Godongwana withdraws Eskom’s PFMA exemption

The National Treasury has decided to withdraw the exemption granted to Eskom from reporting irregular wasteful and fruitless expenditure in its annual financial statements.

Finance Minister Enoch Godongwana confirmed the decision in a joint meeting with various parliamentary committees on Wednesday.

“Yesterday, we had intensive discussions with the AG [auditor-general], and in that discussion there were some contributions from the AG that need to be part of the framing of the gazette.

“In the light of those comments and comments from the public, we have decided to withdraw the gazette for now and have more detailed discussions with the AG and Eskom’s auditors so that the framing is proper and the checks and balances are tightened,” the minister told Parliament.

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Godongwana had gazetted the move last Friday, which would have not obliged Eskom to disclose its wasteful and irregular expenditure as per the Public Finance Management Act (PFMA) until 2025.

The Act requires that state-owned enterprises (SOEs) provide particulars in their annual financial statements and annual reports of “any material losses through criminal conduct and any irregular expenditure and fruitless and wasteful expenditure that occurred during the financial year”.

The gazette met widespread criticism, with political parties and some organisations arguing that the exemption will open the floodgates for “extreme levels of corruption“.

‘We are not hiding’

Godongwana explained to the committees on Wednesday 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 said this would have impacted Eskom’s ability to raise capital.

“We had to look at it from a fiscal sustainability eye. We [decided that] we should grant this exemption from disclosing those in the annual financial statements. But those should be disclosed in the broader annual report. In other words, we are not hiding them,” Godongwana said.

“We wanted to make sure that we set conditions for Eskom to report quarterly on what actions they are taking in that regard. But correctly, the public has taken an interest in this decision because of the history of corruption. We appreciate that South Africans are quite aggressive and vigilant against corruption… we take that as a positive step.”

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The minister refuted claims that the exemption was granted in order to shield Eskom from accountability.

“The intention, really, is to allow Eskom to have a better financial statement and create an environment where there is better transparency on financial management and all of that. The intention is not to hide anything in that regard.”

Godongwana further indicated that the exemption will be re-gazetted after consultation with the auditor-general.

“National Treasury met with the AG on Tuesday, where the AG made comments which will now be framed in the gazette. We have withdrawn the gazette temporarily so that the framing of the gazette is appropriate to ensure mismanagement and corruption are prevented.”

Watch the meeting below: