Eskom CEO Commits To Addressing Wasteful Expenditure After Receiving Partial Exemption From National Treasury

After Eskom Acting Group was given partial exemption by National Treasury from the Public Finance Management Act (PFMA) and other Treasury regulations, the company's CEO said they will address the irregular, fruitless, and wasteful expenditure in the annual report.

Cassim's statement came after Eskom was granted partial exemption for three years, which means the energy company doesn't have to disclose all its irregular, fruitless, and wasteful expenditures in annual financial statements, but only its annual report.

"PFMA compliance remains a priority as Eskom continues to address irregular, fruitless, and wasteful expenditure, including appropriate consequence management proceedings," Cassim said on Tuesday, SA News reported.

"This exemption will assist in the dialogue with credit rating agencies, the lender community, and key stakeholders," he added. "Eskom will abide to the conditions and strict monitoring requirements imposed by National Treasury in granting the exemption."

Jainthree Sankar, who serves as Eskom's chief procurement officer, explained that the energy company will continue to work "with the various regulatory bodies to support delivery on the procurement of goods and services impacting our key operations."

"Eskom is committed to a procurement system that is fair, equitable, transparent, competitive and cost-effective. Any exemption or departures are seen as an exception, not a norm," Sankar said.

National Treasury disclosed the reason behind the partial exemption, saying, "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 government department went on to share that the exemption granted to Eskom will help "fund its balance sheet and still maintain accountability, transparency and reporting requirements in its annual reports and annual financial statements." It added that if the exemptions were not given, it would have put pressure "on the fiscus and limit borrowing powers of the SOE."

Eskom is an energy company that is responsible for supplying electricity across South Africa.

Considering the exemptions provided to Eskom, the National Treasury noted that it will still be bound to strict financial reporting requirements, including the International Financial Accounting Standards (IFRS), the JSE Debt Listing Requirements, and reporting obligations to the parliament.

National Treasury concluded the statement by noting that the company was not exempted from "taking appropriate criminal or disciplinary steps" and all material losses happen due to "criminal conduct and any losses recovered or written off from irregular expenditure will still need to be reported in the annual financial statements."

Eskom shared a new timetable for load-shedding in the country on Monday. In case you've missed it, check it out here.