Eskom exemption conceals the cost of corruption
3 April 2023
Eskom has been exempted from disclosing irregular and fruitless and wasteful expenditure in its annual financial statements, following a special government gazette issued by Minister of Finance Enoch Godongwana on Friday, 31 March. 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.
The exemption was at the request of the Eskom Board Chairman, Mpho Makwana, who needs to explain why this is necessary and why for three consecutive years. There is clearly significant financial irregularity that Eskom wants to hide from investors and South African taxpayers who fund it. Treasury and the Minister must immediately withdraw this exemption.
It is unacceptable to hide material financial information from auditors in the hope of obtaining a better audit outcome. Finance is based on trust and this exemption further erodes confidence in our already battered 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.
The likely reason for this exemption is that Eskom needs more money from investors to fund its operation even if a large portion of its debt is transferred onto the national balance sheet. 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.
What would be better than hiding material facts from auditors and investors, is to make sure that these facts are transparently reported and that a coherent plan is put in place to ensure that Eskom can be effectively unbundled and that investor sentiment can be that Eskom is a viable investment.
Without having to declare irregular and fruitless and wasteful spending, Eskom has no incentive to fight corruption and Treasury gives a free pass to criminal syndicates in Eskom that it knows operates with political coverage. 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, and the billions more?
The DA will do everything possible to stop this blatant attempt to distort the true financial facts of an entity, rotten to its core. We have been in contact with the Minister of Finance to advise that we cannot accept this exemption and are consulting with our legal team to consider our options. South Africans deserve better. We cannot allow our country's future to be held hostage by a culture of corruption and mismanagement. The DA stands firm in our commitment to hold the government accountable for its actions and to fight for a transparent, efficient, and effective Eskom.
Issued by Dion George, DA Shadow Minister of Finance, 3 April 2023
