DA welcomes withdrawal of gazette that exempts Eskom from transparent financial reporting
5 April 2023
The Minister of Finance, Enoch Godongwana has announced his withdrawal of the exemption granted to Eskom, which allowed the utility to exclude details of irregular, wasteful, and fruitless expenditure from its annual financial statements. This comes after pressure from international rating agencies and the Democratic Alliance’s (DA) strong objection.
The DA welcomes the withdrawal of the exemption. The PFMA was enacted to ensure transparency, accountability, and sound management of public finances. Exempting Eskom from disclosing such expenditures in their annual reports would undermine the primary objective of the PFMA.
The attempted exemption was clearly a hare-brained scheme aimed at hiding critical financial information from auditors, hoping to achieve a better audit outcome to enhance the utility's credit ratings and make it appear more attractive to investors. It is perplexing that this decision was taken to try to manipulate financial information in an environment where the South African government is already distrusted, as evidenced by the recent grey listing by the Financial Action Task Force (FATF) and the unlikely possibility that the global financial community would be deceived by such a ruse.
We are perplexed by Treasury’s statement that Eskom has no plans to borrow - what was the rationale for the gazetted exemption then? And how are they going to finance fixes? In the absence of capital to address the operational issues due to inadequate cash interest cover ratios, surely the only option is accelerated unbundling as a speedy precursor to privatisation.
National Treasury either believes that rating agencies are incredibly gullible, or they themselves are desperate and out of touch. This misstep has significantly tarnished the credibility of Treasury as the guardian of public finances. We will pressure the Minister to withdraw the exemption that he granted to Transnet last year.
This move further damaged our international reputation by signalling a lack of transparency and commitment to combating financial crime, making it even more difficult for South Africa to exit the FATF’s greylist. Rating agencies will take notice, waving red flags in response.
Moreover, National Treasury's assertion that corruption is "entrenched" within Eskom starkly contradicts the Minister of Electricity's claims of no corruption. With such incoherence between government departments, attracting investment becomes an even more daunting task.
Simply whitewashing Eskom's financial statements will do nothing to resolve the utility's structural issues. The ANC lacks a coherent plan to address South Africa's ongoing loadshedding crisis. Moreover, the government has backtracked on the unbundling of Eskom. If there is no plan to unbundle the utility, its failure is inevitable. Instead of encouraging mismanagement through such exemptions, the government must reprioritize and expedite the unbundling process without delay.
The pressing concern now is whether this matter has been genuinely resolved. The Minister has indicated that the exemption is completely off the table and that will be gazetted shortly. The DA has already prepared court papers to have this exemption reviewed and set aside should the withdrawal not be gazetted.
Issued by Dion George and Ghaleb Cachalia, DA, 5 April 2023
