The Eskom Integrated Report for 2018 revealed a financial loss of R2.3 billion for 2017/18, with R19.6 billion of irregular expenditure dating back to 2012.
According to the company’s acting chief financial officer, Calib Cassim, Eskom’s financial health has deteriorated in recent years due to lower electricity demand, low tariff increases, and above-inflation cost increases.
However, in addition to this plight, “Eskom has suffered an absence of ethical leadership at the highest level for some time, but we aim to rectify that as a matter of urgency. We believe this is one of the principles underpinning the stabilisation of Eskom and to set it up for sustained success, while fulfilling both its commercial and developmental mandate, said chairman Jabu Mabuza.
Commenting on the report, OUTA’s portfolio manager for energy Ronald Chauke said: “OUTA welcomes the clean-up headed by Eskom’s new team headed by Chairman Jabu Mabuza and CE Phakamani Hadebe, particularly the indications that their investigations into finances are going back years.”
Chauke continued: “Eskom reported on the departure of dozens of those implicated, including 10 executives, and the opening of criminal cases, including against executives.
“Any criminal cases rely on action by the criminal justice authorities, which we hope will be forthcoming. We will be watching those cases and we hope civil claims will be added.”
Rooting out corruption
According to Chauke, it is critical for Eskom’s new leadership to start quantifying the cost of the corruption. Read more: Eskom boasts of improved operational performance despite financial challenges
OUTA noted that capital expenditure is to cut to R45 billion over the next five years, which saves a welcome R55 billion but indicates Medupi and Kusile (R72 billion to go) won’t finish in that period. However, debt is due to expand from the current R387 billion to R600 billion within four years: this indicates borrowing for operating expenses and repaying debt.
The irregular expenditure means R19.6bn was spent outside the prescripts of basic public finance management legislation, not including any unauthorised or fruitless or wasteful expenditure, the organisation noted.
“While Eskom’s team said that the irregular expenditure included unreported items from as far back as 2012 and did not necessarily mean it was wasteful expenditure, we believe that irregular expenditure on that scale points to deliberate, systemic manipulation of finances and procurement. This was not accidental,” stated Chauke.