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Finance minister Enoch Godongwana has announced that government has withdrawn a gazette that exempts Eskom from reporting irregular, wasteful, and fruitless expenditures in its financial statements until 2025.
Godongwana announced the decision to withdraw the gazette “for now” during a joint meeting of various parliamentary standing committees on Wednesday, 5 April 2023.
The minister said the withdrawal was informed by an intensive discussion with the Auditor-General of South Africa and general public backlash over the issue.
He added that government would engage in detailed consultation with the Auditor-General and Eskom’s auditors to ensure the framing of any future exemption is “proper” and provides “tightened” checks and balances for corruption at Eskom.
At the time of publication, the Government Printing Works online portal still listed the gazette, but the file attached to the associated link was no longer available to download.
The finance minister gazetted the exemption on 31 March 2023.
It stated that Eskom was exempted from disclosing any irregular, fruitless, and wasteful expenditure amounts in its annual financial statements until 2025.
This is normally required of state-owned entities as part of the Public Finance Management Act (PFMA) and certain Treasury Regulations.
The measure ensures accountability for taxpayer money taken from SOE coffers and used for ulterior purposes.
Enoch Godongwana, South African Minister of FinanceEskom’s exemption was met with widespread criticism from opposition political parties, civil rights organisations, energy experts, and economists.
Several accused the ANC-led government of trying to hide corrupt activities at the utility, particularly in light of previous comments from electricity minister Kgosientso Ramokgopa.
Ramokgopa had tried to downplay the role of corruption in the poor performance of Eskom’s Kusile Power Plant.
Afriforum and Sakeliga were among the organisations threatening legal action over the exemption.
“There is no clear justification for exempting Eskom from this standard provision, which enables the public to properly evaluate its financial situation,” said Sakeliga.
According to the director of law firm Hurter Spies, Daniël Eloff, the exemption would “undoubtedly” have been successfully challenged in court.
“You can’t use a delegated power in terms of an act to circumvent the purpose of an act,” Eloff stated in a tweet on Tuesday.
A day after the gazette was published, Godongwana defended the exemption and said it aimed to avoid the risk of a “possible negative outlook on Eskom’s corporate rating and credit assessment with the credit rating agencies”.
Eskom welcomed the exemption and emphasised it still had to report irregular, fruitless, and wasteful expenditures in its integrated annual report, which is tabled in Parliament by the public enterprises minister.
“This exemption will assist in the dialogue with credit rating agencies, the lender community and key stakeholders,” said acting Eskom CEO Calib Cassim.
The government passed a similar exemption for Transnet in March 2022, which went largely unnoticed.
Following the publication of its annual results, Transnet explained that the exemption allowed the SOE to be assessed like any other commercial company.
It also relieved Transnet from including certain historical irregular expenditure that had remained unresolved.
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