Checks and balances will be tightened, Godongwana says as he withdraws Eskom exemption – for now

The National Treasury has decided to temporarily withdraw the controversial exemption of Eskom from declaring irregular, fruitless and wasteful expenditure from its annual financial statements.

Finance minister Enoch Godongwana told a joint meeting of five parliamentary committees on Wednesday the Government Gazette announcing the exemption will be withdrawn to properly frame the Treasury’s intentions and to tighten checks and balances for corruption.

The Treasury took the decision to withdraw the gazette after a meeting with auditor-general (AG), Tsakani Maluleke, on Tuesday and having taken into account public outrage about the matter.

“There were comments by the AG which have got to be part of the framing of the gazette and in the light of those comments and comments by the public, we have decided to withdraw the gazette for now and take these comments into account.”

Godongwana said they would consult the AG and the auditors of Eskom, Deloitte, to ensure the framing of the gazette is proper and checks and balances for corruption are tightened.

He acknowledged the public outrage, saying the Treasury appreciated South Africans are “quite aggressive and vigilant against corruption, which is going to be important for our society. We take that as a positive step. We also take it as a positive step because part of the challenge we face with greylisting is the effectiveness, our ability to deal with corruption.”

Godongwana said the intention of the exemption was to allow Eskom to have “better” financial statements but at the same time create an environment where there is transparency on corruption and irregular expenditure.

“The intention is not to hide anything,” he said.

In the 2023/2024 budget, the government provided for a bailout for Eskom of about R254bn over the next three years, which Godongwana said suggested Eskom was a major risk.

“It is our intention to mitigate whatever risk that may arise, which may complicate the problem. That’s the starting point, that’s the intention.

“When Eskom applied, we had to ask ourselves the question — if Eskom’s financial statements are being constrained by these irregularities, what are the implications to Eskom’s cost of capital?

“If they cannot raise capital, what are the implications for the fiscus?”

Godongwana said they looked at the application through the “fiscal sustainability eye”.

“We then said we should grant Eskom the exemption from reporting these material losses due to criminal conduct, irregular expenditure, fruitless and wasteful expenditure.”

They would be exempt from disclosing those in the annual financial statements but would disclose them in the broader annual report, he said.

“In other words, we have not tried hiding them. That’s the thrust and our perspective. We wanted to make sure we set conditions, and among those conditions for Eskom to report quarterly on what actions they are taking in that regard.”

Chair of parliament’s standing committee on finance, Joe Maswanganyi, said they convened the meeting to get the rationale for the Treasury's decision to grant Eskom an exemption.

TimesLIVE

Support independent journalism by subscribing to the Sunday Times. Just R20 for the first month.