of the various suppliers should be undertaken
after the negotiations were concluded. To this end, it said that the
lowest
tender rate should be used as a base for the negotiations. The
ETC it seems attempted to overcome the problem of not being able
to
financially evaluate the bids by seeking to negotiate directly with
each of the bidders. By seeking to do this the ETC was asking
for the
bidding process to be rendered nugatory. In normal circumstances,
once the bids were evaluated, the ETC would have applied

sub-regulation 7(9) of the Regulations. Because the financial
evaluation was impossible it called for a complete deviation from
the
requirements set out in sub-regulation 7(9). It called for a rupture,
which certainly took place as we will see below. Importantly,
if
there was any malfeasance in the awarding of the tender – in
its founding papers Eskom claimed there was - this established
the
gateway for such malfeasance to take place. The ETC was asking for a
deviation from the open transparent and fair process it
initially
followed but was unable to complete. The Constitutional Court (CC)
has already warned of the dangers inherent in such
a deviation:
‘
[27] There is a further
consideration. As Corruption Watch explained, with reference to
international authority and experience,
deviations from fair process
may themselves all too often be symptoms of corruption or malfeasance
in the process. In other words,
an unfair process may betoken a
deliberately skewed process. Hence insistence on compliance with
process formalities has a three-fold
purpose: (a) it ensures fairness
to participants in the bid process; (b) it enhances the likelihood of
efficiency and optimality
in the outcome; and (c) it serves as a
guardian against a process skewed by corrupt influences.’
[6]
[21]
On 26 July 2019 the ETC recommended to the
Investment and Finance Committee (IFC) – a sub-committee of the
Board - that it
approve the commencement of private individual
negotiations with the bidders. The recommendation included a very
pertinent comment
which read:
‘
(b)ased
on
the concerns raised in the attached financial evaluation report,
Michael Ndima from
the Treasury Evaluation
Department was unable to conduct price evaluations.
’
[22]
The comment should have been a matter of concern
for the IFC, which was chaired by Mr Dabengwa, a member of the Board.
It met on
1 August 2019 and accepted the recommendation without more.
[23]
By
adopting this course of action the IFC flouted a number of legal
prescripts, the most important being the provisions of s 217
of the
Constitution of the Republic of South Africa Act 108 of 1996 (the
Constitution). Section 217 prescribes that when an organ
of state
such as Eskom ‘contracts for goods or services, it must do so
in accordance with a system which is fair, equitable,
transparent,
competitive and cost-effective’. Compliance with its terms is
peremptory. Thus, the method and system by which
the tender is
awarded has to achieve five objectives: ‘
fairness,
equity, transparency, competitiveness and cost effectiveness.’
[7]
[24]
As soon as the IFC mandated a closed system of
private negotiations, the risk of failing to comply with the legal
requirement of
transparency and fairness in the process and the
outcome became real.
[25]
But
there was another problem arising from the failure to be able to
financially evaluate the bids because,
inter
alia
,
the bids ‘were not on a comparable basis’. The financial
evaluation was dependent on a technical evaluation. The technical

evaluation, which included an evaluation of the quality of the
product, was not done for some of the bids, and thus whatever
financial
amount was indicated in that bid would not necessarily
reflect the true cost of the fuel oil purchased from that particular
bidder,
or the fuel oil purchased may not be of a quality suitable
for Eskom’s needs. Closed private negotiations on a one-on-one

basis would not solve this problem. The technical evaluation has to
take place and then only would a financial evaluation be possible.

Since the negotiations were to be conducted in the absence of this
technical evaluation they would not bear the fruit the ETC was

possibly hoping for, i.e.
to
secure the most competitive or cost-effective price for the fuel oil.
The approach of using the lowest price as a base for the
negotiations
did not overcome Eskom’s problem of not being able to compare
‘like with like’ as the prices and
quality of the fuel
oil were simply not comparable. Continuing in these circumstances
would result in the whole process losing
all credibility. It would
result in the suppliers not being treated equally and their
respective offers not being adjudged fairly.
[8]
This is regardless of whether it is an open transparent
bidding process or a closed one-on-one negotiation process.
Thus, if
Eskom proceeded with this new process suggested by the ETC, it risked
acting unlawfully as the entire process and the
outcome would not be
‘fair, equitable, transparent, competitive and cost-effective.’
And this, as we will see below,
is exactly what happened.
[26]
Once the IFC mandate was received employees of
Eskom commenced negotiations with BP, Engen, Econ Oil, FFS and Sasol
to supply the
fuel oil sought.  The negotiations took place
during the period 6 - 9 August 2019. Minutes of ‘negotiations’
with
Econ merely reveal that Ms Nothemba Mlonzi (Ms Mlonzi) of Econ
made a presentation to the employees outlining what Econ could offer,

at what price and how it would supply the fuel oil. Other than this
slender piece of evidence there is nothing placed before court
about
the negotiations that were conducted with any of the other parties.
The negotiations were clearly conducted in petto
and the risk
referred to in [25] above materialised.
[27]
On 30 August 2019, a recommendation signed by
three senior employees, Mr Ntombizodqa Mokoatle (Mr Mokoatle), Mr
Tshitangano, and
Mr Bheki Nxumalo (Mr Nxumalo), was placed before the
Board. They recommended that the Board approve the outcome of the
negotiations
and mandate the conclusion of various contracts with
suppliers of fuel oil. The outcome was set out in the following
Table:
Fuel Oil Type
Stations
Supplier
5 Years total
Grade 1
Duvha South and Kriel
Sasol
R 1 656 345 568.76
Grade 1
Arnot
Econ
R 1 618 082 019.00
Grade 2
Hendrina
Econ
R   827 560 540.80
Grade 3
Camden, Duvha North,
Grootvlei, Kendal Komati, Kusile, Letlhabo, Matla and Matimba
Econ
R 5 518 367 388.
46
Grade 3
Majuba and Medupi
Sasol
R 4 579 812 662.88
Grade 3
Tutuka
FFS
R 1 877 415 902.76
Total
R14 200 168 297.92
They
said the outcome was based ‘on the negotiated rates, committed
volumes and readiness to start supply.’
[28]
Econ benefitted handsomely from the decision to
open negotiations with the parties. It received contracts to the
value of R7 964
729 948.26, when the sum total of the contracts was
R14 200 168 297.92. It acquired fifty-six percent
(56%) of the
value of the tender. Econ is a blender not a refinery.
In terms of the tender it was only allowed to supply Grade 3 fuel oil
to
Eskom if none of refineries were willing or able to supply it
directly. Initially Hendrina was the only power station that was
awarded to Econ. It was for the supply of Grade 2 fuel oil at a price
of R827 560 540.80. That would be 0.57% of the total
value
of the tender. Now, in addition, it was awarded contracts for Grade 3
fuel oil at the Camden, Duvha North, Grootvlei, Kendal
Komati,
Kusile, Letlhabo, Matla and Matimba power stations for a globular sum
of R5 518 367 388.46, plus a contract
to the value of
R1 618 082 019.00 for the supply of Grade 1 fuel oil
to the Arnot power station. In total Econ secured
contracts for
eleven power stations. This occurred in circumstances where
refineries were able and willing to supply that particular
fuel oil
to these power stations, save for Hendrina.
[29]
Econ being a blender should not, in terms of the
Board’s resolution, be awarded contracts to supply Grade 3 fuel
oil as it
only distributes these grades of fuel oil. In any event,
what is clearly troublesome is that the burning question, how is it
that
as a distributor it is able to supply fuel oil cheaper than the
refineries when it sources the fuel oil from one or other of these

