South Africa

Civil society slates Eskom exemption

South African civil society groups criticized Eskom’s exemption from reporting irregular spending in its annual financial statements, saying the move raises concerns about rampant corruption at the state-owned power utility.

The National Treasury on Friday granted a request by Eskom to lift some disclosure requirements and move the category of irregular, fruitless and wasteful expenditure to its annual report for three years.

Exempting the company from reporting those costs in its financial statements may reduce the risk of a qualified opinion from the utility’s auditors and, in turn, protect the company’s credit rating, according to the Treasury.

The utility reported a balance of R67.1 billion of such expenses in the 2022 financial year.

“Eskom is an organization that’s steeped in concerns around irregular expenditure and corruption,” said Wayne Duvenage, chief executive officer of the Organisation Undoing Tax Abuse, a nonprofit. “Hiding them does no good.”

Eskom and other state-owned companies were targets of corruption — known locally as state capture — during former President Jacob Zuma’s nine-year rule.

In the period that followed, Eskom’s management began reviewing contracts dating as far back as 2012 to check for expenditure that contravened or fell outside applicable laws.

The utility has worked with the Department of Public Enterprises, which oversees Eskom, and the Treasury to separate historical irregular expenditure from normal spending “to minimize the continued impact on the annual financial statement,” the company said in its 2022 results.

Eskom also maintained that progress has been made through checks and balances established over the past three years to reduce the extent and risk of irregular expenditure. 

The Congress of South African Trade Unions, the country’s biggest labor federation, said in a statement Tuesday that it was “shocked and alarmed” at the decision to grant the exemption.

“The National Treasury either believes that rating agencies are most fantastically gullible or they themselves are delusional,” it said.


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