Africa-Press – South-Africa. Finance Minister Enoch Godongwana has turned down a request from Eskom chairperson Mpho Makwana to exempt Eskom from a section of the Public Finance Management Act (PFMA) that would have allowed it not to disclose “irregular, fruitless and wasteful” expenditure in its annual financial statements.
It would still have had to disclose these in its annual report.
Eskom requested the exemption because it hoped it would give the entity a better chance of getting an unqualified audit. Godongwana initially approved the request and gazetted it on the last day of the 2022/23 financial year. But he later withdrew and called for public comment after a public outcry.
On Wednesday, Godongwana issued a statement to say that he had declined the request. The statement reads:
The Treasury would continue to assist Eskom in strengthening its mechanisms to prevent, detect and investigate any financial irregularities and ensure that fraud and corruption were fully reported.
However, the Treasury said while it was committed to maintaining “the ethos” of the PFMA it was mindful of the onerous reporting and compliance burden of state-owned companies. Apart from the PFMA, which introduces concepts such as “irregular expenditure”, which are not accounting terms, state-owned companies must also comply with the Companies Act and the International Financial Reporting Standards (IFRS) and the JSE Debt Listing Requirements.
The PFMA, in particular, makes it more onerous for a state-owned company than a listed company to achieve an unqualified audit, even when there is no financial mismanagement or corruption. This, in turn, makes it more likely for them to require a government guarantee and support from the fiscus at a time when the Treasury is trying to reduce the need for government support.
During the period for public comment, the Treasury has engaged with the Auditor-General and the accounting industry on the accounting and reporting burden of state-owned companies. It would continue to work with the Auditor-General, it said, “to develop a revised irregular, fruitless and wasteful expenditure framework” for the PFMA as part of a reform process, it said.
This, in turn, it hoped, would ensure that state-owned entities are not dependent on fiscal allocations and guarantees for their capital and operational funding requirements.
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