refineries and then re-sells it to Eskom, remains unanswered. I must
pause here to point out that the question is not based on

speculation. It will be seen from the analysis below – see [54]
to [64] - that according to Eskom, Econ had to convince Eskom
that it
had concluded back to back contracts with refineries. Econ claimed
that it did not have to convince Eskom of this, but
nevertheless it
had concluded such contracts. By so doing, Econ admits that it is
re-selling fuel oil purchased from refineries
to Eskom. Hence, the
question asked here should have been asked by whoever conducted the
negotiations, for it goes to the very
core of whether the contracts
to be concluded with Econ would be competitive and cost-effective.
This is apart from the fact that
it would be a breach of the Board’s
decision of 30 January 2019 to award the tender for Grade 3 fuel oil
to Econ.
[30]
On 11 September 2019 a financial evaluation of
the latest information received from the negotiations was conducted
by Corporate
Finance, which is the same division that initially
evaluated the bids. It noted that the ultimate total value of the
contracts
- R14 200 168 297.92 – was
R421 947 348.00 more than the mandate endorsed by IFC. In
statistical
terms it represented an increase of 3.1% of the initial
mandate. And this was after all the discounts negotiated were taken
into
account. The team conducting the evaluation emphasised that they
were concerned that no technical evaluation was done for the tenders

from Exol and Refinex, and were therefore not able ‘to comment
if the prices submitted are on a common base’. At the
same
time, the suppliers did not clarify a number of issues. Some of these
being:
a.
that Sasol ‘had indicated that the HFO and
Catlight comprises of material cost component and a fixed portion.’
Sasol
had ‘also indicated that the fixed portion will be
escalated annually on the first Wednesday of July by the average
Producer
Price Index (PPI) as published by Stats SA.’ It is
still not clear which portion of the price is the material portion
and
which is the surcharge portion and thus ‘it will be
difficult to apply the CPA [Contract Price Adjustment] formula to
their
price’;
b.
Engen ‘did not complete all the sections of
the price schedule provide [sic] as part of the enquiry by Eskom’
making
it unclear as to whether the price was fixed in South African
Rands and ‘will not be subject to any rate of exchange
adjustments’;
c.
Engen’s transport component for the all the
power stations ‘is R800.00’, but its ‘delivery
prices are different’.
Further clarification from Engen was
necessary;
d.
Exol had only provided an example of its cost
structure. It did not provide a CPA for its price adjustment which
‘would make
it difficult for Eskom to independently verify its
price adjustments’;
[31]
As a result, the evaluators supported the request
to conclude contracts with the respective suppliers, Sasol, Econ and
FFS only
after these issues were clarified  and a technical
evaluation was done in regard to the ‘Exol Oil and Refinex’

tenders.
[32]
The
clarification was never obtained. The technical evaluation, too, was
not done. Nevertheless, a recommendation was placed before
the Board
on 29 October 2019 that the tender be awarded to the parties as per
the Table in [27] above. The Board accepted the recommendation
and
resolved that contracts be awarded to Sasol, Econ and FFS. The
resolution is crafted in rather convoluted terms.
[9]
It is this resolution – referred to in the papers as a decision
- that Eskom seeks to have reviewed and set aside (the impugned

decision).
[33]
It
seems to have escaped the attention of the Board that Econ was being
awarded contracts to supply Grade 3 fuel oil when it is
a blender and
not a refinery, and that such award was contrary to its earlier
resolution that this grade of fuel oil should, as
a first option, be
procured directly from refineries to reduce its costs of production,
and only be sourced from non-refineries
if no refinery was able or
willing to supply that particular fuel oil. The Board was always
aware that Econ was merely an intermediary
of Grade 3 fuel oil. By
purchasing from it when refineries were able and willing to supply
the said fuel oil Eskom would have paid
more for the fuel oil than it
should have. That, it will be recalled, was the
raison
d’ȇtre
for its resolution of 30 January 2019. In my judgment, the members of
the Board breached their fiduciary duties by taking this
decision.
They simply failed to carry out their duties with the requisite care,
skill and diligence required of them by the Companies
Act and the
common law.
[10]
Put simply,
the Board should never have accepted the recommendation of the IFC.
Unfortunately, no explanation has been proffered
in the papers as to
why it did so. The issue was raised at the hearing, and again no
explanation was proffered.
[34]
After
the award was issued to Econ it commenced discussions with Eskom
regarding the award. Those discussions ended without the
parties
agreeing on a fundamental question: does a contract between them
exist? I invest my attention to that issue later in the
judgment. Of
importance for the moment is what Eskom did with regard to the
tender. Soon after the impugned decision was taken,
some of its
employees wrote a memorandum addressed to the ETC asking for
authorisation to increase the value of the tender by more
than R4bn -
from R14 200 168 297.82 to R18 330 959 054.32.
The ETC approved this and made a recommendation
to this effect to the
IFC. Why there was a need to increase the price of the tender is not
explained. At this point Eskom had appointed
Mr De Ruyter as its new
Chief Executive Officer (CEO), who queried the tender process and the
outcome. After receiving reports
from the relevant persons and
structures in Eskom he recommended to the Board that it resolve to
cancel the tender ‘due to
allegations of fraud and corruption
between suppliers and Eskom employees, and a new strategy for the
procurement of fuel oil’.
[11]
In the founding papers Eskom placed substantive evidence of alleged
corruption in the awarding of the contract to Econ, and relied
on
this as one of its bases for having the impugned decision reviewed
and set aside. The alleged corruption implicated Econ.
Unsurprisingly,
these were vehemently denied by Econ. In its replying
papers Eskom indicated that ‘it is not necessary for this Court
to
find that Econ acted improperly’ for the review to succeed.
This is correct. There is no need for me to conclude on the
issue.
[12]
I pause to mention
that Eskom and Econ are engaged in other litigation wherein these
issues are certain to prominently feature.
Eskom has commenced
arbitration proceedings against Econ for overcharging it to the tune
of R1 279 739 385.11 during
the period 2012 –
2017. Econ in turn has instituted a claim for damages suffered as a
result of an alleged defaming of its
name and reputation by Eskom and
Mr De Ruyter.
[35]
Eskom appointed a Mr Werner Mouton (Mr Mouton) to
scrutinise the tender in its entirety and to report on his findings,
which he
did. His report indicates that there were many problems with
the process and the outcome of the tender. He presented his report
on
3 February 2020. He reported that, (i) Econ as a reseller did not add
any value to the product  – although he did
not mention
it, this could only apply to Grade 3 fuel oil - it supplied, (ii)
BP’s tender was cheapest but it was only able
to supply after 4
months, (iii) Engen was only excluded because clarity was not
obtained as to its pricing, (iv) it was not clear
as to why Econ
could supply fuel oil cheaper than the refineries as it purchased it
from these refineries and merely transported
it to Eskom, (v) Eskom
had not conducted a technical evaluation of the infrastructure, (vi)
the pricing relied upon was not accurate
since no hedging was in
place, which placed Eskom in peril as it was subject to foreign
exchange and commodity price fluctuations,
(viii) some of the
components in the CPA used could not be verified by Eskom, and (ix)
negotiations were conducted by Account
Managers who lacked the skill
‘or the will’ to undertake the task. In the founding
papers Eskom relied on the contents
of the report to have the Board’s
decision reviewed and set aside. Econ is very critical of Mr Mouton’s
report.
Eskom in reply says that it does not rely on the report
for the relief it sought. Econ’s criticism and Eskom’s
change
in stance is of no moment, as I have scrutinised the papers
and drawn conclusions without having regard to his conclusions. There

