PHUTI MOSOMANE
ESKOM has been granted an exemption from disclosing irregular, fruitless, and wasteful expenditure in its annual financial statements, following a special government gazette issued by the Minister of Finance, Enoch Godongwana.
The gazette, published on the last day of the financial year, grants Eskom exemption from Section 55 (2) (b) (i) of the Public Finance Management Act (PFMA) for 2022/23 and the following two years.
Eskom board chairperson, Mpho Makwana, made the request for exemption.
In a media statement on Monday, National Treasury defended its decision to exempt Eskom from disclosing irregular and fruitless expenditure in their financial statements.
“Eskom is not exempted from ensuring that it takes effective and appropriate steps to prevent irregular, fruitless, and wasteful expenditure,” said Treasury.
“This exemption still requires Eskom to disclose financial and non-financial information on irregular, fruitless and wasteful expenditure but only in its annual report. All other institutions are required, by law, to report irregular as well as fruitless and wasteful expenditure in the annual report and the annual financial statements.”
“By allowing Eskom to report on irregular and fruitless and wasteful expenditure in its annual report and not in its financial statements, the National Treasury ensures that reporting transparency and accountability is not compromised and still made public as currently required, while mitigating the risks that could arise if these transactions are reported in the annual financial statements.”
Opposition parties have sharply slammed the decision to exempt Eskom from the provisions of the Public Finance Management Act (PFMA).
According to Dr. Dion George, a DA Member of Parliament (MP), Eskom appears to be concealing significant financial irregularities from investors and South African taxpayers who support the company financially.
George said that the National Treasury and the Minister of Finance should retract this exemption immediately.
He also said that it is unacceptable to conceal important financial information from auditors in the expectation of receiving a favourable audit outcome.
The financial sector is based on trust, and this exemption only serves to further diminish confidence in the already struggling economy.
“We already know that government is unable to manage any state-owned entities responsibility and this attempt to hide the extent of that dysfunction cannot be tolerated. Hiding information on this problem doesn’t make it go away and certainly does not ensure investment; it only serves to promote corruption,” said George.
It’s possible that the reason for this exemption is that Eskom requires additional funding from investors to support its operations, even if a significant portion of its debt is shifted onto the national balance sheet, said George.
“By hiding material information, the signal to investors Eskom hopes to attract is already negative and they would only invest if there is significant, premium, government guaranteed return.”
“The decision to grant Eskom this exemption is tantamount to an admission that corruption within the entity must be accepted as a given, and that solutions to rolling blackouts will come at criminally induced premiums. With the closing balance of irregular expenditure amounting to R67.1 billion on 31 March 2022, as stated in Eskom’s latest annual report, this number will undoubtedly escalate due to decreased oversight,” he said.
“Just how committed is the Treasury and Government to preventing corruption at Eskom? Are we to accept purchases such as R80,000 knee guards and R200,000 wooden-handled mops, as previously reported.”
George further said that the DA has been in contact with Godongwana to advise that we cannot accept this exemption and are consulting with their legal team to consider options.
Former Standing Committee on Public Accounts (SCOPA) chairperson and African People’s Convention (APC) leader, Themba Godi, said: “Why? This has NEVER happened since the PFMA was enacted. Transparency and accountability are not for this government.”
The Economic Freedom Fighters said in a statement that the party vehemently condemns and rejects “the irrational, reckless and deplorable decision by the Minister of Finance’s decision to exempt Eskom”.
“We are appalled by this desperate and sickening attempt by the governing party, the ANC, to hide the rampant corruption at Eskom that has plunged our country into avoidable electricity blackouts. The minister of finance and the national Treasury are now operating like a mafia, casting a dark shadow over our democracy and transparency it requires,” EFF said in a statement.
The EFF added that the party will write to “the chairperson of the Standing Committee on Public Accounts, Standing committee on Finance, and the Portfolio Committee of Public Enterprises to seek permission from the speaker of the National Assembly to convene an urgent joint meeting to receive a detailed report explaining the rationale behind such nonsensical decision.”
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