Godongwana permanently sinks Eskom’s controversial exemption

Finance Minister Enoch Godongwana has permanently withdrawn Eskom’s exemption from some aspects of the Public Finance Management Act (PFMA) that require the power utility to disclose irregular, fruitless and wasteful expenditure in its annual report and financial statements. 

Godongwana made the decision after concluding consultations with the Auditor-General and considering comments from the public, including submissions from the accounting and auditing profession. 

There was widespread criticism aimed at Godongwana for signing a special Government Gazette on 31 March 2023, which would pave the way for Eskom to no longer disclose irregular, fruitless and wasteful expenditure over the next three years that did not arise from corruption. 

Critics across the political and civil society spectrum argued that the exemption could be used by Eskom’s management and board to hide wrongdoing at the utility, which was a key site of State Capture corruption.  

Following the backlash, Godongwana temporarily withdrew the exemption to have more consultations. He has now permanently withdrawn the exemption.

Granting the exemption, which Godongwana and the National Treasury described as “partial”, would have had the effect of Eskom not having an obligation to disclose irregular, fruitless and wasteful expenditure in its annual report and its financial statements — as required by the PFMA. 

Irregular, fruitless and wasteful expenditure that occurs through criminal activity, such as theft and corruption, would still have had to be reported by Eskom in its financial statements. Other instances of irregular, fruitless and wasteful expenditure not linked to corruption, such as contraventions of day-to-day/ordinary accounting rules and the processes of recovering funds, would have needed to be be disclosed only in the annual report. 

The state-owned transport group Transnet was recently granted a similar exemption, which still stands and will run for the next two years.

In a statement on Wednesday, the Treasury said Godongwana had decided to not grant Eskom a partial exemption, saying he recognised efforts by the power utility’s management and board to fight corruption while having to comply with the reporting burdens placed by the PFMA.

“However, it is the view of the Minister that Eskom needs to do more operationally to reduce the scope of fraud and corruption before such exemption can be considered, and for it to be effective.

“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,” the Treasury said.

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