Eskom now has to report to parliament’s portfolio committee for electricity and energy at least every quarter after a scathing qualified report by auditor-general Tsakani Maluleke showing little progress in the utility’s financial management over the past three years with deterioration in some areas.
New leadership and time are the main factors to drive a turnaround of Eskom’s organisational culture of flouting accounting procedures with impunity, board chair Mteto Nyati said on Friday when the Eskom board and management appeared before the committee to explain.
It was during this session that electricity & energy minister Kgosientsho Ramokgopa first warned of the return of load-shedding after more than 300 days on Friday morning. Eskom then announced stage three load-shedding that was suspended early Sunday morning after it was able to replenish its emergency diesel reserves and dam levels.
The qualified report for 2023/24 was enough to “make even Sister Theresa angry,” ACDP member of the committee Wayne Thring said.
The findings include:
- The annual financial statements Eskom submitted to the auditor-general were so full of mistakes and would have led to further qualifications, had the auditor-general’s team not assisted the utility to correct it during the audit.
- The significant lack of internal controls has not been attended to for the past five years.
- As a result of its lack of internal controls, Eskom has been unable to prevent the breaking of laws and regulations.
- There are no consequences for officials who contravene procurement processes.
- Eskom failed to follow through on commitments to address these matters, “due to a lack of accountability at various levels in the organisation, inadequate oversight and monitoring processes and ineffective consequence management”.
Kevin Mileham, DA member of the committee, asked the Eskom team what is going to change since it has reneged on previous commitments to sort out its poor financial management.
Thring called the inability of the Eskom board to stem losses over the previous three to five years “treasonous”. He said the inefficiencies at Eskom “has hammered our economy” and its inability to address the auditor-general’s recommendations has resulted in continued “pain and suffering” for South Africans.
MK MP Sipho Mbatha lamented the lack of progress was due to a perpetual lack of information according to the auditors. “They cannot find the paperwork for critical decisions within Eskom.” He asked if Eskom has an internal audit function that files all “paperwork” and contracts so that it is available for the external auditors.
Nyati told the committee the change in leadership in Eskom will drive its recovery and progress towards an new organisational culture without crime, corruption and a lack of discipline but it takes time to change.
Nyati was only appointed to lead the board in October 2023, more than halfway into the reporting period and Eskom CEO Dan Marokane at the end of the period.
He said there have been improvements since year-end that includes a drastic reduction in load-shedding and the enforcing discipline and adherence to internal controls, and Eskom is expecting a profit after tax of R10bn, compared with a loss of R25.5bn in the reporting period.
Marokane said 2023/24 was and “exceptionally challenging year” but a good foundation has been laid for improved performance in this financial year.
He said Eskom now has a clear, time-based plan to address the matters raised by the auditor-general.
Eskom has appointed skilled staff to focus on tightening internal controls, risk management and compliance with the Public Finance Management Act.
It has consolidated its forensic, security and investigative functions and this unit will report directly to him, Marokane said. It will also address the backlog in investigations and disciplinary action.
The finance, internal and forensic functions are being strengthened.
Marokane said Eskom now has a dedicated task team to address the findings relating to state capture. It will institute criminal charges against management, staff and suppliers who are implicated and pursue the declaration of implicated board members as delinquent directors. The task team will also drive civil proceedings to recover financial losses suffered by Eskom.
The utility works closely with law enforcement agencies and has beefed up the vetting of people in critical positions, Marokane said.
Eskom is also optimising its processes and use of technology, and it is reviewing the contracts of suppliers implicated in malfeasance.
The sitting of the portfolio committee came a day after energy regulator Nersa granted Eskom a tariff increase of only 12.74% from April 1 in stead of the 36.4% it applied for. The reduction is largely based on Nersa’s effort to exclude inefficiencies in Eskom’s operations to prevent consumers being burdened unnecessarily.
The allocation of revenue from electricity tariffs for the next two financial years were also cut drastically which will leave the utility with almost R250bn less that it applied for over the tariff period of three years.
Nyati said the determination is part of “a new reality” where consumers insist on tariff increases that do not exceed the inflation rate. “We have to live within our means,” he said. “We must have an organisation that is lean and works within these parameters.”
Marokane said Eskom is studying the Nersa decision and will respond later.
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