‘Whoever advised you, misled you minister’: MPs want Eskom exemption withdrawn permanently

The National Treasury has been urged to the withdraw Eskom’s exemption from the Public Finance Management Act (PFMA) on a permanent basis.

Finance Minister Enoch Godongwana announced the withdrawal on Wednesday during a joint meeting with Parliament’s various committees including the Standing Committee on Public Accounts (Scopa).

Godongwana’s decision to grant Eskom an exemption from disclosing irregular wasteful and fruitless expenditure in its annual financial statements received backlash from the South African public.

The move would have exempted Eskom from the provisions of the PFMA for the next three financial years – including the current one – until 2025.

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But on Wednesday, Godongwana confirmed that the exemption has been withdrawn pending consultation with the office of the auditor-general (AG).

The minister told the various committees that the exemption was at the request of Eskom and the application was approved by Treasury due to the power utility’s financial position becoming so constrained.

He explained that this would have impacted Eskom’s ability to raise capital.

Godongwana, however, indicated that the withdrawal was temporary.

‘Irrational, unjustifiable’

ANC MP Bheki Hadebe welcomed the decision to withdraw the exemption, saying he believed the request by Eskom was “irrational and unjustifiable”.

“Eskom has obtained qualified audit opinions the past five years from 2017/2018 [financial year] to date 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,” he said.

Hadebe also said he was of the view that Eskom should appear before Parliament to explain the reasons for their exemption request.

“If we can get answers into the rationale… whether or not what they sought to achieve will eradicate [their] issues then we will be in a position to come to a different conclusion,” the ANC MP continued.

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He added that: “If we are unable to measure the extent of irregular, fruitless and wasteful expenditure [then] how do we then find comfort that the steps taken to deal with [the issues] are adequate because we will be deprived of the nitty-gritties and the nuts and bolts.”

National Freedom Party (NFP) Munzoor Shaik Emam said he was disappointed that the exemption was even considered.

“Who did you engage and get guidance and advice from in wanting to go this direction in the first place given the fact that Treasury better than anybody else knows how serious the situation is that we are facing in this country with all state-owned entities and all spheres of government when it comes to corruption, manipulation of financials and things of that nature?”

‘Opposite effect’

Democratic Alliance (DA) MP Dion George said the decision was “a bad idea”, especially in light of South Africa’s recent greylisting.

“In my opinion, I think it has actually damaged our reputation even more that it already was damaged.

“We are considered not to be a transparent player and here was a pretty amateur attempt to try to fiddle the system so we would get a better audit outcome to possibly attract cheaper capital into Eskom that we know it needs very desperately,” George said.

“Nobody wants Eskom to collapse financially because we know what that means in terms of our electricity supply and the impact on our economy. So what other options were considered given that we know the problem at Eskom and the fact that it is riddled with corruption.

“Also what I would like to know is was there pressure from the auditor-general because we would expect that they would extremely unhappy with a situation like this?” the DA MP asked.

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Inkatha Freedom Party (IFP) MP Narend Singh said the move to grant the exemption would have the “opposite effect” on Eskom rather than strengthening the utility’s ability to get funding.

“All lenders are going to look at South Africa and the financial statements that are produced from here with a microscope,” Singh said.

Economic Freedom Fighters (EFF) MP Veronica Mente labelled the exemption as “criminal”.

“[This] is a very dangerous route that could simply create precedence in all turnaround strategies by the municipalities [or any other SOE] that are dysfunctional and this could cripple the state’s fiscus,” she said.

Mente further warned that the exemption will be challenged in court if it was to proceed after the consultation process.

Watch the meeting below:

United Democratic Movement (UDM) MP Nqabayomzi Kwankwa called for the law that empowers the finance minister to make a decision on exemptions to be revisited.

“We must set parameters for such an exemption,” he said.

He also said he believed the exemption was not going to help us attract funding because the approach was misleading to investors.

“If you consider the negative publicity that Eskom has received, I’ll put it to you that it has even rendered this exemption null in-void because people know Eskom now has something to hide.”

‘Protecting those who steal from Eskom’

Kwankwa urged that the withdrawal be permanent.

“You must consider minister that the exemption happens at the time of [former Eskom CEO, André de Ruyter’s allegations on corruption]. I am not a great fan of De Ruyter but I am a great fan of anyone who comes to the public [as a] whistleblower on the misuse of government funds.

“He did cite in his interview that people must be allowed to steal a little bit. So if now we exempt Eskom from providing the information, it means we are protecting those people who were allowed to steal a little bit when Eskom was sourcing funding.”

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Scopa’s chairperson Mkhuleko Hlengwa pointed out that Eskom did not have a functional audit action plan to be exempted from disclosing its expenditure.

“It would be wholly reckless and irresponsible to condone that through an exemption. Whoever advised you, misled you minister and we must be frank about that because the holistic picture of affairs at Eskom speaks to the contrary of an exemption, but the tightening of legislative compliance which has to exist.

“We will not turn Eskom around by sanitising the books, by shielding things or willy-nilly exemptions given the gravity of the situation,” he said.