may be some similarities in our conclusions but this is purely
coincidental.
[36]
Thereafter,
Mr Hewu, who clearly had sight of Mr Mouton’s report, prepared
a memorandum addressed to the Board wherein he
recommended that the
tender be cancelled ‘with immediate effect’. He motivated
the recommendation by voicing the following
concerns: (i) BP was the
cheapest supplier yet excluded from the tender, (ii) there may be a
breach of s 4(1)(b) of the Competition
Act by the bidders in that
they may have colluded during the tender, (iii) the pricing
methodologies and formulae utilised by the
bidders was obscure, (iv)
the financial team’s evaluation of Engen’s bid was
inconclusive, (v) there was an acute lack
of ‘skills,
competence and understanding’ by the ‘cross-functional
team that evaluated’ the tender, (vi)
there was non-compliance
with s 217 of the Constitution as well as of s 51(1)(a)(iii) and
51(1) (b)(ii) of the Public Finance Management
Act 1 of 1999
(PFMA)
[13]
, and (vii) the
Board’s decision to procure fuel oil directly from the
refineries was not adhered to.
[37]
On 13 March 2020 the Chairman of the Board,
Professor Malegapuru Makgoba (Professor Makgoba) circulated a request
for a ‘round
robin resolution’ to have the tender
cancelled and asked that members of the Board consider it. Two
members of the Board
objected to the resolution. The objections were
in writing, one from Mr Dabengwa –who is also the chair of IFC
– and
one from Dr Pulane Molokwane (Dr Molokwane). Mr
Dabengwa’s criticism of the proposed resolution was that it was
strong on
allegation but weak on fact. He pointed out that the
process engaged was lengthy, involved the full participation of the
cross
functional team of Eskom employees, and in his view the
contracts awarded were based solely on the cheapest bids received,
including
those from refineries, blenders ‘and any other
potential suppliers’. He rejected the contention that the cross
functional
team lacked the ‘understanding, requisite skills and
competence of the fuel market’ in order to assess the various
bids. He also rejected the claim that the award breached an earlier
decision by the Board to, as a first option, purchase certain
types
of fuel oil only from refineries. According to him no such decision
was taken. Dr Molokwane’s first concern was that
Eskom had
developed a ‘culture of delaying, cancelling awards on some
flimsy reasons.’ Secondly, she was anxious that
cancelling the
tender could result in a lawsuit against Eskom. Thirdly, there was no
evidence to support the allegation of collusion
between bidders.
Fourthly, the alleged corruption in Bid Corp 4786 was found not to
have been proven. And, fifthly, the entire
process, including the
award of the tender, had Board approval.
[38]
Mr De Ruyter in turn put in writing his reasons
for recommending that the tender be cancelled.
[39]
The Board met on 25 March 2020 where whether or
not to cancel the tender was considered. A resolution for the
cancellation of the
tender, subject to the approval of National
Treasury, was eventually tabled. Seven Board members voted in favour
of cancelling
it, while three voted against. The reasons given for
cancelling it were the same as those provided by Mr De Ruyter. By
reversing
the impugned decision, the seven Directors had now taken
the necessary steps to remedy the situation.
[40]
Two letters were sent to National Treasury
informing it of the Board resolution and seeking its approval, one on
3 April 2020 and
one on 4 May 2020. Eventually on 17 July 2020 the
National Treasury responded saying that it did not support the
cancellation.
National Treasury had three problems with the
recommendation: firstly, it was not clear if Mr Mouton was assessing
the bids and
why he recommended Engen and BP be awarded contracts
when they ‘failed to comply with the requirements of the tender
process’;
secondly, it is not clear what Eskom’s defence
to litigation from parties who were furnished with ‘award
letters’
would be; and thirdly, the cancellation of the tender
is not consonant with paragraph 3 of the PPPFA Regulations.
[41]
Eskom
persisted with its view that the tender was marred by unlawful
conduct requiring it to cancel it altogether. It then decided
to
bring this application. It was obliged by law to do so.
[14]
This then is a self-review brought by an organ of state. The
Promotion of Administrative Justice Act 3 of 2000 (PAJA) is therefore

not applicable.
[15]
It can
only be reviewed under the principle of legality.
[16]
The application should be brought within a reasonable time and
whether this has been the case here is dealt with later in the
judgment.
[42]
There was in the meantime a flurry of
correspondence between Eskom and Econ focussing on the contract that
was supposed to follow
the awarding of the tender. This is dealt with
in greater depth below when the question of whether a binding
contract between the
two was concluded or not is considered.
[43]
On the
facts and the analysis set out above I find that in managing and
implementing the tender Eskom simply failed to comply with
the
prescripts set out in s 217 of the Constitution, the provisions of
the PFMA and those laid out in the Regulations. The conclusion

therefore that the impugned decision is unlawful is ineluctable.
Unable to escape this conclusion Econ shifted the focus to the
IFC
decision to grant the ETC the mandate to commence open ended
negotiations with all the bidders. It contended that the impugned

decision cannot be disturbed unless the IFC decision itself is
reversed. That decision, Econ contends, constitutes administrative

action which has legal effect until set aside by a court of law. As
Eskom has not sought to have it set aside it remains in place.
Econ
relies on well-established authority relating to administrative
action. The authorities are unequivocal that an administrative
action
remains in place even if it is unlawful until it is set aside by a
court. This is because ‘it exists in fact and it
has legal
consequences that cannot simply be overlooked.’
[17]
Thus contends Econ, the impugned decision cannot be attacked, at
least not until the IFC decision is set aside.
[44]
I am unable to accept the contention. Firstly,
the IFC decision may exist in fact, but it does not have any legal
consequences.
Secondly, the decision, in my view, does not constitute
administrative action. Administrative action is defined in s 1 PAJA
as:
‘
any decision taken, or any
failure to take a decision, by-
(a) an organ of state, when-
(i)
exercising a power in terms of the Constitution or a provincial
constitution; or
(ii)
exercising a public power or performing a public function in terms of
any legislation;
which adversely affects the
rights of any person and which has a direct, external legal effect..
‘
[45]
In
this case, the decision to grant the ETC a mandate to open
negotiations had no impact or effect, both internal (on Eskom) and

external (on Econ) unless and until it was endorsed by the Board. The
IFC decision was the one that ruptured the lawful process
and
rendered everything that followed – the negotiations and their
outcome – unlawful. Radical as it was it, nevertheless,
did not
‘adversely affect’ anyone’s rights nor did it have
‘direct external effect’.
[18]
It was a decision that mandated negotiations to commence. After the
IFC took that decision the ETC commenced negotiations.  Upon
its
conclusions it recommended to the IFC that the outcome be endorsed.
The IFC did so, and then recommended to the Board that
it endorse the
outcome. The Board had every right to reject the recommendation
coming from the IFC, and I hold, for the reasons
set out above, that
it should have done so. Until it accepted the decision, however, the
outcome of the negotiations, just like
the IFC decision mandating the
negotiations, was legally meaningless; it did not ‘adversely’
affect ‘the rights
of any person’ and it had no ‘direct,
external legal effect’. Action by the Board was required for it
to have
legal effect. In other words, by adopting it through the
impugned decision the Board bestowed legal effect upon it. Hence,
that
is the decision that has to be impugned. Not the recommendation
of the IFC to the Board, nor the decision of the IFC to mandate
the
ETC to commence open ended negotiations with all the bidders.
[46]
Econ’s
contention is really an attempt to cultivate an argument already
rejected by our courts. In
Allpay
the CC reminded us that the subject matter of a review should be the
decision to award the contract and ‘
not
each decision along the way in the process.’
[19]
This
is precisely what the IFC decision was. In
National
Energy Regulator of South Africa
it held that even if an intermediate decision – decision taken
along the way - constitutes administrative action the law

