- The Minister of Finance, Enoch Godongwana, has finally determined that Eskom not be granted a partial exemption from section 55(2)(b)(i) of the Public Finance Management Act (PFMA), (Act No. 1 of 1999 – the Act) and Treasury Regulation 28.2.1, from disclosing irregular, fruitless and wasteful expenditure and material losses from criminal conduct in its annual financial statements (AFS).
On 31 March 2023, the Minister of Finance granted a partial exemption to Eskom Holdings SOC Ltd from section 55(2)(b)(i) of the Public Finance Management Act (PFMA) and Treasury Regulation 28.2.1 for a period of three years.
Minister Godongwana explained to the sitting the reasoning for having initially granted the exemption: “The intention really was to allow the Eskom to have better financial statements, and at the same time create an environment where there remains transparency on corruption, and irregular expenditure, as well as all the other related issues. It was never the intention of the exemption to hide anything in this regard,” Minister Godongwana told the joint committee.
The exemption would still have required Eskom to disclose all irregular and fruitless expenditure in its annual report, and would have been subject to audit, but separately from the financial statements, so that the financial statements of Eskom would be more aligned with how listed companies generally report.
It also would not have exempted Eskom from taking appropriate steps to prevent irregular and fruitless and wasteful expenditure, including appropriate criminal or disciplinary steps because of any losses incurred to date.
On 6 April the Minister decided to temporarily withdraw the exemption to allow for a period of further engagement and written technical input from all relevant stakeholders on the matter.
Now permanently withdrawn, the Minister is of the view that Eskom needs to do more operationally to reduce the scope of fraud and corruption before such an exemption can be considered, and for it to be effective and the commitment of the Eskom board and management to fight and expose fraud and corruption. As Eskom attempts to recover from the devastating impact of state capture, and take steps against past and current corruption, it needs to ensure that its anti- corruption strategy is credible and has the support of key stakeholders like investors, lenders, suppliers, customers, and the public.
Author: Bryan Groenendaal
