WITH bailouts of South Africa’s beleaguered state-owned power utility estimated to cost taxpayers about R500 billion by the 2025/26 fiscal year, the financial problems at Eskom are reaching unprecedented heights.
As the Standing Committee on Appropriations convened last Wednesday to address the dire realities confronting the country, this concerning situation has heightened questions about the efficient use of public money and service delivery.
The most recent National Treasury update shows that Eskom has been given a staggering R496bn in bailouts from the fiscal year 2008/09.
“These bailouts have diverted crucial taxpayer funds that could have been used to address pressing social issues,” cautioned Mmusi Maimane, Chairperson of the Committee. “Each bailout represents a failure in financial management that ultimately hurts all South Africans.”
Members of the committee expressed their concerns that Eskom had breached one of the conditions of the bailout, which directed it to dispose of its Eskom Finance Company by March 31, 2024, while National Treasury had to reduce its debt allocation by R2bn.
The dire financial landscape of Eskom is further illustrated by the National Treasury’s report, which revealed a staggering R23.3bn spent through deviations in the second quarter of 2024, accounting for 91% of the total deviations granted to the top 20 government institutions.
“This surge is alarming and reflects a government panic-mode response to an ongoing energy crisis that has plagued the country,” Maimane said. “It’s essential that we question not only the necessity of these deviations but also the accountability of Treasury in managing this dire situation.”
Eskom’s procurement data highlights a shocking trend; a total of 639 deviations have been made, amounting to nearly R23bn in public funds within just three months.
The utility has justified its actions by citing the need for emergency procurement due to the energy crisis, allowing it to bypass standard procurement protocols. “If ongoing expenditures aren’t scrutinised closely, taxpayer funds will continue to be squandered,” Maimane stressed.
The concerns extend beyond Eskom, as the standing committee also addressed broader issues affecting other state-owned enterprises (SOEs). Notably, SA Airways (SAA) has faced turmoil since the collapse of its Takatso deal, which has left the national airline in a precarious position without viable equity partners.
“The lessons learnt from the failed SAA deal should serve as a wake-up call for the government to rethink its approach to SOEs,” Maimane said. “We cannot afford to repeat such costly mistakes.”
In a related report presented by National Treasury’s chief procurement officer, Mendoe Ntswahlana, serious weaknesses in government procurement practices were highlighted. “Poor planning and inadequate market research are rampant,” he said. “It becomes a serious threat to the fiscus when fundamental procurement principles are ignored.”
The report underscored a troubling trend, with R26bn spent through deviations, 98% of which were attributed to just 20 government institutions. Eskom was once again the major contributor, accounting for R23.3bn of these deviations.
The report also pointed to substantial increases in contract modifications or expansions, which reached R7.35bn in the second quarter, with Eskom leading at R4.5bn. This raises significant questions regarding oversight and the effectiveness of governance frameworks within state enterprises.
Notably, the SABC also reported an increase in contract modifications, growing from R95.06 million to R1.1bn in the same timeframe.
Critics have voiced their apprehension about the procurement process, especially concerning the disproportionate distribution of contracts to specific suppliers, further emphasising the need for reform.
KSB Pumps and Valves, for instance, received a staggering R6.06bn in deviations from Eskom and other entities, leading to concerns about competitiveness and fairness in procurement practices.
Many South Africans are properly challenging the justification behind investing billions into a failing utility in light of the government suggesting a hefty 36% pricing increase for power services.
As parliamentarians prepare for the upcoming midterm budget process, the standing committee is committed to exploring sustainable solutions.
“We must ensure better accountability and limit bailouts,” Maimane said. “If that means redirecting funds to areas that genuinely improve citizens’ lives, then it’s a road we must pursue.”
The call for urgent action rings clear; without accountability and better management, Eskom's financial woes and its insatiable appetite for public funds will continue to weigh heavily on the shoulders of South African taxpayers.
The situation poses serious implications for other SOEs as well, underscoring the need for comprehensive reforms across the board. If the government cannot regain control over fiscal policies and prioritise efficient spending, the lights may continue to flicker, leaving taxpayers in the dark.
The pressing demand for transparency and responsible governance has never been more critical in safeguarding South Africa’s financial future.
sizwe.dlamini@inl.co.za