With two units at Koeberg nuclear power station likely to be out of commission at the same time, Eskom will struggle to keep the lights on, said Electricity Minister Kgosientsho Ramokgopa.
Eskom’s efforts to improve auditing controls to catch and prevent irregular expenditure remain woefully inadequate, the power utility’s auditors told parliament’s watchdog standing committee on public accounts on Wednesday.
Siyakhula Vilakazi, a partner at SNG Grant Thorton, said record-keeping at the parastatal was so weak that auditors could not reliably test compliance with tender rules or certify the internal finding that irregular expenditure had dropped to R11.7-billion in the past financial year as correct.
“When, as management, you have an issue but you do not have documentation, so you do not know how this issue arose, it then becomes a challenge to come up with an action that could actually address the issue at hand,” he told MPs.
“So record-keeping is an issue that has to be addressed properly before one comes up with a plan that says this is how we are now going to prevent and start addressing all the issues around irregular expenditure.”
The result was that auditors could not, for example, do satisfactory sample tests to verify that Eskom had followed the rules when procuring Covid-19 personal protective equipment because the company could not supply a register of all contracts related to this.
“That we couldn’t do because documentation is not there,” he said.
“So the documentation is a big problem because it makes it impossible for auditors to test compliance and even for management to know how to address the issues that are coming from many years, are back.”
Vilakazi said the auditors selected samples of instances where the Public Finance Management Act (PFMA) had been flouted, but did not find evidence that either an investigation was conducted to determine the root cause or that steps were taken against implicated employees.
When confronted, management was always swift to point to steps taken regarding irregular contracts that were reported in the media.
“But of course from the audit side, we do not only focus on those high profile cases, we also look at the ones down there in the corridors, the ones that are not known about and that is where we are seeing issues that steps are not being taken,” Vilakazi said.
“It becomes very difficult for one to believe that we are in a position to address this irregular expenditure issue as soon as possible, and thereby avoid the qualification paragraph that we have been having in our audit opinion.”
Eskom has received qualified audit opinions for five years in a row, starting in the 2016 financial year.
The figure of R11.7-billion in irregular expenditure for 2021 included R3-billion, restated from the 2020 audit, that relates to its flawed contract with long-time supplier Econ Oil. The same contract resulted in another R1.25-billion in irregular expenditure in 2021.
Though the total was an improvement on R14.3-billion recorded in 2020, Vilakazi said this was not necessarily the full picture.
“The fact of the matter is, we are saying that cannot be proven,” he said.
“We are not even certain that R11-billion is correct because we have identified quite a number of items that we felt were irregular but were not included in that R11-billion. So the argument that oh no, there is a reduction in irregular expenditure will be questionable.”
Vilakazi said the auditors had noted that Eskom was unable to give satisfactory explanations as to why instances of PFMA breaches they detected were not included in the internal calculations of irregular expenditure.
He cautioned that the company was heading into the rough in terms of loan repayments, while it had not secured authorisation for cost-reflective tariffs and the auditors had found that its debt collecting was not as strict as made out to be.
“In five years’ time there is quite a number of debt repayments that will have to be made … R152-billion will have to be available to ensure that those debt payments can be made.”
Over and above this, the company would have to pay R25-billion in interest on its loans, he added, and encouraged MPs to press management, when they appeared before the committee, on how it planned to repay the maturing debt.
The warnings come as Eskom this week again resorted to stage 4 load-shedding and conceded that it was running out of diesel to fire open-cycle gas turbines to keep the lights on after doing so last week for the local government elections.
The latest outages have prompted calls for Eskom chief executive Andre de Ruyter to resign, but he said on Tuesday this would not resolve the crisis.
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