Treasury explains why it exempted Eskom from disclosing financial losses

The National Treasury has explained why Eskom was exempted from disclosing irregular and fruitless expenditure.

Finance Minister Enoch Godongwana exempted the embattled power utility from Section 55(2)(b)(i) of the Public Finance Management Act (PFMA) for the last financial year and the next two years, as per the gazette published on 31 March.

TREASURY BREAKS SILENCE OVER ESKOM EXEMPTION

In a statement, National Treasury explained that having irregular, fruitless and wasteful expenditure on annual financial statements may put further pressure on the public purse.

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“A major risk of having non-material, non-corrupt transactions reported in the annual financial statements include a higher likelihood of qualified audit opinion… that triggers loan covenants, which will likely further increase Eskom’s cost of borrowing and may result in additional fiscal pressure from Eskom’s debt burden should the entity be unable to negotiate lender waivers for these covenants.

“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 annual financial statements. If the exemptions were not considered, it would place pressure on the fiscus and limit borrowing powers of the SOE,” the statement read.

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National Treasury also emphasised that Eskom is still bound to other strict financial reporting requirements including those of the International Financial Accounting Standards (IFRS), the JSE Debt Listing Requirements and reporting obligations to parliament and oversight structures that arose as a result of Eskom’s debt relief arrangement.

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SA UP IN ARMS OVER EXEMPTION

Political parties, organisations and society at large have all criticised the move by National Treasury saying that it will encourage corruption at Eskom.

The Economic Freedom Fighters (EFF) said it will not stand idly by while corruption festers.

“We will write to the Chairpersons of the Standing Committee on Public Accounts (SCOPA), Standing Committee on Finance (ScoF) and the Portfolio Committee of Public Enterprises to seek permission from the Speaker of the National Assembly to convene an urgent joint meeting to receive a detailed report explaining the rationale behind such a nonsensical decision,” the party said.

The Democratic Alliance also condemned the decision and said it will meet with its legal team to consider its options.

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