National Treasury has moved to clarify its decision to grant Eskom an exemption on disclosing part of its financial records.
It was reacting to the growing discontent around the news that over the next three years, the power utility will not be required to disclose some of the details in its annual reports.
In a statement issued on Monday, Finance Minister Enoch Godongwana’s office stated that while Treasury granted a partial exemption to Eskom under Section 55(2)(b)(i) of the Public Finance Management Act (PFMA) and Treasury Regulation 28.2.1 for a period of three years, the power utility was still required to table 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 as set out in the PFMA section mentioned above. Whilst the historical (ie previous year) information was also reflected in the annual financial statements, a separation in the reporting of irregular and fruitless and wasteful expenditure across the annual report and annual financial statements was made for all institutions from the 2022/2023 financial year,” the statement read.
According to Treasury, it's “new approach to reporting on irregular and fruitless and wasteful expenditure is in line with the response of President Ramaphosa to state capture and corruption”.
Treasury also said it was working alongside the Auditor-General of South Africa (AGSA) to review the usefulness of the concept of irregular expenditure, and to focus on identifying corrupt or suspicious expenditure, or expenditure made in bad faith.
“This is part of an effort to address the Commission’s recommendation cited in paragraph 184.108.40.206” and return to the original intent of the PFMA to let managers manage, while holding them accountable.
“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,“ the statement went on to say.
Treasury also emphasised that Eskom is by no means not exempted from ensuring that it takes effective and appropriate steps to prevent irregular and fruitless and wasteful expenditure.
Read full statement here
The exemption also follows a letter penned by Eskom chairperson Mpho Makwana to Godongwana.
In the letter dated March 9, Makwana asked that Eskom not only be exempted from disclosing financial statements but also from other sections of the PFMA.
“The effect of such exemption and departure approval, collectively, is that material losses due to criminal conduct, irregular expenditure and fruitless and wasteful expenditure, and appropriate consequence management (including criminal prosecutions, disciplinary charges and losses recovered or written off), will continue to be reported by Eskom. However, those particulars will no longer be subject a to full statutory audit by the Auditor-General South Africa. As such, the threat of a qualified audit for reasons relating to PFMA non-compliance will be alleviated.”
He further added that this will: “Provide relief to Eskom in circumstances where its financial position is constrained and the cost of borrowing is a major concern in its financial recovery efforts. As may be agreed with the Auditor.”
Read Full letter here
But political parties and other stakeholders organisation have rejected the move stating that it will have an adverse impact on the the country and Eskom's efforts to tackle the rampant corruption that already exits.