Eskom’s corruption woes vanish in puff of smoke as exempted from key regulations – Ivo Vegter

The South African government has come under fire for exempting Eskom, the country’s power utility company, from the Public Finance Management Act, which requires state-owned enterprises to report irregular, fruitless, and wasteful expenditure, as well as theft. The exemption, which was signed by finance minister Enoch Godongwana, could protect the company from revealing details of irregular spending and losses through criminal conduct. Eskom has been at the center of a corruption crisis, with various officials being charged with fraud and corruption. The government has been accused of ignoring the issue, with electricity minister Kgosientsho Ramokgopa claiming corruption is not at the heart of the company’s troubles. Read more on the matter below.

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How they made Eskom corruption vanish

By Ivo Vegter*

First, new electricity minister Kgosientsho Ramokgopa announced that corruption is not at the heart of Eskom’s troubles. Then, finance minister Enoch Godongwana exempted Eskom from the Public Finance Management Act.

The government was mighty miffed when outgoing (and the next day ex-) CEO of Eskom, André de Ruyter went on national television in February to give South Africans a shocking summary of the corruption crisis at Eskom.

Cyril Ramaphosa was shocked. Shocked! ‘We were most concerned about his utterances,’ he exclaimed, ‘and what immediately came to mind was that André de Ruyter, being the person at the level of group chief executive officer, should have gone to any of our institutions with the information that he purports to have because those are institutions that are independent, where there won’t be any form of interference, diversion, blockage or even any form of subterfuge.’

This prompted advocate Paul Hoffman, director of Accountability Now, to pen a comprehensive smackdown of Ramaphosa’s protest, disputing that any of the law enforcement agencies, and particularly the Hawks, are ‘independent’, in fact or in law.

Read more: OUTA on Eskom PFMA exemptions: where’s the transparency?

Blind eye

A month later, the newly-appointed minister of electricity, Kgosientsho ‘Sputla’ Ramokgopa, upon completing a whirlwind tour of Eskom’s power stations, declared that corruption was not at the heart of the problems at Eskom.

As an example, he cited the 3 000MW that lies offline at Kusile, which he said has ‘nothing to do with corruption whatsoever and… everything to do with design deficiencies.’

He turned a blind eye to the fact that the design deficiencies have everything to do with corruption, since they’re the result of poorly designed boilers procured from Hitachi, pursuant to a dodgy tender that kicked back a large share of the contract value to Chancellor House, which directly funds ANC coffers and would be better named Corruption House.

He claims only one power station, Tutuka, listed corruption among its challenges.

Perhaps the others took note of the attempted assassination of De Ruyter and decided discretion was the better part of valour when it came to powerful crime syndicates with tentacles that reach all the way into cabinet.

Eskom once paid R200 000 for a single wooden-handled mop, and R80 000 for a pair of kneepads that retail for R300, and Ramokgopa thinks we’ll believe him when he says the issues at Eskom are merely technical problems and lack of investment.

‘I’m not a police officer,’ he declared. Given his apparent blindness to corruption, we should be very grateful he isn’t. 

According to Daily Maverick reporter Vincent Cruywagen, ‘The South African Police Service is currently investigating 131 Eskom-related cases, while the Hawks have 83 cases across six provinces, with 18 in court.’

These cases are worth billions, but hey, no biggie, right, Sputla?

Read more: Eskom predicts bleak year ahead with generation capacity shortfall

PFMA

There’s a bit of awkwardness, however, in that the Public Finance Management Act (PFMA) requires Eskom, like all SOEs, to report theft, as well as fruitless and wasteful expenditure.

Eskom points out in its Integrated report for 2021/22, ‘Non-compliance with sections 50 and 51 of the PFMA, 1999, has proven an ongoing challenge and has led to qualified audit opinions for the past few years. This has been caused by a lack of specialised oversight on key PFMA-related processes, which could lead to reputational damage, financial loss, fruitless and wasteful expenditure and criminal prosecution of directors. This is exacerbated by fraud, corruption, unethical behaviour, employees not complying with policies and procedures, as well as regulatory and litigation challenges facing Eskom.’

It reported irregular expenditure as of 31 March 2022 of R67.1 billion, fruitless and wasteful expenditure of R5 billion, and losses due to criminal conduct of R2.8 billion. 

Puff of smoke

Eskom will be happy to learn that none of this is more than a technicality in the eyes of the electricity minister. Just to make sure, however, finance minister Enoch Godongwana also sprang to Eskom’s rescue. 

A Gazetted notice over his signature dated 31 March 2023 says that for the next three financial years, Eskom will be exempt from the section of the PFMA and the Treasury Regulation which require it to include in its annual reports particulars of ‘any material losses through criminal conduct and any irregular expenditure and fruitless and wasteful expenditure that occurred during the financial year’.

This notice – unlike a similar notice issued to exempt Transnet from the same provisions exactly a year earlier – appears to exclude ‘material losses through criminal conduct’ from Eskom’s exemption.

And so, as if by magic, all the corruption, fraud and theft at Eskom vanished in a puff of smoke. 

Not two weeks ago, Eskom’s board chairperson, Mpho Makwana, assured us the company was ‘proactively dealing with Fraud and Corruption’. 

He’ll be pleased to hear that he can stand down.

The reason Godongwana claims to have suspended Eskom’s obligation to comply with the PFMA, according to a letter to Makwana leaked to News24 (paywalled), is because the ‘shocking lack of financial controls’ at Eskom might cause qualified audit findings, which could put Eskom’s credit rating at risk.

Read more: Former Eskom CEO to meet with lawmakers about corruption allegations

See no evil

The strategy of the ministers in charge of Eskom is simple, and they learnt it from Mizaru, Kikazaru, and Iwazaru, who see no evil, hear no evil, and speak no evil.

Apparently, they expect ratings agencies and bondholders to either not notice their clever stratagem, or to go along with it on the basis that if Eskom does not have to report negative news, everything is hunky-dory, and its credit rating can remain intact.

The fact that Eskom expects to impose a minimum of Stage 2 load-shedding for every week in the 2022/23 financial year, which started on 1 April 2023, well, that’s merely a technical problem. 

Corruption is nowhere to be found (except at Tutuka), irregular expenditure is no more, and Eskom’s creditors can rejoice. It’s all being swept under the rug. 

*Ivo Vegter is a freelance journalist, columnist and speaker who loves debunking myths and misconceptions, and addresses topics from the perspective of individual liberty and free markets. Follow him on Twitter, @IvoVegter.

This article was first published by Daily Friend and is republished with permission

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