Treasury withdraws Eskom exemption temporarily, pending consultation with AG, says Godongwana

Finance minister Enoch Godongwana has told parliament that the National Treasury has opted to withdraw the gazetted exemption it awarded to Eskom from declaring irregular, fruitless and wasteful expenditure — pending consultation with the office of the auditor-general (AG).

According to a government gazette published at the end of March, Godongwana exempted Eskom from the provisions of the Public Finance Management Act for the 2022-23, 2023-24 and 2024-25 financial years. This exempted the power utility from disclosing any irregular, fruitless and wasteful expenditure that occurred during those financial years in the annual report.

Analysts raised concerns that this served to slam the door on transparency at Eskom and facilitate looting.

Godongwana announced the withdrawal on Wednesday during a briefing at a joint meeting of parliament’s standing committees on appropriations, finance, public accounts and the auditor-general, and the portfolio committee on public enterprises.

He said the National Treasury met with the auditing watchdog on Tuesday and decided to withdraw after the institution requested consultation.

He said after this consultation, the exemption will be re-gazetted with the auditor-general’s considerations taken into account.

“National Treasury met with the AG on Tuesday where the AG made comments which will now be framed in the gazette. We have withdrawn the gazette temporarily so that the framing of the gazette is appropriate to ensure mismanagement and corruption are prevented,” said Godongwana.

The decision to approve the exemption application by Eskom was informed by Eskom’s financial position becoming so constrained that it undermined the entity’s ability to raise capital, he said.

“We had to look at it from a fiscal sustainability eye. We decided that we should grant this exemption from disclosing those in the annual financial statements. But those should be disclosed in the broader annual report. In other words, we are not hiding them.”

Godongwana maintained that this was not done to obscure transparency at Eskom or to shield corruption. He mentioned the recent greylisting, which underscored South Africa’s challenges in dealing with corruption, saying the government could not afford to pay lip service to good governance.

“We wanted to make sure that we set conditions for Eskom to report quarterly on what actions they are taking in that regard. But of course, the public has taken an interest in this decision because of the history of corruption. We take that as a positive step.

“The intention, really, is to allow Eskom to have a better financial statement and create an environment where there is better transparency on financial management and all of that. The intention is not to hide anything in that regard.”

ANC MP Bheki Hadebe welcomed the Treasury’s decision to temporarily withdraw the exemption. However, he maintained that the request and the subsequent decision was irrational and unjustifiable.

“Eskom has obtained qualified audit opinions [for] the past five years and these were mainly on irregular as well as fruitless and wasteful expenditure. These were increasing instead of decreasing, which is also an underlying factor,” said Hadebe.

Hadebe said Eskom must come to parliament to explain the rationale for the request.

Another ANC MP, Sakhumzi Somyo, welcomed the withdrawal of the gazette approving the exemption but said Eskom should not be let off the hook when it came to irregular, fruitless and wasteful expenditure.

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