Reliable power is essential for economic growth in key sectors such as manufacturing, where growth is vital for absorbing labour and addressing high unemployment levels. (Gianluigi Guercia/AFP/Getty Images)
Following legal challenges and concerns about inviting another round of state capture, the government has done an about-turn on some of its controversial efforts to give Eskom extra breathing space.
The energy state of disaster declared by President Cyril Ramaphosa in February, and a gazette exempting Eskom from making certain disclosures in its financial statements, have been withdrawn, the government said in two separate announcements on Wednesday.
The state of disaster was the subject of legal challenges by the Organisation Undoing Tax Abuse (Outa) and trade union Solidarity, while certain organisations — including the Democratic Alliance and the Institute of Race Relations — had signalled their intention to take on the Eskom exemption.
Ramaphosa has previously defended the state of disaster as a measure to get rid of unnecessary bureaucratic obstacles standing in Eskom’s way as the country grapples with load-shedding.
The exemption, on the other hand, was conceived to help the utility avoid a qualified audit, which could put it in the crosshairs of ratings agencies, further imperilling its financial position and the public purse.
But civil society and other organisations cried foul over the two interventions, which they said would undermine oversight and give certain actors the power to make decisions that fly in the face of the public’s best interests.
The withdrawn government gazette exempting Eskom from disclosing irregular, wasteful and fruitless expenditure in its annual financial statements sparked accusations that the government was facilitating another round of state capture.
Speaking to the Mail & Guardian on Wednesday, Outa’s head of legal affairs Stefanie Fick said the withdrawals were a win for transparency and civil society.
“I sometimes look at South Africa and feel hopeless and then something like this happens. Our voices matter and this is just an excellent example of that. If we stand together and make our voices heard, this is what happens. And thank goodness the government listened.”
A joint statement issued by Cooperative Governance and Traditional Affairs Minister Thembi Nkadimeng and Minister of Electricity Kgosientsho Ramokgopa doubled down on the government’s justification for declaring the state of disaster in the first place.
“The state of disaster,” the statement said, “was a necessary response to the impact of critical levels of load-shedding on the economy and vulnerable sectors such as health and small businesses.”
Outa pre-empted a briefing by the two ministers, scheduled to happen on Wednesday afternoon. The non-profit revealed in a Twitter post its legal team had earlier been informed of the government’s decision to withdraw the state of disaster.
The withdrawal was confirmed on Wednesday morning by sources who told the M&G that loopholes in regulations, exposed through the legal challenges, would have resulted in “serious embarrassment”.
According to Outa, the decision to declare the disaster was irrational, arbitrary and unlawful, because the government already has the requisite power to deal with the crisis — it simply hasn’t done so.
A letter from the office of the state attorney to Outa and Solidarity’s legal representatives invited the organisations to withdraw their applications.
“The state respondents do not intend filing an answering affidavit addressing the merits of either application,” the letter said.
Meanwhile, during a meeting in parliament on Wednesday morning, Finance Minister Enoch Godongwana revealed that the decision to withdraw the Eskom exemption had come after an intense discussion with auditor general Tsakani Maluleke the previous day.
According to Godongwana, Maluleke said during the discussion that the auditor general ought to have input on how such gazettes are framed. The gazette has been withdrawn, pending detailed consultations with the auditor general, as well as Eskom’s auditors, Godongwana said.
The exemption was requested by Eskom board chair Mpho Makwana in a letter dated 9 March.
The minister granted a similar exemption to Transnet last year. Together, Eskom and Transnet were far and away the biggest targets of state capture. According to the Zondo report, of the estimated R57 billion syphoned from the state during the period, 97% came from these two entities, which are at the heart of the country’s economic woes.
On Wednesday Godongwana acknowledged the public’s outcry over the exemption but insisted it was not granted to allow Eskom to conceal corruption. Instead, it would serve to further protect the utility’s financial position and the fiscus. Earlier this year, Godongwana announced the treasury’s proposal that the government take over R254 billion of Eskom’s debt.
“The intention is to allow Eskom to have better financial statements but at the same time create an environment where there is transparency on corruption and irregular expenditure and all of those things … The intention is not to hide anything in that regard,” the minister said.
MPs welcomed the decision to withdraw the exemption but probed the minister on what many deemed an attempt to circumvent accountability. Some suggested the minister’s gazetting of the exemption has dented the treasury’s reputation in the wake of the country’s greylisting.