Cape Town – MPs have called for the permanent withdrawal of Eskom’s exemption from the Public Finance Management Act (PFMA) after Finance Miniter Enoch Godongwana said that it would be shelved “for now”.
Godongwana told Parliament on Wednesday that the National Treasury had opted to withdraw the gazetted exemption, pending consultation with the office of the auditor-general (AG).
The minister’s decision to grant Eskom an exemption from disclosing irregular wasteful and fruitless expenditure in its annual financial statements received backlash from the South African public.
But according to Daily Maverick, Godongwana and Eskom board chairperson Mpho Makwana were concerned that reporting irregular and fruitless expenditure in the financial statements and annual report raised the probability of the utility receiving a qualified audit opinion.
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This would make Eskom lenders nervous about the utility’s ability to pay back the R423-billion debt on its financial books. Credit rating agencies might also be spooked and take a negative view on Eskom, and lenders would see the power utility as being at risk of defaulting on its debt repayments. This would increase Eskom’s borrowing costs when it plans to raise more or new money from lenders to fund its operations, the report said.
“The exemption granted to Eskom will enable it to continue to fund its balance sheet and still maintain accountability, transparency and reporting requirements in its annual reports and annual financial statements. If the exemptions were not considered, it would place pressure on the fiscus and limit borrowing powers of the SOE,” the report quoted Treasury as saying.
MPs on Wednesday, however, urged that the exemption be withdrawn on a permanent basis.
“In the past five years, Eskom has been qualified in areas of irregular expenditure year on year. So it would make no sense then particularly because Eskom has not formulated a credible functional and sustainable audit action plan in response to the audit outcomes.
“… Minister, it would be wholly reckless, dangerous, and irresponsible to condone that through an exemption. Whoever advised you, misled you minister – we must be frank about that,” said UDM MP Nqabayomzi Kwankwa, adding that a law that empowers the finance minister to make a decision on exemptions must be revisited.
He added: “You must consider minister that the exemption happens at the time of [former Eskom CEO, André de Ruyter’s allegations on corruption]. I am not a great fan of De Ruyter but I am a great fan of anyone who comes to the public [as a] whistleblower on the misuse of government funds.
“He did cite in his interview that people must be allowed to steal a little bit. So if now we exempt Eskom from providing the information, it means we are protecting those people who were allowed to steal a little bit when Eskom was sourcing funding.”
DA MP Dion George said the decision was “a bad idea”.
“In my opinion, I think it has actually damaged our reputation even more that it already was damaged.
“We are considered not to be a transparent player and here was a pretty amateur attempt to try to fiddle the system so we would get a better audit outcome to possibly attract cheaper capital into Eskom that we know it needs very desperately,” George said.
“Nobody wants Eskom to collapse financially because we know what that means in terms of our electricity supply and the impact on our economy. So what other options were considered given that we know the problem at Eskom and the fact that it is riddled with corruption.
“Also what I would like to know is was there pressure from the auditor-general because we would expect that they would extremely unhappy with a situation like this?” the DA MP asked.
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Compiled by Betha Madhomu
Godongwana withdraws Eskom exemption ‘for now’
Cape Town – Finance Minister Enoch Godongwana says he has decided to withdraw the exemption of Eskom from the Public Finance Management Act “for now”.
The National Treasury had on Friday exempted Eskom from reporting its annual financial statements on wasteful and irregular expenditure that did not arise from corruption.
But on Wednesday, Godongwana said he had told Parliament that the National Treasury had opted to withdraw the gazetted exemption, pending consultation with the office of the auditor-general (AG).
“Yesterday we had intensive discussions with the auditor-general (AG) and in that discussion there were some contributions from the AG that need to be part of the framing of the gazette
“In the light of those comments…, we have decided to withdraw the gazette for now and have more detailed discussions with the AG and Eskom’s auditors so that the framing is proper and the checks and balances are tightened,” News24 quoted Godongwana as saying.
Godongwana also acknowledged the public outrage, saying the Treasury appreciated South Africans are “quite aggressive and vigilant against corruption, which is going to be important for our society.
“We take that as a positive step. We also take it as a positive step because part of the challenge we face with greylisting is the effectiveness, our ability to deal with corruption”, Times Live reported.
Godongwana said the intention of the exemption was to allow Eskom to have “better” financial statements but at the same time create an environment where there is transparency on corruption and irregular expenditure.
“The intention is not to hide anything,” he said, according to the report.
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Compiled by Betha Madhomu
Eskom committed to addressing wasteful expenditure – Cassim
Cape Town — Eskom Acting Group CEO Calib Cassim says the power utility is committed to addressing irregular, fruitless, and wasteful expenditures.
This comes after the National Treasury exempted Eskom from disclosing its irregular expenditure on its annual report.
Cassim assured the nation that the exemption comes under strict monitoring.
“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 to the conditions and strict monitoring requirements imposed by National Treasury in granting the exemption,” Cassim said.
ALSO READ | Treasury justifies Eskom exemption
Despite the exemption, Eskom’s chief procurement officer Jainthree Sankar said regular procurement processes will continue to be followed.
“Eskom continues to work with the various regulatory bodies to support delivery on the procurement of goods and services impacting our key 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,” Sankar said.
Meanwhile, Western Cape Premier Alan Winde described Eskom’s exemption as a “major blow to transparency”.
“This exemption from Treasury, which is the guardian of our country and government’s financial guardrails flies in the face of all financial checks and balances and good governance,” Winde said.
He said that Finance Minister Enoch Godongwana’s go-ahead showed “that, rather than stopping corruption, it is being formalised at Eskom”.
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Compiled by Junaid Benjamin
