News flash
- The Eskom Board is pleased to announce that Mr Leslie Mkhabela has been appointed as the Lead Independent Director, effective 31 January 2025.
- Mr Mkhabela joined the Eskom Board as an Independent Non-Executive Director on 01 October 2022, when the new board was appointed by the late Minister of Public Enterprises Mr Pravin Gordhan.
Eskom is facing several systemic operational, financial and sustainability issues that are receiving intense focus by the newly capacitated and recruited executive team to ultimately improve internal controls and service to customers. Consequence management and interventions are being actioned to address reportable irregularities raised relating to legacy management control issues.
“In our quest to strengthen governance and leave behind an organisation with structures that have the necessary robust checks and balances, the Board deemed it necessary to appoint Mr Mkhabela as a Lead Independent Director. We are happy that Mr Leslie Mkhabela has accepted this important role which he will occupy for the remainder of his term as an Eskom Board member. He has consistently demonstrated decisive, ethical, and inclusive leadership,” said the Eskom Board Chairman, Mr Mteto Nyati.
Unsustainable Debt
Eskom’s chief financial officer, Calib Cassim, said that municipal debt has reached R74-billion by the end of the reporting period. By November, this debt had snowballed to R95-billion.
Eskom is also challenged with smothering debt and interest costs, which are weighing on its money-generation potential. By October, its debt stock reached R397-billion, and it paid about R90-billion every year in interest rates, largely due to the weakening rand.
Addressing reportable irregularities and legacy management control issues
The recent publication of the FY2024 results was delayed by investigations into legacy management control issues. The qualified external audit opinion received for FY2024 was a result of PFMA records that were not complete or accurately maintained in line with legislative requirements relating to irregular expenditure, fruitless and wasteful expenditure, and losses due to criminal conduct. Except for this qualification, the financial statements are considered to be fairly presented in terms of the International Financial Reporting Standards (IFRS).
The audit findings call for appropriate steps to hold officials accountable, and this action is underway. The steps that are already being taken to address the control issues include a strengthened executive team that has the appropriate skills and leadership to drive adherence to internal controls, risk management and PFMA oversight. A resourcing drive to adequately capacitate the finance, internal audit and forensics functions to address key skills lost over the years will commence shortly.
Eskom has consolidated its forensics, security and investigative functions under the Group Investigations and Security function reporting directly to the Group Chief Executive. Additionally, a dedicated project management office has been created to address findings from data analytics as well as internal and external investigations and to address the backlog in investigations and consequence management both internally and externally with law enforcement agencies.
Investigation into non-technical losses
As part of the action plan to address electricity theft (non-technical losses), a forensic investigation uncovered the bulk generation of illegal prepaid electricity tokens on Eskom’s online vending systems, for both Key Revision Number (KRN) 1 and KRN 2 prepaid meters. Indications are that this is only likely if there is collusion between Eskom staff and illicit operators who breached controls within the prepaid ecosystem to facilitate the creation and sale of fraudulent prepaid electricity tokens.
A forensic investigation is still underway to identify the root causes and make recommendations for improvement as it progresses. An update from the investigation will be provided once it is finalised. The matter is also being handled by the relevant state investigative authorities.
Author: Bryan Groenendaal
