The national treasury has defended the decision to exempt Eskom, which has been in deep financial trouble for years, from certain provisions in the Public Financial Management Act.
The exemption still requires Eskom to disclose financial and non-financial information about irregular, fruitless and wasteful expenditure, but only in its annual report.
According to the Treasury, transparency and accountability regarding reporting will not be compromised and will continue to be disclosed as currently required, but this mitigates the risks that may arise.
“Eskom is not exempt from ensuring that it takes effective and appropriate steps to prevent irregular, fruitless and wasteful expenditure. Nor is he exempt from taking appropriate criminal or disciplinary action as a result of any losses incurred to date. All material losses from criminal conduct and any losses recovered or written off from irregular expenditure will still have to be reported in the annual statements.”
The treasury says that reporting these transactions in the financial statements increases the likelihood of a qualified audit opinion, which other listed companies do not face. A qualified audit opinion could further increase Eskom’s cost of borrowing and put additional pressure on Eskom’s debt burden.
“The exemption granted to Eskom will enable it to continue to fund its balance sheet and still maintain accountability, transparency and reporting requirements in its annual reports and financial statements. If the exemptions are not considered, it will put pressure on the fiscus and limit borrowing powers of the state institution,” the treasury said.
Eskom welcomed the release and gave the assurance of its commitment to comply with applicable legislation.
According to the power supplier, he has been in discussions with various stakeholders from the national treasury and the Department of Public Enterprises for several months about his proposal to seek the minister’s approval in relation to this exemption.
“Compliance with the Public Finance Management Act remains a priority as Eskom continues to address irregular, fruitless and wasteful expenditure, including appropriate consequence management procedures,” said Calib Cassim, Acting Head of Eskom.
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