nevertheless permits a review of the ultimate decision.
[20]
Hence, even if I am wrong and the IFC decision could have been
reviewed, it does not preclude Eskom from seeking to review
the Board
decision.
[47]
Having found that the impugned decision was
unlawful, it is necessary to craft a remedy that is just and
equitable. In this case
there is only one: the decision has to be set
aside in its entirety.
[48]
In
consequence of the Board resolution of 29 October 2019, Eskom and
Econ were to conclude a contract that embodied terms and conditions

acceptable to both of them. Eskom says that discussions and
negotiations between it and Econ commenced immediately after the
Board’s
decision, but these did not bear fruit. Econ disagrees.
It points out that upon being awarded the tender an offer was made to
it
which included a copy of a standard NEC Supply Contract,
[21]
(NEC3) and which it accepted. Thus it claims that upon its acceptance
of the offer a binding contract, embodying the terms set
out in NEC3,
was concluded between them.  In the light of my finding that the
Board’s decision was unlawful and should
be reviewed and set
aside, the question as to whether there was a binding contract
concluded between the parties is moot, as are
all the other ancillary
issues raised in this application. However, both parties expended
substantial time and resources on that
issue, which had been referred
to adjudication by Econ
[22]
and finalised there. They are in the circumstances entitled to a
decision on the issue. And, in any event, if I am wrong on the
first
issue, the second issue would remain alive. It is therefore best that
it be resolved once and for all in this court. Thus
it is to this
issue that I now turn my attention.
(iii)
Was a valid contract between Eskom and Econ concluded?
[49]
On 8 November 2019 an employee of Eskom, Ms
Portia Khumalo (Ms Khumalo) sent an email to Ms Mlonzi of Econ with
an attachment consisting
of an acceptance letter and draft contract,
the NEC3 contract, for her consideration. The NEC3 is a standard
supply contract used
by Eskom. It has to be supplemented with other
documents, or contracts as referred to in the papers, before it can
be said that
a proper and complete contract has been concluded with a
party. On its own it is incomplete. The other documents would
constitute
annexures to the NEC3. In the present case the NEC3 would
have to contain the following annexures: (i) the Conditions of
Contract;
(ii) the Agreements and Contract Data; (iii) the Pricing
Data; and (iv) the Scope of Work. These were ultimately sent but they
too do not take the matter any further.
[50]
The same day Ms Khumalo withdrew her email and
replaced it with another. The second email included a new letter of
acceptance but
the same NEC3. The letter of acceptance was signed on
behalf of Eskom by Mr Nxumalo, the Group Executive: Generation. Ms
Mlonzi
responded stating that she had ‘gleaned through the
draft contract’ and she required ‘some preliminary
clarity’.
This concerned whether the parties would choose ‘the
consignment stock model or the purchase order model’, and which

particular power stations were allocated to Econ. It is strange that
at this stage Ms Mlonzi was not clear which supply model was
to be
adopted given that she, on behalf of Econ, participated in the post
bid negotiations. Similarly with the issue of the particular
power
stations that were allocated to Econ after the negotiations. In any
event, further emails were sent to her by Ms Khumalo
on 7 November
2019. And on 8 November 2019 Ms Mlonzi responded and attached the
letter of acceptance, which she had now counter-signed
on behalf of
Econ. Her email reads: ‘Please find attached hereto the signed
acceptance letter for Corp 4786 for your attention.’
On 11
November 2019 Ms Khumalo responded, per email again, asking Ms Mlonzi
to ‘go through the draft’ NEC3 and informing
her that she
would arrange a ‘telecon meeting’ for discussion and
hopefully finalise the NEC3 ‘on Thursday (14/11/2019)’.
[51]
The annexure titled, Agreements and Contract Data
contained a ‘Form of Offer’, which makes clear that once
the offeree
accepts it the offeree becomes the ‘Supplier’,
and, very importantly:
‘
Notwithstanding anything
contained herein, this agreement comes into effect on the date when
the tenderer receives one fully completed
and signed original copy of
this document, including the Schedule of Deviations (if any)’
[52]
It is common cause that an original copy of
documents, the NEC3 or any of the annexures attached thereto, was not
completed and
signed.
[53]
On 14 November 2019 Ms Mlonzi met with senior
managers of Eskom’s procurement division. The meeting was an
invitation to Econ
‘to clarify the required fuel oil back-up
letters.’ This meeting laid the foundation of what was required
from Econ
for the parties to finalise the NEC3. Its importance cannot
be overstated, and for that reason it is necessary to quote at length

from the minutes. The meeting opened with an employee of Eskom –
identified as ‘Boiketlo’ in the minutes - explaining
how
it came to be that Econ was awarded the tenders for the supply of
fuel oil. He proceeded to say:
‘
During the evaluation
process, Eskom also considered the letter of support you have
provided and they contributed the stations you
were awarded on a
letter dated 6 November 2019.
Because you are not a Refinery,
we understand that you may not have 20 million liters [sic] of HFO [a
grade of fuel oil] readily
available hence the request for supply
back up letter. The acceptance or Offer letter was awarded to you on
the basis of the support
assurance you have given to Eskom. So before
the NEC contract can be signed, you will need to firm up or
authenticate the proposed
back-ups information provided to Eskom
during the tendering period. This is to ensure that the non-supply
risk will be mitigated
by Eskom through the supply back to back
agreements with your sources.
In simple terms, we are saying
that the offer letter sent to you on 6 November 2019 is conditional
or subject to you coming up with
the supply back to back agreements
as you have indicated on your tender documents.’
(Quotation
is verbatim)
Ms
Mlonzi raised a question about whether the volumes indicated in the
offer letter were different from those in the NEC3, or whether
the
offer letter is based on whether Econ has a back to back agreement
that equals the volumes on the offer letter. The Eskom employee

explained Eskom’s stance as follows:
‘
So if we are giving you 11
stations you must give us the supply back to back agreement for 11
stations. If your source says we can
only give you 9 that basically
mean we may have to revise the offer letter to match the volumes on
the supply back to back agreement.
If you go to your source and they
withdraw their support then the offer falls off the table. And I
think you will appreciate that
this request comes on the experience
whether proven or not from time to time we struggled with deliveries
from Econ Oil hence the
request for supply back to back agreement.
This requirement is key to Eskom.’
The
discussion continued. Attention was focussed on the time Econ
required to acquire these back to back agreements and the time
Eskom
could afford to give Econ. Ms Mlonzi stated that Econ would need 30
days to secure the back to back agreements, to which
the Eskom
employees responded by saying that, while they are sympathetic to the
request, Eskom did not have that much time at its
disposal. Ms Mlonzi
made the following statement that is of significance as to whether a
contract was concluded:
‘…
the back to back
agreement will exclude Hendrina and Arnot power stations. Grade 1 and
2 are not at risk because they are blended
in our plant.’
[54]
Later that day Mr Tshitangano wrote a letter to
Ms Mlonzi. He basically reiterated what was said and agreed at the
meeting with
some minor elaboration. He began by informing her that
the purpose of the meeting was to ensure that Econ was able to supply
the
stock Eskom would be seeking. He continued:
‘
The meeting further
discussed Econ Oil’s obligations to declare quantities that
will be sourced from other suppliers and Eskom’s
right to
verify whether there are signed agreements between Econ Oil and its
suppliers.
These agreements should have been submitted with the
bid and further verification should have been done during
negotiations
.
The discussion revealed that
quantities offered by Econ Oil are not firm because there are no
signed agreements between Econ Oil
and its sub suppliers. Econ Oil
further confirmed that Grade 1 and Grade 2 is produced in-house
and
that Grade 3 is sourced from refineries
.
Refineries
participated in the bid process which complicates their relationship
with Econ Oil
.’
(Emphasis added)
He
concluded by giving Econ seven days – until 21 November 2019 -
to furnish Eskom with the necessary back to back agreements
with its
suppliers.
[55]
On 15 November 2019 Ms Mlonzi wrote a letter to
Ms Khumalo confirming that Econ was requested to submit back to back
agreements
with its suppliers and that she would endeavour to submit
these by 22 November 2019. She further stated that Econ requests that

the start date for the supply be moved to 18 November 2019 as Econ
cannot ‘mobilise and plan logistics and stock pile’

before that. She also agreed that she was to provide Econ’s
input to the ‘draft contract’ – NEC3 –
by
that day. Later she provided Econ’s ‘comments’
which were:
(i) a ‘request’
for the start date for the supply of the fuel oil to be moved;
(ii) that Econ could
not meet Eskom’s requirement that Econ provided insurance cover
in the amount of R25m as required by
clause 84.2 and that the maximum
cover it was able to secure was for R10m; and
(iii) a proposal
that the parties agree to an ‘operational alignment’
which is that they either agree that the ‘supplier
(Econ) may
demand take or pay from the seller, [sic] or rateable supply model be
applied in case of heightened demand.’
[56]
Econ missed the deadline to supply the back to
back contracts by 21 November 2019. On 22 November 2019 Ms Mlonzi
sent a letter to
Ms Khumalo enclosing an agreement between Engen and
Econ in terms of which Engen agreed to supply a minimum of 10m litres
of Grade
3 fuel oil per month to Econ. Included in her letter were
copies of two letters, one from Total and one from Sasol. The letter
from Total states that Total is not able to conclude an agreement
with Econ on some of the deliverables sought by Econ, but Total
could
make available 2500 tons to Econ, however, it could not conclude a
contract to this effect as ‘a draft contract is
sitting with
our legal team’. The letter from Sasol states that Sasol ‘is
offering’ Econ 2000m
3
of ‘Catlight’ and 2000m
3
of
‘HFO 150’ but this is ‘subject to the signing of
the supply agreement’. Ms Mlonzi concluded her letter
with the
following sentence: ‘Your acceptance feedback will be
appreciated.’
[57]
Mr Tshitangano responded to her the next day. He
informed her that Econ was required to provide back to back supply
agreements by
21 November 2019 and had failed to do so. Thus
‘
In the absence of signed
agreements between Econ Oil and refineries, it is not possible for
Eskom to sign a supply contract with
Econ Oil.’
He further informed
her:
‘
Eskom would like to draw
your attention to the fact that it is a misrepresentation to offer
quantities during the bidding process
knowing that you do not have
capacity to produce such quantities or secure them from third
parties.
Eskom will commence with a
process to re-allocate all Grade 3 and Catlight fuel oil quantities
to other preferred bidders who will
confirm the availability of
quantities or volumes on a monthly basis.’
[58]
Hence, given Econ’s request and its failure
to supply the back to back contracts, Eskom claimed that it could not
see itself
concluding a contract with Econ regarding the purchasing
of Grade 3 fuel oil for a period of five years commencing 1 October
2019.
Econ, on the other hand, was not in agreement with Eskom’s
interpretation of the events as well as the consequential legal

obligations each party had assumed in terms of the purported
contract. On 25 November 2019 Ms Mlonzi wrote to Mr Tshitangano and

informed him of Econ’s difference of opinion. She stated that
Econ had a contract with Eskom based on the signed ‘letter
of
award’ she forwarded to Eskom on 8 November 2019. This,
according to her, is because the letter of award did not contain
any
preconditions. As for the discussion at the meeting of 14 November
2019, she held the view that the meeting was simply for
Econ to
satisfy Eskom that it had secured the supply of Grade 3 fuel oil. It
was given, according to her, until 22 November 2019
and not 21
November 2019 to furnish written proof of this, which it had done.
[59]
Mr Tshitangano responded with a lengthy letter
explaining Eskom’s position. Eskom, he said, was clear that
despite the letter
issued to Econ no contract was concluded. The
conclusion of the contract was to take place after certain conditions
were met. The
letter specifically informed Econ that the NEC3 which
was attached was a draft that was to be finalised after further
discussions
were held between the parties.  Thus, he says, Econ
‘
was and is well aware that
no contract existed between the two parties when it signed letter
[sic] of acceptance for NEC contract
on 8 November 2019.’
He
reiterated that Econ had failed to supply the back to back agreements
by 21 November 2019 and:
‘
Econ Oil only submitted a
belated back to back-Supplier agreement with Engen. Commitment
letters from Total and Sasol do not meet
Eskom’s requirements.
The belated agreement with Engen will pose risk to Eskom because its
facilities are in Durban, far
from the power stations which must be
serviced. The long distance transportation will affect the quality of
the products.
Consequently, Econ Oil’s
initial allocation of grade 3 will be reduced to 5 million liters to
mitigate the inherent risk of
long-distance transportation of the
products. Econ oil is free to make representations to Eskom if there
are any acceptable measures
to mitigate long distance transportation
risks.
Eskom will only sign a contract
with Econ Oil based on volumes confirmed by back to back agreements
and not commitment letters.
Commitment letters were acceptable at
bidding stage and not contractual stage.
Any representations should be
received before 18H00 on 26 November 2019.’
(Quote
is verbatim)
[60]
While Eskom took the view that no contract
existed, it indicated that it was still willing to pursue a contract
with Econ for Grade
3 fuel oil. It invited Econ to make
representations to it on the same day. Econ responded with an equally
lengthy letter penned
by Ms Mlonzi. She commenced by vehemently
disputing that the back to back contracts had to be supplied by 21
November 2019. That
deadline she says was introduced on 23 November
2019. She pointed out that Eskom’s concern about the supply
coming from Durban
has to be viewed in the light that previously Econ
supplied this fuel oil ‘with maximum success’ and that
they were
presently engaged in a trial run to ensure that the supply
would be problem-free. She insisted that at the meeting of 14
November
2019,
‘
Eskom confirmed that it
WAS NOT
the requirement of the tender/bid stage to submit a
back to back agreement’
(Bold and capital letters
in original)
And,
in any event, Engen had already signed such an agreement, Total had
presented Econ with an agreement which Econ had already
signed, and
Sasol had presented Econ with a draft agreement. In addition,
‘
It is the practice in the
industry that the Refinery commits to a minimum volume. Once you
start the supply and submit a confirmed
forecast of your volumes,
then they plan for you and supply you accordingly.
In this case, the minimum volume
required for Grade 3 had been met and allocated in this contract.’
[61]
On 27 November 2019 Mr Tshitangano responded
saying,
inter alia
,
that:
‘
It is clear that Econ Oil
did not pay attention to the contents of Eskom’s letter dated
14 November 2019. May you kindly read
the last paragraph of this
letter and withdraw your accusations.’
…
It is important for Econ Oil to
note that some suppliers were disqualified for not complying with
timelines.’
[62]
He wrote another letter on 28 November 2019 where
he repeated that the deadline to supply back to back contracts was
noted in its
letter of 14 November 2019, and further that,
‘
It is unfortunate that
Econ Oil does not want to own responsibility for submitting an
outdated and irrelevant document and further
shifting the blame to
Sasol. Eskom is of the view that in the event that Econ Oil fails to
deliver fuel oil, the blame will be
shifted to Sasol or Engen.’
[63]
On the same day, Econ, wrote to Eskom stating, as
follows:
‘
It is with great pleasure
that we have submitted the contracts from Refineries which satisfy
the volume awarded as per
letter of award dated 1 November 2019
.
The submission is subsequent to
the requirements arising from the meeting held on 14 November 2019.
We would like to request a
meeting to discuss:-
1.  The start of the
contract.
2.  The contents of the NEC
3 contract as raised in the meeting and subsequent correspondence.
3. The operational model of the
contract (including telemetry on the relevant sites).’
(Underlining added)
[64]
That was the last of the direct communication
between the parties regarding the 8 November 2019 letter of
acceptance and the requirement
that Econ furnish back to back supply
agreements with refineries.
[65]
Thus far the evidence canvassed above shows that
a ‘letter of award’ was signed by Eskom and it was
accepted by Econ,
but no formal contract had yet been signed. The
NEC3 was to be used as a basis for a detailed comprehensive contract
to be concluded.
The facts relayed above show that the communication
between the parties post the awarding of the tender was intense and
that it
concluded without consensus.
[66]
The NEC3 contract is a generic contract. It does
not provide any detail about what the specific rights and obligations
of both parties
on the purchase and supply of fuel oil for each of
the power stations affected are. It is necessary for the parties to
conclude
a contract which specify these. One would think that it is
absolutely essential that such a contract be concluded as to the
nature
of the product being supplied, the quality of the product, the
quantity of the product, the time periods when the product must be

