By Lehlohonolo Lehana.
The Minister of Finance Enoch Godongwana says Eskom will not be granted a partial exemption requiring it to disclose irregular, fruitless and wasteful expenditure and material losses in its annual financial statements.
Godongwana had initially granted the power utility a partial exemption from section 55(2)(b)(i) of the Public Finance Management Act (PFMA) and Treasury regulation 28.2.1 for three years.
After an outcry from the public, business and political parties, the National Treasury withdrew the gazette granting the exemptions on April 6 and invited public comments on the proposed exemption for Eskom.
Godongwana said, they engaged with the Auditor-General and considered all public comments received through Government Gazette General Notice No. 3270 of 6 April 2023, which withdrew the Government Gazette General Notice No. 3247 of 31 March 2023 and invited public comments on a proposed exemption for Eskom.
“In total, fifty-six (56) comments were received, with twenty-three (23) comments received in formal correspondence and thirty-three (33) comments received through emails, covering a broad spectrum of accounting and reporting, auditing, governance, legal principles, and public interest issues have been duly considered.”
He added that they also engaged with audit firms, professional auditing and accounting bodies, a rating agency, and other relevant authorities to discuss the challenges and seemingly onerous compliance reporting requirements applicable to State-Owned Entities such as Eskom.
Treasury wanted the exemption to protect Eskom from qualified audits and other scrutiny over its books which would have impacted its credit rating and other associated risk costs with doing business with the embattled power utility.
The finance ministry argued that irregular spending being flagged by auditors was enough to do damage with credit rating agencies and other firms – while the classification didn’t necessarily amount to wrongdoing or criminal activity.
“Although irregular expenditure does not automatically equate to fraud and corruption, many comments submitted view irregular expenditure as an indicator of how SOEs are managing their finances.
“Accounting and auditing experts noted that SOEs are currently subject to more onerous accounting and reporting standards than commercial companies, as they are required to comply with both the PFMA and the Companies Act, as well as the International Financial Reporting Standards (IFRS) and JSE Debt Listing Requirements.
“In addition, as part of the Eskom debt relief arrangement, Godongwana has instituted additional reporting obligations on Eskom, which the entity will be required to submit to Parliament and oversight structures.