Shock over Eskom’s exemption from Public Finance Management Act

There has been widespread shock from energy experts following the release of government’s gazette on Friday which gives Eskom a blanket exemption from the Public Finance Management Act (PFMA).

Finance Minister Enoch Godongwana is said to have granted Eskom exemption from the PFMA, even though the State Owned Entity is bound by the rules.

The exemption also includes any irregular, fruitless and wasteful expenditure that occurred during the financial years of an annual report.

CSIR energy expert Monique Le Roux says, “There has been further clarification made by Treasury over the weekend, saying Eskom will still have to report of their fruitless and wasteful expenditure on their reports.”

It seems from the clarification that Eskom and Treasury are just using this example to obtain better debt relief and additional loans for Eskom. [This is] something that they desperately need, given the fact that they have a huge debt burden and government [has] agreed to take on half of that debt.”

Le Roux says Treasury and Eskom will have to give more clarity on Eskom’s exemption from the PFMA to install confidence in the market.

“Eskom is going to have to look at increasing industrial ways to getting additional loans to restructure their debt. It could be argued that this could have been approached with a lot more caution by government and Eskom due to that fact that there are so many red flags concerning. Eskom and the inability by Eskom and government to deal with this corruption. Eskom and Treasury will have to provide a lot more clarity,” adds Le Roux.

Meanwhile, customers who buy their electricity directly from Eskom can brace themselves for a steep price hike.

As of April 1, the power utility will factor in the 18.65% tariff increase granted by the National Energy Regulator of South Africa (Nersa).

Eskom had initially requested over 32% increase, citing higher fuel costs among other reasons.

The video below is reporting more on the story:

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