supplied, the location where the product has to be supplied, the
issue of time-delay in the supply of the product, the issue of
a
penalty should the product not be supplied on time, the price to be
paid, the time period when the payment has to be made, what
happens
when payment is delayed, what would constitute a beach of the
contract, what are the consequences of a breach, when can
a party
cancel the contract and what the consequences of the cancellation
are. They cannot be left unaddressed. This is a contract
of
significant magnitude for the parties and for the public. It is a
contract of national importance and therefore one in which
the public
has a great interest. In this circumstance these issues have to be
detailed in the contract with as much precision as
possible.
[67]
The parties were not concerned with the level of
detail identified in the previous paragraph. They were nevertheless
not
ad idem
as to what
should be in the contract and whether or not they had actually
already concluded a binding contract. They seemed to
have arrived at
a
cul de sac
. There
was a lull in the exchange of correspondence between 28 November 2019
and 17 January 2020.
[68]
On 17 January 2020 Ms Mlonzi sent a letter to Mr
Nxumalo requesting ‘a meeting date to discuss the signing of
the contract
and particularly to get the start of the contract.’
In her mind the contract still needed to be signed. It bears
remembering
that  the contract was to commence on 1 October
2019, and that in her letter of 15 November 2019 Ms Mlonzi stated
that Econ
requests that the start date for the supply be moved to 18
November 2019  -  see [55] above.   There was no

reply to Ms Mlonzi’s letter of 17 January 2020. On 28 January
2020 Ms Mlonzi wrote to Mr De Ruyter informing him that she
had not
received a response to her letters of 29 November 2019 and 17 January
2020 where she requested a meeting to ‘discuss
the contract
subsequent to the award.’ She requested his intervention ‘to
have the NEC3 contract of the award received
on 8 November 2019
signed.’ She was concerned that the 90 day period commencing 8
November 2019 was fast approaching. Finally,
she pointed out that
only one meeting was held since the award letter, wherein the Eskom
team had queried Econ’s ability
to deliver its end of the
bargain. To allay any fears or anxieties in this regard, she
reiterated that Econ had subsequent to the
meeting signed back to
back agreements with three refineries. Mr De Ruyter did not respond
to her letter. Neither Eskom nor Econ
engaged each other again. On 31
July 2020 Econ’s erstwhile attorneys wrote a lengthy letter to
Eskom outlining Econ’s
position and calling for a meeting
between Eskom and Econ for the parties to attend to a number of
issues. Relevant parts of the
letter reads:
‘
3. It has been nine (9)
months since our client was issued with the Letter of Award and Eskom
has failed to take any meaningful
steps to progress the matter and
implement the tender. …
…
5.  It is common cause in
our law that the award of a tender constitutes administrative action
and as the party who was awarded
the tender, our client enjoys the
full ambit of rights associated therewith.
6.  In view of the above,
our client has instructed to request the Eskom urgently, …
6.1 Advise on a date for a
meeting … to discuss and decide on the commencement date for
the tender;
…
6.3
Take all such steps that are necessary to conclude and sign the NEC3
contract with our client,
without delay.’
[69]
The letter was not responded to and no meeting
was held. Econ appointed new attorneys who wrote to Eskom’s
attorneys claiming
that a contract between Econ and Eskom was
concluded and remained extant, that Econ declares a dispute with
Eskom, and, relying
on a clause in NEC3, has referred the dispute for
adjudication. Eventually the ninth respondent, Mr Kevin Trisk SC (Mr
Trisk),
was appointed as the adjudicator. Eskom participated in the
adjudication with it rights fully reserved. It insisted that no
contract
had been concluded, and said that out of courtesy to and
respect for the adjudicator it would participate in the adjudication
process.
Eskom challenged his jurisdiction on the grounds that it was
founded on the existence of a contract and in this case, according
to
Eskom there was none. Eskom’s view was that he was to determine
the issue of his jurisdiction separately from whether
there was a
breach of the contract.  Mr Trisk dealt with both issues at
once. He found that a binding contract between Eskom
and Econ came to
be, that it subsists and therefore he was jurisdictionally empowered
to deal with the dispute, that Eskom had
breached the contract, was
liable for damages and that Econ was entitled to seek specific
performance from it from the date of
his decision.
[70]
Mr Trisk’s decision is irrelevant to the
main application in this proceeding. That it has no binding effect is
elementary.
In addition and more importantly, it has no elucidatory
benefit for the determination made herein. That is based solely on
the
facts and contentions presented in the papers and in oral
argument before me. The conclusion I arrive at in the main
application,
which is explained below, is the diametric opposite to
that of Mr Trisk. It is obvious then that in my view his decision is
wrong.
His decision would have been relevant for the conditional
counter-application where Econ seeks a declaratory to the effect that

