Dongfang Electric Corporation Accused of Using Political Connections to Win Power Station Contract
On April 26, 2017, Chinese state-owned company, Dongfang Electric Corporation was awarded a contract by South Africa’s Eskom Group for the installation of a new boiler at the company’s Duvha Power Station in Mpumalanga, South Africa for a bid offer of R4 billion (~$300 million) — R1 billion more than a bid offer made by General Electric (GE). GE is contesting this decision on the grounds that the process was rigged by Eskom to favor Dongfang over more competitive offers.
Interestingly, Dongfang was not initially one of the companies shortlisted by Eskom as potential candidates, due to concerns the Chinese firm had failed to meet mandatory requirements in the tendering process. GE and a firm called Murray & Roberts became the primary contenders when final offers were submitted on March 3.
Eight days prior to awarding the contract to Dongfang, however, Eskom hired a politically-connected advisory firm, Trillian, to conduct due diligence. Trillian’s majority shareholder, Salim Essa, was a close associate of the politically influential Gupta business family that reportedly had an close relationships with President Jacob Zuma.
Although Trillian argues that a simple cost-benefit analysis deemed Dongfang a less risky prospect for the project, observers see another example of a Chinese firm leveraging political influence to gain an advantage.