Eskom promises not to abuse irregular and wasteful spending exemption

Power utility Eskom says that complying to the Public Finance Management Act remains a top priority, and the exemption granted by the National Treasury won’t impact its fight against corruption.

National Treasury gazetted a declaration on Friday (31 March) to exempt Eskom from disclosing irregular and wasteful expenditures in its annual financial statements.

Eskom said it had been engaging with various stakeholders from the National Treasury and the Department of Public Enterprises for several months on the proposal to seek the Minister’s approval in relation to this exemption and departure application.

“With the exemption, the irregular, fruitless, and wasteful expenses will now be reported in Eskom’s Annual Report, as opposed to its Annual Financial Statements. The integrated report is tabled by the Minister of the Department of Public Enterprises in Parliament,” it said.

Eskom said it will “continue to respect and cooperate with supervisory authorities including the Minister of Public Enterprises as its Executive Authority, the National Treasury, the Auditor-General of South Africa, Parliament and other relevant ministries”.

“PFMA compliance remains a priority as Eskom continues to address irregular, fruitless and wasteful expenditure, including appropriate consequence management proceedings. This exemption will assist in the dialogue with credit rating agencies, the lender community and key stakeholders.

“Eskom will abide by the conditions and strict monitoring requirements imposed by National Treasury in granting the exemption,” said Eskom’s Acting Group Chief Executive, Calib Cassim.

The utility said it would also continue to work with the various regulatory bodies to support delivery on the procurement of goods and services impacting its operations.

“Furthermore, Eskom is committed to a procurement system that is fair, equitable, transparent, competitive and cost-effective. Any exemption or departures are seen as an exception, not a norm,” it said.

Despite Eskom’s assurances, the backlash towards the exemptions is unlikely to die down.

Several political parties, civil action groups and business interest groups have reacted to the move by Treasury with outrage, pointing out that one of the biggest companies caught up in state capture, with active allegations of widespread and entrenched corruption and a history of procurement abuse, should not be able to hide instances of this abuse from public scrutiny.

In its most recent financial statements, the group recorded over R11 billion in irregular expenditure and over R2 billion in wasteful and fruitless expenditure.

Eskom said it has made “positive strides” in the past three financial years to establish systems, procedures, checks and balances designed to reduce the extent and risk of fraud, corruption and irregular expenditure.

“The 2021/22 audited financial statements show a marked reduction in the incidence of irregular expenditure that originated in that year. Although more work is required, the systems and mechanisms implemented to address the causes of historical issues have proven largely successful,” it said.

Finance minister Enoch Godongwana is expected to publish a statement on the exemption in due course, explaining the reasoning behind it.

As mentioned by Eskom, the exemptions have to do with credit ratings and giving the company more access to lenders. According to a leaked letter from the minster – seen and reported on by News24 – Eskom’s severely weak financial controls have opened the group up to a possible credit downgrade, which would make it unaffordable for the company to raise funds for its operations.

Contrary to Eskom’s statement, the letter from Godongwana paints a grim picture for the checks and balances it purports to have in place.

Business group Sakeliga has demanded that the exemption be withdrawn, threatening legal action if it remains in place.

Read: Legal threats fly over move to allow Eskom to hide irregular and wasteful spending