Eskom is bound by its outcome. But that could only be if I were to
have found that a contract between the two parties subsists.
I did
not. The conditional counter-application therefore falls away.
[71]
It is trite law that:
‘…
where
in the course of negotiating a contract the parties reach an
agreement by offer and acceptance, the fact that there are still
a
number of outstanding matters material to the contract upon
which the parties have not yet agreed may well prevent the agreement

from having contractual force. … Where the law denies such an
agreement contractual force it is because the evidence shows
that the
parties contemplated that
consensus
on
the outstanding matters would have to be reached before a binding
contract could come into existence …The existence
of such
outstanding matters does not, however, necessarily deprive an
agreement of contractual force. The parties may well intend
by their
agreement to conclude a binding contract, while agreeing, either
expressly or by implication, to leave the outstanding
matters to
future negotiation with a view to a comprehensive contract. In the
event of agreement being reached on all outstanding
matters the
comprehensive contract would incorporate and supersede the original
agreement. If, however, the parties should fail
to reach agreement on
the outstanding matters, then the original contract would stand.
… Whether in a particular case
the initial agreement acquires
contractual force or not depends upon the intention of the parties,
which is to be gathered from
their conduct, the terms of the
agreement and the surrounding circumstances.
’
[23]
(Citations have been omitted).
[72]
The evidence relayed above demonstrates that both
Econ and Eskom were clear in their minds that the letter of award
sent by Ms Khumalo
and its acceptance a few days later by Ms Mlonzi
was a first step towards concluding a contract. This is manifest in
the robust
and intense exchanges that took place between them after
the letter was sent and signed. There were many unresolved issues
that
had to be addressed and were being addressed, but which
ultimately failed to produce consensus between them. Even Ms Mlonzi
for
Econ was concerned that it was not clear at that stage as to
whether ‘the consignment stock model or the purchase order
model’
was to be used. This issue was never cleared up. Almost
one month after the letter of award, Ms Mlonzi recognised that the
letter
of award did not deal with “the issue of start of the
contract‘, as well as ‘the operational model of the
contract
(including telemetry on the relevant sites).’ These
were no minor issues. They had to be resolved. Both parties were
acutely
aware that the NEC3 included in the letter of award was a
draft. It, together with the annexures attached thereto, does not
constitute
a sensible meaningful contract. It could not be used by
either party to determine what its rights and obligations for five
years
would be: there were fundamental issues that had to be cleared
up before they could intelligibly identify their respective rights

and obligations. Finally, the conduct of the parties in this case
throughout was consistent with the understanding that until they
both
signed an original document attending to their respective concerns,
there was no contract. The understanding was correct.
It only changed
for Econ much later when it found that after all its efforts Eskom
had abandoned the intention to conclude a contract
with it.
[73]
At the hearing it was contended on Econ’s
behalf that there was no need for there to be a document signed by
both parties
for a contract to come into existence, as the NEC3 is
normally used by Eskom and many other parastatals. It is normally not
signed
but parties thereto abide it once it was included –
albeit as a draft contract – with the letter of award. That may

be so, but in this case there was no mistaking that the parties were
aware,
ab initio
, that
it did not constitute the contract. They knew and agreed with each
other that they had to do more. In particular they knew
that
essentialia remained unsettled. The objective facts show that they
attempted to settle these essentialia, but they came unstuck.
Eskom
then simply walked away. Econ felt abandoned and helpless. It is
aggrieved, but it has no cause of action, at least not one
by the law
of contract.
[74]
In short, the existence of an offer and an
acceptance thereto is a necessary but at times insufficient condition
for a binding contract
to be established. For that to occur there has
to be
animus contrahendi
.
There was none in this case.
D
Delay
[75]
Finally, before closing on the merits of the
case, it is necessary to address a contention of Econ that the
application to have
the Board decision of 29 October 2019 reviewed
and set aside should not be entertained. The Board resolved on 25
March 2020 to
cancel the tender, effectively reversing its earlier
decision. Econ contends Eskom is guilty of unduly delaying the
application
and should therefore be non-suited. It only brought the
application on 28 January 2021. Eskom certainly could have brought
the
application soon after 25 March 2020. In the meantime Eskom
awaited a response from Treasury for approval of its decision to
cancel
the tender. National Treasury only replied on 17 July 2020.
Econ on the other hand was attempting to have the contract concluded.

When this failed their respective legal representatives got involved.
This entire engagement culminated in the adjudication. Once
the
adjudication was complete Eskom was left with no choice but to
approach this court. Until then the application may not have
been
necessary, especially if Econ was willing to accept two facts: that
no contract between it and Econ had been concluded, and
the Board had
reversed the impugned decision before the contract was concluded and
cancelled the award, rendering it necessary
to re-commence afresh
with the process of administering the tender. It is correct that once
Econ refused to accept both of these
facts, Eskom could have brought
this application, but it elected, not unreasonably in my view, to
follow the route chosen by Econ
which ended with the adjudication.
Soon after the adjudication was over, Eskom brought this application.
In these circumstances,
I find myself unable to agree with the
contention that Eskom unduly delayed bringing this application. There
can be no dispute
that the application was brought within a
reasonable time after the adjudication was complete. On the other
hand, if the period
from whence the application should be brought is
said to have commenced after National Treasury refused on 17 July
2020 to support
the Board’s cancellation of the tender, then
too the application was brought within a reasonable time. Finally, if
the period
commenced on 25 March 2020 – when the decision to
cancel was taken - then in my judgment it would be grossly unjust to
non-suit
Eskom for taking 10 months to bring the application: firstly
the delay is not inordinate and secondly as Eskom succeeds on the
merits – meaning it had strong prospects when it launched the
application – it would be in the interests of justice
that the
delay be condoned.
E
CONCLUSION
[76]
The managing and implementation of the tender was
blemished by irregularity and illegality of a most fundamental kind,
and could
under no circumstances be rescued. Had the Board applied
its mind properly to the matter it would have had no choice but to
forsake
the outcome of the negotiations. Instead it chose to adopt
it. By so doing it perpetuated the illegality and gave it legal
effect.
It did right by electing to self-review in order to undo its
action. The only just and equitable pathway open to a court in a
matter
with so fundamental a breach of the law is to review and set
aside the decision of the Board.
[77]
Upon that conclusion all other ancillary matters
become moot. However, for the sake of completion the issue of whether
a contract
between Eskom and Econ had come to be has been addressed
in detail. For reasons set out above it is appropriate to declare
that
no such contract emerged from their interactions post the
managing of the tender.
F
COSTS
[78]
Econ submitted that even if it loses the
application it should not be mulcted with a costs order, but rather
that Eskom should be
ordered to pay its costs. It says that it was
compelled to oppose the application as Eskom made a number of
disparaging allegations
against it, but then at the very last moment
recoiled from pursuing these. Eskom had accused it of engaging in
dishonest, fraudulent
and corrupt conduct prior to and during the
shepherding of the tender. The allegations, it was submitted, were
widely reported
in the media thus giving Econ no choice but to oppose
the application in order to protect its name and reputation.  Since
Eskom has recoiled from relying on them, it should bear the
consequences by paying the costs of Econ’s opposition. Econ, in

my view is not correct. Eskom only said that this court need not make
a final determination on the issue of whether Econ was engaged
in
corrupt practices in order to conclude that the tender was marred by
unlawfulness.  Further, and more importantly, Econ’s

opposition was not based solely on the need to protect its name and
reputation. It was based on protecting and advancing its economic

interests. It firmly and steadfastly maintained that it had secured a
contract by which it acquired legal rights to financial benefit.

