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World Bank confirms probe into corruption scandal involving Hitachi

Xinhua, October 7, 2015 Adjust font size:

The World Bank has acceded to a request to investigate the alleged unlawful activity in influencing the awarding of contracts by South African state-run electricity utility Eskom to Japanese Hitachi Ltd, it was announced on Wednesday.

World Bank Integrity Vice President, Leonard McCarthy has confirmed that the bank is looking into the matter and assessing "whether World Bank funds were put at risk due to the actions of the parties identified in the US Securities and Exchange Commission (SEC) civil action,"the opposition Democratic Alliance (DA) said.

Last Wednesday, the DA urged the World Bank to investigate the corruption scandal surrounding Hitachi and Chancellor House, a front-company of the ruling African National Congress (ANC).

Under a deal with Eskom, Hitachi was to provide boilers for the Medupi and Kusile power stations in South Africa.

Hitachi agreed to pay 19 million U.S. dollars to the SEC to settle charges of corrupt payments to ANC's Chancellor House, according to the DA.

The contracts were subsequently paid for with a loan provided by the World Bank to Eskom, with the effect that World Bank funds ended up in ANC coffers, the DA alleges.

The DA says the World Bank is suspected of effectively bankrolling the ANC through their share in Hitachi via Chancellor House.

The Hitachi tender has cost South Africa dearly. The failure by Hitachi to deliver on their contractual obligations has been one of the underlying reasons for the length delay in brining Medupi online, resulting in countless job losses and cost the economy billions in lost revenue due to prolonged load shedding, according to the DA.

Hitachi allegedly allied with Chancellor House in 2005 in order to boost their Black Economic Empowerment (BEE) profile in a deal that saw the ANC investment company purchase a 25-percent stake in the mega-company for only 1 million rand (about 70,000 U.S. dollars). Under the arrangement, Chancellor House would share in the profits of power station contracts awarded to Hitachi.

Hitachi was subsequently awarded a 38.5-billion-rand (about 2.75 billion U.S. dollars) contract by Eskom in 2007 to construct boilers at Medupi and Kusile in a move that was later found to be a conflict of interest, given that Valli Moosa, then Eskom chairperson, was also a member of the National Executive Committee (NEC) of the ANC.

In a de facto admission of guilt, Hitachi paid 19 million dollars to settle the charges brought against it by the SEC in terms of the Foreign Corrupt Practices Act (FCPA).

According to the DA, the ANC has unduly benefitted in excess of 100 million rand (about 7 million dollars) through their eight-year association with Hitachi. Endit