The South African government has granted Eskom, the struggling power utility, a two-year exemption from reporting irregular spending. The decision was announced in a government gazette on 31 March 2023, in an attempt to safeguard the company’s credit rating.
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In a letter addressed to Eskom’s chairperson, Mpho Makwana, Finance Minister Enoch Godongwana confirmed that while Eskom will be exempt from reporting irregular spending, any losses resulting from criminal activities or disciplinary measures related to wasteful expenditure must still be reported.
TimesLives reported that the finance minister has requested the beleaguered power utility create a strategy to promptly detect such expenses.
The decision to provide Eskom with an exemption from reporting irregular spending could diminish the possibility of receiving an adverse opinion from its auditors. This move would in turn shield Eskom’s credit rating, as stated by the Treasury.
Eskom’s auditor, Deloitte & Touche, previously revealed irregular expenditure, losses due to criminal conduct, as well as fruitless and wasteful costs in December. Consequently, Deloitte stated that Eskom may be unable to maintain its operations.
Godongwana highlighted that the decision was made ‘after due consideration of the risk of a possible negative outlook on Eskom’s corporate rating and credit assessment with the credit ratings agencies.’
Eskom is rated with CCC+, which is one of the lower credit ratings that can be handed to a company by the credit rating agency, S&P Global Ratings. The Treasury has yet to respond to requests for further comment, while Deloitte has declined to comment at the current time.
In February, the Treasury announced its plan to take over R254 billion of Eskom’s debt, as the company is unable to generate enough income to cover its running costs and debt service, leading to regular power outages in the country.
Following the announcement, S&P placed Eskom’s debt evaluation under ‘positive watch’, implying that it might upgrade the utility’s status.
To prevent further harm to Eskom’s credit rating, the Treasury has granted the power company an exemption from reporting irregular spending.
Transnet also received a similar exemption in March of last year, according to a gazette notice.
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Picture: Eskom.co.za