Having adopted this view, Econ pursued the contract and the rights it
supposedly acquired therefrom vigorously and vehemently.
Even after
Eskom and its attorneys informed Econ that no such contract was
concluded, Econ continued to pursue its case. By so
doing it imposed
upon Eskom great cost. It also bears recording that Econ was
compelled to support and justify the conduct of the
ETC and, of
course, the IFC. It insisted that that conduct was lawful and that
the managing and implementation of the tender was
free from
impropriety and illegality. By following this course Econ took a risk
with the litigation. In summary, I cannot subscribe
to Econ’s
view that it should be immunised from an adverse costs order, and
that it should be awarded costs because Eskom
sullied its name and
reputation. It would be only fair and just for costs to follow the
result in the main application, just as
in the case of the
interlocutory applications.
[79]
The papers in the matter were voluminous. The
legal issues were not complex but the factual material was. They
would warrant the
employment of two counsel.  The order below
will reflect this.
[80]
I thank all legal representatives for their
co-operation and assistance in this matter.
G
ORDER
[81]
The following order is made:
a.
The application by the first respondent to have
an affidavit in response to the applicant’s replying affidavit
admitted is
granted.
b.
The applications by the applicant to have two new
affidavits admitted after the closure of pleadings is dismissed with
costs, including
the costs occasioned by the employment of two
counsel.
c.
The decision taken by the Board on 29 October
2019 to award the tender referred to as Bid Corp 4786 to the first,
second and third
respondents is reviewed and set aside.
d.
It is declared that no contract between the
applicant and the first respondent for the supply of fuel oil for a
period of five years
commencing on 1 October 2019 exists.
e.
Save for the costs order referred to in paragraph
b. above the first respondent is to pay the costs of the application
which costs
include those occasioned by the employment of two
counsel.
Vally
J
Gauteng
High Court (Witwatersrand Division)
Date
of hearing:

9 June 2021
Date
of judgment:

29 June 2021
For the 1
st
to 9
th
applicants:
W Trengove SC with C Steinberg
and M Mbikiwa
Instructed
by:

Edward Nathan Sonenbergs Inc
For the 1
st
respondent:

H Epstein SC with S Tshikila and E Richards
Instructed
by:

Stan Fanaroff & Associates
[1]
The failure of Eskom to provide a copy of the resolution and the
minutes of the meeting is concerning. Sub-sections 73(6) and
(7) of
the Companies Act 71 of 2008 (Companies Act) impose a duty on Eskom
to have these resolutions and minutes at hand.
[2]
It was compiled by Mr Hewu but sent to the Board by Mr De Ruyter
[3]
See
Willcox and others
v Commissioner of Inland Revenue
1960 (4) SA 599
(A) at 602A;
Magmoed
v Janse van Rensburg and Others
[1992] ZASCA 208
;
1993 (1) SA 777
(SCA) at 810I - 811A;
Knoop
v Gupta
2021 (3) SA
88
(SCA) AT [19]
[4]
This is referred to as Stage 4 in the tender document
[5]
It bears noting that the ETC specifically recorded that ‘blenders
were requested to submit tenders due to major refineries
not being
able to meet the total requirements.’ This is another
indication that Bid Corp 4786 was conducted on the basis
that the
Board had resolved to, as first option, only purchase fuel oil
directly from refineries and only look to non-refineries
such as
blenders if none of the refineries was able to meet its
requirements.
[6]
Allpay Consolidated
Investment Holdings (Pty) Ltd and Others v Chief Executive Officer
of the South African Social Security Agency
and Others
2014 (1) SA 604
(CC) at [[27]
[7]
Municipal Manager,
Qaukeni Local Municipality and Another v FV General Trading CC
2010 (1) SA 356
(SCA) at [11] and [13];
Metro
Projects CC v Klerksdorp Local Municipality
2004 (1) SA 16
(SCA) at [11]
[8]
Compare:
Premier of
the Free State Provincial Government v Firechem Free State (Pty) Ltd
2000 (4) SA 413
(SCA), especially at [30]
[9]
The resolution reads:
Subject
to the schedule giving a breakdown of the price per ton to be paid
to the supplier being shared with the IFC Chairman
with confirmation
to the Board approval is granted for the outcome of the negotiations
with all the tenderers (Refineries and
Blenders) in accordance with
the mandate to negotiate with both Refineries and Blenders in one
basket as follows  [what
follows is the recommendation captured
in the table in [27] above]
[10]
See
s 76
of the
Companies Act, especially
s 76(3)
which provides:
‘…
a director of a
company, when acting in that capacity must exercise the powers and
perform the functions of director-
(a)   In good faith
and for a proper purpose;
(b)   In the best
interests of the company; and
(c)   with a degree of
care, skill and diligence that may reasonably be expected of a
person-
(i)
carrying out the same functions in relation to the company as those
carried out by that director;
and
(ii)
having the general knowledge, skill and experience of that
director.’
As
for the common law duties these have been extensively canvassed in
the authorities. There is no need to burden this judgment
with
listing them and providing citations.
[11]
The new strategy he proposed was nothing more than a replica of the
old one, which was as a first option to procure certain types
of
fuel oil directly from refineries in order to reduce the cost of
production. In other words, there was no need for a new strategy.
[12]
One basis for seeking to admit the report by Mr Cassim was that it
made reference to some of this corruption. I have, it will
be
recalled, refused to admit Mr Cassim’s report.
[13]
Section 51(1)(b)(ii)
of the PFMA provides that ‘an accounting
authority for a public entity must take effective and appropriate
steps to prevent
irregular expenditure, fruitless and wasteful
expenditure, losses resulting from criminal conduct and expenditure
not complying
with the operational policies of the public entity.’
The Board is Eskom’s accounting authority.
[14]
Khumalo and Another v
Member of the Executive Council for Education: KwaZulu Natal
2014 (5) SA 579
(CC) at [29], [34] and [36];
Merafong
City Local Municipality v AngloGold Ashanti Ltd
2017 (2) SA 211
(CC) at [61]
[15]
State Information
Technology v Gijima Holdings (Pty) Ltd
2018 (2) SA 1
(CC) at [37] and [41]
[16]
Buffalo
City Metropolitan Municipality v Asla Construction (Pty) Ltd
2019 (4) SA 331
(CC) at [45]
[17]
Oudekraal Estates
(Pty) Ltd v City of Cape Town
2004 (6) SA 222
(SCA) at [26];
Merafong
City Local Municipality
above n 14 at [36]
[18]
Compare:
Rhino Oil and
Gas Exploration South Africa (Pty) Ltd v Normandien Farms (Pty) Ltd
and Another
2019 (6)
400 (SCA) at [29] – [34]
[19]
Allpay
above n 6, at [60]
[20]
National Energy
Regulator of South Africa and Another v PG Group (Pty) Limited and
Others
2020 (1) SA
450
(CC) at [36]
[21]
NEC is an acronym for New Engineering Contract. It is a standard
form contract which is easily available in the market place,
see
Transnet SOC Limited v
Group Five Construction (Pty) Ltd and Others
[2016] ZAKZDHC 3 (9 February 2016) at [5]
[22]
Econ relied on clauses in the NEC3 to refer the matter to
adjudication.
[23]
CGEE Alsthom
Equipments ET Enterprises Electriques, South African Division v GKN
Sankey
1987 (1) SA 81
(A) at 92A-E (Citations have been excluded)