Treasury withdraws Eskom exemption after outcry

Finance Minister Enoch Godongwana has withdrawn an exemption granted to Eskom through his office that would excuse the financially distressed power utility from disclosing irregular and fruitless expenditure, the Nationally Treasury confirmed on Wednesday.

Godongwana’s decision comes days after the exemption was implemented in terms of Section 55 (2) (b) (i) of the Public Finance Management Act (PFMA) of 1999 and Treasury Regulation 28.2.1 of Section 76 of the Act. It was published in the Government Gazette on Friday (31 March 2023).

His decision was met with public outrage.

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During a parliamentary briefing on Wednesday, Godongwana withdrew the exemption, adding that he would seek further consultations on the matter.

“We have decided to withdraw the gazette for now and take all these comments to account and also have a detailed consultation with the Auditor General and the auditors of Eskom so that the framing must be proper [and] checks and balances for corruption are tightened.”

In granting the exemption, Godongwana said Treasury looked at what the constraints of such irregular costs would be, not only on Eskom but on the sustainability of the fiscus.

“We then said, we should grant Eskom the exemption from reporting these, what are called material losses, due to criminal conduct irregular expenditure, fruitless and wasteful expenditure, from disclosing … in the annual financial statement,” he said.

He said part of the conditions of the exemption was that Eskom discloses the figures in its broader annual reports.

The exemption is applicable to Eskom’s 2022/23, 2023/24 and 2024/25 financial years, with the announcement coinciding with the release of the utility’s 2022/23 interim financial results.

Section 55 (2) (b) (i) of the PFMA states that the annual report and financial statements for a public entity must: “Fairly present the state of affairs of the public entity, its business, its financial results, its performance against predetermined objectives and its financial position as at the end of the financial year concerned.”

During the 2022 financial year, Eskom reported a balance of R67.1 billion of such irregular and fruitless expenses.