ABB payment shows depth of SOE crises

The story of SwedishSwiss engineering giant Asea Brown Boveri (ABB), being fined 4-million Swiss francs (about R75m) by the Swedish attorney-general and volunteering to pay SA R2.5bn over a “dodgy” deal at Kusile, is a signal that there are many underlying stories to the procurement crises at our stateowned entities.

In a co-ordinated series of settlements, ABB has settled with authorities in Switzerland, Germany, SA and the US. These developments add to growing recognition that the damage being wrought by the Eskom crisis on the local and regional economy has as much to do with saboteurs stealing coal, diesel and spares as it has with exploitation by entrenched multinational firms.

The narrative tends to be that black-owned “rent-seeking” firms, many of them having bought old coal mining concerns from erstwhile oligarchs and supplying Eskom, have accessed rents in the shift from cost-plus to fixed-cost arrangements. A complementary narrative is that the interests of this layer are common with the petty thieves and saboteurs at Eskom who pilfer diesel, swap good for bad coal, and steal parts.

It is these actors, we are told, who are responsible for the failure to resolve maintenance challenges, plant failures and the inability to keep the lights on. For embellishment, I guess, a further assertion is made that the continuing efforts of these syndicates and their BEE acolytes are what continues to constrain the turnaround of Eskom.

So, in short, how we understand the recent past and the present explains to what degree the continuing failures at Eskom can be reasonably justified. Ditto the role of different players in explaining how we got here and why we remain here. These narratives, while widely accepted, obscure more problems than they meaningfully or productively reveal.

The settlement finalised by ABB and the National Prosecuting Authority’s Investigating Directorate last week was not only a mea culpa from the firm but a deeper admission that ABB had over the past decade and a bit — if not earlier — been a big part of an ecosystem that aided and abetted the theft of public resources and posed serious risks to our energy security.

I added “if not earlier” because the company that became ABB after a 1988 merger between Sweden’s ABB

and BBC Brown Boveri of Switzerland, is no stranger to Eskom builds. Past Eskom annual reports reveal that both Asea and Brown Boveri were involved as boiler and generator original equipment manufacturers at Arnot (completed in 1975), Kriel (completed in 1979) and Kendal (completed in 1983).

Unsurprisingly, as US justice authorities suggested in a release last week, “the improper advantages” enjoyed by ABB included access to confidential and internal Eskom information, which seemingly signalled the “capture” of Eskom’s planning and buying decisions. In whose interests would providing access to future investment plans and other decisions of the utility be? Has this access deepened the reliance of Eskom (and other state-owned firms such as Telkom and Transnet) on companies like ABB for high value and complex services and components, without any national benefit?

On balance, it seems a firm like ABB has had a mixed record on that score. The firm has undertaken numerous projects at Eskom, Telkom and even Transnet, launching traction transformer factories and, more recently, the localisation of a standardised compact rectifier solutions, all seemingly with opportunities for local production and the integration of local suppliers into global value chains.

These investments — triggered by state-owned enterprise spending decisions across different sectors, from rolling stock to boiler and generator contracts — now require reconsideration, to assess how malicious engagement with subcontracting and other transformation and industrial participation requirements by multinationals like ABB, creates legal risks in the short to medium term.

All of this has left long-term scars on those left to pick up the mess in lost trading hours, eroded productive potential and multi-decade reversals of economic and social progress.