Foundation Welcomes Withdrawal of Gagging of Information at Eskom
Issued By the FW de Klerk Foundation on 06/04/2023
The FW de Klerk Foundation welcomes the withdrawal of the notice issued by Finance Minister Enoch Godongwana on 31 March exempting Eskom from disclosing “financial and non-financial information on irregular, fruitless and wasteful expenditure” in its financial statements. The original gagging order would have circumvented the accountability requirements of the Public Finance Management Act (PFMA) – and would, instead, have allowed Eskom to account once a year in its annual report.
The gagging order – which caused shock and dismay across the political spectrum – would have been irreconcilable with the foundational values of openness and accountability that are essential for good governance.
The Foundation also welcomes the recent termination of the national state of disaster to deal with the energy crises that it warned (in a 14 February 2023 statement) would “pose a direct and serious threat – not only to human rights – but also, possibly, to our constitutional democracy.”
Eskom has repeatedly faced numerous allegations of rife corruption – corruption that government knows about according to the revelations of former Eskom CEO Andre De Ruyter earlier this year. The very possibility such an entity could be given further leeway to continue to waste public funds undermines our Government’s commitment to “take decisive action against corruption and make a clear break with the era of state capture.”
On Wednesday, the Minister announced his decision to withdraw the exemption – “for now” – to allow further consultation with the auditor-general and Eskom’s auditors. According to Eskom’s 2022 Integrated Report, the entity reported R67.1 billion in irregular expenditure, R5 billion in fruitless and wasteful expenditure and R2.8 billion in losses due to criminal conduct.
The exemption would have protected the state-owned entity (SOE) from releasing information regarding expenditures incurred as a result of contraventions of accounting rules, in an attempt to escape a qualified audit by the Auditor-General and the threat such a report would pose to Eskom’s credit ratings.
In response, Treasury stated “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, while mitigating the risks that could arise if these transactions are reported in the annual financial statements.”
Whilst the exemption may have been aimed at “mitigating the risks” to restoring the financial health of Eskom, it set a dangerous precedent that could further erode public trust in SOEs and in the integrity of the Department of Finance.
The PFMA is a critical tool in promoting good governance, accountability and transparency in public entities. As South Africans continue to contend with serious disruptions to their businesses and lives caused by loadshedding, they should have every right to scrutinise the manner in which Eskom is running its operations and combatting the kind of corruption identified by Mr De Ruyter.
The exemption is not the first of its kind and has been applied previously, notably to another failing SOE, Transnet. As stated by Cosatu spokesperson Sizwe Pamla, this waiver of the Act’s accounting requirements, “is a green light to criminals that they can go and feast and loot with impunity at Eskom and Transnet.”
Section 195 of the Constitution sets out the basic values and principles governing public administration, which includes transparency, accountability and the promotion of efficient and effective use of resources. Additionally, Section 237 of the Constitution establishes the role of the Auditor-General in auditing and reporting on the accounts, financial statements and financial management of all public entities. These provisions are essential for ensuring that state-owned entities are held to account for their financial practices and that there is transparency in their operations.
Ensuring Eskom’s long-term viability is an important step to ending the energy crises. However, this must be carried out in a way that is consistent with the principles of transparency and accountability as enshrined in the Constitution. It is crucial that the ANC take urgent steps to ensure that state-owned entities are held to account for their financial practices, in line with its plans to strengthen governance frameworks and implement stricter procurement processes, through the prioritisation of forensic reports, audits and investigations.
A positive aspect of this unfortunate episode was the effectiveness of the public outcry against Minister Godongwana’s exemption notice. He deserves some credit for responding so quickly to the public demand that he should withdraw the exemption.
The Minister has called for public comment on the proposed Eskom exemption. Should you feel strongly about this issue, your comment can be emailed to OAGqueries@treasury.gov.za by no later than Friday, 21 April 2023.