Eskom claws back control over ‘critical’ procurement

Eskom has welcomed the treasury’s relaxation of procurement rules, which the state utility says will allow it to attend to its ageing power stations far quicker.

In a statement released on Friday, Eskom said a new instruction note, which came into effect last month, “will assist in providing agility and control in the procurement and supply management process to Eskom”. 

Restoring Eskom’s control over procurement, the utility added, will help to unlock “some of the bottlenecks in our attempts to speedily resolve some of the pressing operational challenges”.

Eskom reports to the treasury on procurement matters — a stopgap put in place to prevent the mismanagement of public funds that characterised the state-capture era.

The treasury has helped Eskom alleviate bottlenecks where it can, approving its emergency procurement of equipment to fix its decaying coal-fired units, which are at the heart of South Africa’s 15 years of load-shedding. Eskom is one of the entities with the highest number of applications to deviate from the treasury’s procurement regulations.

In a March meeting with parliament’s committee on public enterprises, Jainthree Sankar, Eskom’s chief procurement officer, noted that its reporting to the treasury was causing considerable strain on the department and its resources.

Sankar noted that Eskom also needs to be able to demonstrate to lending organisations that it can conclude procurement in a shorter space of time and complete projects timeously.

Changes to the Public Finance Management Act’s (PFMA’s) supply chain management processes will allow Eskom to approve contract variations without treasury approval and to work directly with manufacturers and maintenance suppliers.

“The amendments also provide Eskom with flexibility and agility over expansions, deviations and handling of urgent matters in its procurement processes,” Eskom noted in Friday’s statement.

“The overall intent of the relaxation is to ensure the swift and flexible implementation of the procurement processes in a way that takes into account the core principles of the PFMA while ensuring fairness in the procurement processes.”

The power utility said it will continue to promote competitive bidding, which is required by the Constitution.

“In the plan to drive efficient procurement and engaging with OEMs [original equipment manufacturers] and maintenance suppliers, this measure supports the efforts for Eskom power stations and operating units to work faster and more efficiently on procurement of what they need at an operating level.”

Eskom will be required to report on procurement activities under the exemption 14 days after the conclusion of a transaction. This will maintain continued oversight by the treasury and the auditor general.

“We see this note as part of the integrated efforts of the department of public enterprises, national treasury and Eskom and this decision by national treasury indicates growing trust to give Eskom back control over the most critical and urgent of its procurement,” Sankar said.

“This will also positively impact on our ability to address procurement matters on the ground to make decisions impacting operations more swiftly.”

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Sarah Smit
Sarah Smit
Sarah Smit is a general news reporter at the Mail & Guardian. She covers topics relating to labour, corruption and the law.

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