Eskom Exemption: Treasury Clarifies Stance on Financial Disclosure

National Treasury has addressed concerns surrounding its decision to grant Eskom a partial exemption on disclosing certain aspects of its financial records. Here’s what you need to know:

The exemption details:

• Over the next three years, Eskom is exempted from disclosing some details in its annual reports.
• The power utility is still required to table financial and non-financial information on irregular, fruitless, and wasteful expenditure in its annual report.
• The exemption was granted under Section 55(2)(b)(i) of the Public Finance Management Act (PFMA) and Treasury Regulation 28.2.1.

Treasury’s rationale:

• The new approach aligns with President Ramaphosa’s response to state capture and corruption.
• Treasury is working with the Auditor-General of South Africa (AGSA) to review the concept of irregular expenditure and focus on identifying corrupt or suspicious expenditure or expenditure made in bad faith.

The impact on transparency and accountability:

• Eskom will still report on irregular and fruitless and wasteful expenditure in its annual report, ensuring transparency and accountability are not compromised.
• Eskom is not exempted from taking effective and appropriate steps to prevent irregular and fruitless and wasteful expenditure.

Eskom’s request for exemption:

• In a letter dated March 9, Eskom chairperson Mpho Makwana requested exemptions from disclosing financial statements and other sections of the PFMA.
• The exemption will alleviate the threat of a qualified audit for reasons relating to PFMA non-compliance and provide relief to Eskom’s financial recovery efforts.

Opposition to the exemption:

• Political parties and other stakeholders argue that the exemption will adversely impact the country and Eskom’s efforts to tackle corruption.

Key quotes:

• “By allowing Eskom to report on irregular and fruitless and wasteful expenditure in its annual report and not in its financial statements, the National Treasury ensures that reporting transparency and accountability is not compromised and still made public as currently required.” – Treasury statement.
• “Provide relief to Eskom in circumstances where its financial position is constrained and the cost of borrowing is a major concern in its financial recovery efforts.” – Mpho Makwana, Eskom chairperson.

To view the full Treasury statement, click here.

To read Mpho Makwana’s letter, click here.