SA’s largest trade union federation, Cosatu, says the Treasury’s decision to give Eskom and Transnet exemptions from reporting irregular and wasteful expenditure in their financial statements creates a pathway for the re-emergence of state capture.
Power utility Eskom and ports and rail operator Transnet, both crucial to the economy, are still reeling from the state capture era in which misappropriation of public funds and mismanagement led to their breakdown.
“This reckless decision is tantamount to them facilitating another round of state capture. We call on President [Cyril] Ramaphosa to intervene and instruct National Treasury to cancel this bizarre decision immediately,” the labour federation’s spokesperson Sizwe Pamla said.
The then deputy chief justice Raymond Zondo’s commission of inquiry into state capture made adverse findings on the ANC’s cadre deployment policy, which resulted in unsuitable individuals being appointed as executives at SOEs and on boards. Zondo said this often resulted in ANC politicians enriching themselves and the party.
The Treasury’s decision to exempt Eskom from sections of the Public Finance Management Act was gazetted at end-March while the decision on Transnet’s exemptions was gazetted in 2022. Both exemptions raised widespread concern, with politicians, lobby groups and organised business also saying they feared the entities would be unable to root out corrupt practices.
The exemptions from the disclosure comprise the financial year that runs until end-March 2023 and the two years thereafter.
No rationale
Cosatu, which is also aligned to the ANC, said the exemptions should be cancelled as there is no legal rationale for it.
“Eskom is in a crisis today because National Treasury kept bailing out the power utility without ensuring that proper governance was implemented. Medupi and Kusile were built to ensure the economy would not experience load-shedding,” said Pamla.
“Transnet is being decimated by criminal syndicates stripping it of its cable and steel, and more than 100 train carriages have been destroyed by arsonists, while gangs run amok on trains terrorising passengers.”
The decision on irregular expenditure could be justified because these items would typically relate to emergency procurement that sometimes bypasses rules such as the need to get three quotes before a supplier is appointed.
Eskom has been consistently saying the act inhibits its ability to procure expertise, goods and services to deal urgently with breakdowns at power stations.
In a statement on Monday, the power utility said the exemptions will enable it to report the irregular, fruitless and wasteful expenses in its annual report, as opposed to its annual financial statements.
“This exemption will assist in the dialogue with credit ratings agencies, the lender community and key stakeholders. Eskom will abide by the conditions and strict monitoring requirements imposed by National Treasury in granting the exemption,” said Eskom acting group CEO Calib Cassim.
The Treasury said reporting on irregular and fruitless and wasteful expenditure in its annual report and not in its financial statements will allow Eskom to “mitigate the risks that could arise if these transactions are reported in the annual financial statements”.
For Transnet, the exemptions allow the entity “to develop and implement internal control measures to ensure accurate and complete reporting” after a four-year period in which Transnet has received qualified audit opinions from the auditor-general due to misstatements that were identified as irregular expenditure in its annual financial statements.
Cosatu’s concerns regarding the exemptions are similar to that of Western Cape premier Alan Winde, who said the decision is concerning and will aid further corruption at Eskom.
The EFF said it will approach parliament’s standing committee on public accounts on the matter while the official opposition, the DA, said the decision to grant Eskom the exemption is tantamount to an admission that corruption within the entity must be accepted as a given, and that solutions to rolling blackouts will come at criminally induced premiums.
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