By Lehlohonolo Lehana.
The notice gazetted that exempts Eskom from disclosing irregular, fruitless and wasteful irregular expenditure will be withdrawn, finance minister Enoch Godongwana announced on Wednesday.
The withdrawal follows a public uproar over the exemption, which critics said would serve to conceal the corruption that has become rife in Eskom.
Godongwana said the department would withdraw the gazette after consultation with the auditor general (AG) yesterday, 4 April, and the widespread public outcry.
However, the minister alluded to the possibility of the exemption being reintroduced in the future.
He said that the department will have a detailed consultation with the AG, Deloitte’s and Eskom’s auditors to tighten checks and balances for corruption.
On Friday, Treasury published a gazette exempting Eskom from section 55(2)(b)(i) of the PFMA and Treasury Regulation 28.2.1 for a period of three years.
Treasury explained that the exemption was given for several reasons, but primarily to protect the embattled power utility’s credit rating and audit opinion, which would have had a knock-on effect on the power utility’s financials and loans.
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.
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?”
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.
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.
Meanwhile Eskom says it is piloting a national demand response programme in the small commercial and residential sectors in response to the electricity crisis facing South Africa.
The programme is an expansion of the successful industrial Demand Response Programme, which has been operational for over ten years.
Demand response programmes are agreements between Eskom and participating power users which result in users getting compensation – such as favourable rates or discounts – in exchange for cutting power usage when contractually obligated to.
These times are determined by the system operator, and typically hit during peaks, or when unexpected or unplanned outages occur and demand needs to be reduced to stabilise the grid.
Eskom currently uses the system with industrial users where qualifying groups on the programme are contracted annually with Eskom (via an agreement).
Those contracted with Eskom on the programme currently receive a financial incentive based on actual performance and could potentially be excluded from national load shedding at stages 1 and 2.
This is often reported as load curtailment.
Eskom is now piloting this programme with smaller businesses and energy users, including in the residential sector.
According to the power utility, the objective of the pilot is to test, among others, the appropriateness of technologies, market uptake, and the implementation and participation in this sector.
“The pilot will enable Eskom to evaluate projects on an ongoing basis until the threshold of 50MW has been reached,” it said.
Qualifying aggregated load providers (ALPs) that meet the demand response criteria will be compensated to reduce aggregated electricity demand when dispatched via Eskom’s system operator.
The programme carries a minimum load entry level of 1MW and a maximum of 5MW, and those that apply must be the facilitator of the load being controlled through the agreement.
It is unlikely that a typical residential home would meet the load threshold for such a contract, however, bigger residential areas and gated communities like estates could ostensibly sign on, as long as they meet the conditions.
“An ALP could be referred to as an Eskom customer, a non-Eskom customer, a municipality or metro, a project developer or service provider, an energy services company or any other entity that is able to aggregate, control and measure electrical load from multiple sources, and provide this bulk load to the system operator to be dispatched,” Eskom said.
A performance contract will be put in place with the ALP for a period of up to three years, the group said, and participants will be expected to be able to curtail load twice a day for an hour at a time, minimum.
- The ALP is scheduled on a day-ahead basis and dispatched on the day, with a 30-minute notification period.
- The ALP must reduce load on instruction for a minimum of one hour with a maximum of two events per day (maximum 500 hours per annum).
- The 30-minute interval remote metering is a prerequisite.
- The ALP will receive an energy payment for the verified load reduced.
The demand response pilot is a national initiative, but municipalities are working on similar programmes more locally.