Eskom spent R840 million on flats that can’t be occupied, Scopa hears

State-owned entities (SOEs) continued on the downward spiral of irregular expenditure, the Auditor-General of South Africa (AGSA) found for the 2019-2020 financial year.

Briefing the standing committee on public accounts (Scopa) on Wednesday, AGSA business executive Polani Sokombela told the committee that Transnet accumulated R56.2 billion in irregular expenditure while the Passenger Rail Agency of South Africa (Prasa) recorded R28.6 billion and Denel sat on R3.1 billion.

The South African Broadcasting Corporation (SABC) recorded irregular expenditure of R202 million in the last financial year, with a cumulative of R5 billion, while Eskom recorded R33 billion – an increase of R11 billion from the previous financial year.

R5 billion of the R33 billion was due to tender processes not being adhered to, Sokombela told the committee.

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Eskom’s fruitless and wasteful expenditure increased from R538 million to R2.9 billion in the last financial year. Part of the R2.9 billion was spent on building a block of flats which were meant to house technicians who were going to work at Kusile Power Station when it was being built.

However, the power station was finished before the flats, Sokombela said.

Initially, the budget for the flats was R160 million, which later increased to R840 million. The flats have now been abandoned and deemed impaired.

“How the original budget ballooned to R840 million is a question that hasn’t been answered. That building has been impaired down to zero, because where it is sitting currently, it would be very difficult to get tenants who would be willing to stay there and pay. At this point, it is not even in a condition for people to live in it. For someone to take over that building, Eskom will have to pay them,” the committee heard.

Eskom has vowed to investigate the matter.

During the 2019-2020 financial year, Eskom raised R50.9 billion against the target of R46.2 billion. While it sounds like good news, any additional loans or funds is not good news for the entity, considering the debt it has accumulated.

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In the next five years, Eskom will have to repay about R197 billion in debt and interest of about R145 billion.

“If one looks at the performance of the entity at this stage, it is clear that the debt cannot be repaid using Eskom-generated funds.Government will have to support. They’ve been getting a qualified auditing opinion for the past four years in one area – irregular and fruitless expenditure because of modifications done on major contracts that don’t comply with regulations.

“This happens year in and year out and it has become an issue,” Sokombela said.

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