HITACHI has agreed to buy the stake in Hitachi Power Africa held by the investment arm of the African National Congress (ANC) after criticism that the shareholding constituted a conflict of interest, as the unit had won business from state companies.

Hitachi Power Europe will buy the 25% stake from Chancellor House Holdings for an undisclosed amount, the South African unit of the Tokyo-based company said in a statement on Thursday. It will also buy the 5% held in the unit by black-owned Makotulo Investments & Services to become the sole shareholder.

"All parties have agreed strict confidentiality about the terms and conditions of the contract," Hitachi Power Africa said in the statement.

Hitachi Power Africa won contracts worth R38.5bn from Eskom to install boilers at the national utility’s Medupi and Kusile coal-fired power station projects.

Executives of Hitachi’s South African unit had in 2010 said the Chancellor House stake was a conflict of interest and ideally should be sold, following criticism from opposition parties and labour unions.

Mathews Phosa, the ANC treasurer-general at the time, ordered Chancellor House to sell the stake within six weeks. That order was not effected.

ANC spokesman Jackson Mthembu declined to comment on Friday, referring queries to Chancellor House Holdings, which also declined to comment immediately.

Power emergency

Delays and errors by contractors including Hitachi have held up the start-up of the R105bn Medupi plant in Limpopo, Africa’s biggest power facility, by at least two years, stifling economic growth in electricity-constrained South Africa.

On February 20 this year, Eskom declared a power emergency and asked large industrial customers, including ArcelorMittal SA, BHP Billiton and Glencore Xstrata, to temporarily cut usage by at least 10% to ease supply pressures. Domestic consumers were also asked to reduce usage.

Eskom said it found about 9,000 faulty welds in the plant’s first boiler, which will heat water into steam to drive power-generating turbines. In November last year, Hitachi said it had completed 98% of its work on the boiler at the plant.

"This will be the first boiler of this type manufactured in South Africa in 25 years and these issues are all part of the learning curve involved in re-establishing the skill base," Hitachi chief operating officer Tom Brown said. "Rectification of the weld defects noted earlier in the year is now nearly finished."

Disadvantaged citizens

Chancellor House stood to make R50m in profit over eight years from its interest in the Hitachi unit, though Hitachi said in 2010 this money was "ring-fenced" for redistribution to disadvantaged black citizens such as women, youth, the disabled and the aged.

The company also said it could not guarantee that the ANC itself would not benefit from the funds.

Hitachi allied with Chancellor House to meet requirements to boost black participation in the economy to help redress discrimination during the apartheid era.

Its contract with Eskom was probed by the public protector because Eskom’s chairman at the time, Valli Moosa, was a senior ANC member. While Mr Moosa "failed to manage the conflict of interests", Hitachi’s contract award "was not in any way affected", the protector found in an August 2008 report.

Mr Moosa, who is now the chairman of Anglo American Platinum, said Hitachi was picked by company executives and the decision was reviewed several times before it reached him. He further requested an independent review by auditors Deloitte, who gave it the "green light", he said in a phone interview this week.