NOMPU SIZIBA: State-owned power utility Eskom released its annual results for the year ended March 2018. The revelations were concerning to say the least. The company announced that it suffered a net loss of R2.3 billion. It reflected that there was some R19.6 billion worth of irregular expenditure, which dates back to as far as 2012. The company is heavily indebted to the tune of over R360 billion and has to borrow money to pay off its debt instalments. Eskom’s acting CFO Calib Cassim joins us on the line now. What do these numbers speak to?
CALIB CASSIM: Good evening to you and your listeners. From an earnings perspective, you can seen that we have grown from R7 billion to R45 billion on the back of cost saving initiatives. However, as we come below the earnings line, we see that the growth in depreciation and finance costs have escalated to give us a loss of R2.3 billion FY 2018.
NOMPU SIZIBA: The irregular expenditure of R2.3 billion dates back to 2012. Can you unpack this number for us? You’re reporting for the year ended March 2018, so there would naturally be interest in whether there was irregular expenditure for this specific year. If you say it dates back to 2012, how much of it dates back to that time?
CALIB CASSIM: Firstly, as part of the clean-up and addressing the qualification from March 2017, what we’ve identified as irregular expenditure, which was incurred in this financial year of ’18, is R5.5 billion. There is a second element of R6.5 billion, which affects more than FY ’18 and we haven’t got to that particular stage where we’ve been able to split the R6.5 billion between the current years it was reported and previous years. And then the amounts that we’ve identified that was definitely linked to prior to FY ’18 was R7.5 billion.
It’s important to highlight that as part of the clean-up and processes we have implemented, to align to both our and Treasury’s requirements, many of the adjustments and enhancements have literally been embedded in the last quarter of FY ’18. So we are expecting the trend for actual expenditure to decrease in FY 2019. But we are still doing some clean-up relating to the historic years, which means some of those items will come out in FY 2019 results.
NOMPU SIZIBA: The irregularities that you speak of, what do they relate to? Is it mostly in the area of tenders or is it other areas as well and has anyone been criminally charged following your investigations?
CALIB CASSIM: Yes, this is effectively relating to procurement compliance in terms of Eskom’s own internal policies and that of National Treasury. Some of the big items, for example, are that R6.5 billion relates to deviation in contracts that exceeded, for example, R15 million as a deviation, which requires Eskom to get permission from Treasury’s procurement office for those deviations and Eskom has not done this in the last two years.
The second issue was R4.9 billion relating to what we call sole-source procurement, where we are required to request permission from Treasury to pursue this type of procurement. We have not done this, we should have gone out on open tender. The last issue to highlight is that there was R3.2 billion relating to tax certificates in particular, foreign suppliers who have a footprint in SA, which was not obtained at the time of concluding those contracts, which means as we incurred expenditure against those contracts, it is deemed irregular from a reporting perspective.
The interview continues below, listen to the podcast for more revelations from Eskom’s results.