NECSA & Eskom performance, challenges, audits; with Deputy Minister

Meeting report

The Chairperson welcomed the Committee members to the virtual meeting. He appreciated the Mining Council for submitting their reports on time, but noted with concern that the Nuclear Energy Corporation of South Africa (NECSA) and Eskom had not done the same. He emphasised the importance of receiving reports at least 72 hours before a meeting.

Mr B Farmer (PA; Western Cape) inquired whether the political heads, namely the Minister and Deputy Minister, were present, stating that the Committee had a tradition of not proceeding in their absence.

Ms S Boshoff (DA; Mpumalanga) supported Mr Farmer’s position and reiterated that the meeting should not have continued without the political heads.

The Chairperson confirmed the Deputy Minister's presence and noted that all relevant entities fell within her purview. Her presence was sufficient for the meeting to proceed.

The Chairperson asked who would be presenting on behalf of the Mine Health and Safety Council.

Mr David Nsiza, Chief Inspector of Mines and Mine Health and Safety Council Chairperson, said he would represent the Department of Mineral Resources and Energy(DMRE). He conveyed apologies on behalf of the Minister Mantashe, who could not attend due to other commitments.

The Chairperson expressed dissatisfaction, stating that the Minister was aware that the Committee did not accept Departmental reports in the absence of the political head. He dismissed the DMRE from the meeting and opened the floor to any other Department ready to present.

Mr N Pienaar (DA; Limpopo) criticised the DMRE's report, describing it as "ridiculous" and lacking in substance. He urged the Department to submit a comprehensive report in the future.

The Chairperson advised Members not to engage further with the DMRE, reiterating the Committee’s policy that no presentation was entertained without the political head present.

Turning to the Department of Electricity and Energy (DEE), the Chairperson addressed the Deputy Minister regarding the poor quality and delayed submission of reports from NECSA and Eskom.

Ms Samantha Graham-Maré, Deputy Minister, DEE, apologised and clarified that the reports had been sent on Friday, 4 April. She expressed pride in NECSA’s achievements, describing it as a local and international flagship institution for the Department. She indicated that the Department would present the Auditor-General’s (AG's) report and NECSA’s long-term international nuclear strategy.

She commended Eskom’s recent performance, despite historical challenges related to corruption, state capture, and leadership instability. She praised the current chairperson of Eskom for leading the institution through a significant turnaround. She noted a 95% energy availability in the past year, contrasting with the 329 days of load-shedding the year before.

The Chairperson welcomed the Deputy Minister’s remarks and acknowledged the progress made by both entities. It was rare for a Ministry to express such confidence in a board, and the Committee would communicate this appreciation to the respective boards.

NECSA audit outcomes

 

Ms Precious Hawadi, Group Chief Financial Officer at NECSA, began the presentation by apologising for the chairman's absence, who was on her way. She then briefed the Committee on NECSA’s audit outcomes and improvement plans.

Ms Hawadi highlighted that the NECSA Group had significantly improved audit outcomes over the past three years, attributing this progress to organisational culture shifting toward compliance. Currently, all entities within the NECSA Group have achieved a minimum audit outcome of "unqualified," with two subsidiaries attaining clean audits. The Group focused on implementing its audit improvement plan to address items raised in the management report and achieve unqualified audits with no findings (clean audits) across all entities, while maintaining this standard for subsidiaries already at this level.

She reported that during the fourth quarter of the 2024/25 financial year, NECSA had completed the first phase of its early audit (17 February – 17 March), with the second phase commencing on 3 April. This phased approach would ensure that all audit work would be completed by 30 June, leaving July for consolidation. Starting early allowed NECSA to address findings proactively and limit extended deliberations with the Auditor-General (AG).

Ms Hawadi noted that companies such as Pelchem, AEC Amersham, and Gammatec had consistently maintained clean audits over the 2022/23 and 2023/24 financial years. She added that AGSA had identified eight themes (30 items) in NECSA’s 2023/24 audit, of which three themes -- disclosure, consequence management, and revenue collection -- had affected the audit opinion. Five administrative themes -- accounting adjustments, disclosure findings, information technology (IT) issues, non-material compliance, and non-material supply chain management (SCM) -- had not affected the audit opinion.

As of February, 87% (26 out of 30) of these items had been resolved, while four items (13%) remained in progress. Of these four items:

• One had been referred to National Treasury for clarification and alignment;
• Two were related to historical irregular expenditure; and
• The remaining item was under investigation.

Ms Hawadi explained that most irregular expenditure stemmed from historical years before 2023/24, totaling R11.437 million across 15 items, from 2018/19 to 2023/24. For the current financial year, two items totaling R231 000 had been identified. One was in the consequence phase, while the other was under investigation. In addition, six items amounting to R1.236 million were determined not to be irregular expenditure after further investigation by internal audit.

Management had taken steps to address irregular expenditures through collaboration with internal audit and prepared a condonation report for submission to the board in May. The AG had raised concerns about non-compliance with Section 51(1)(e)(iii) of the Public Finance Management Act (PFMA), which required disciplinary action against employees responsible for irregular or wasteful expenditures.

Ms Hawadi emphasised that NECSA’s governance and compliance had improved significantly since implementing its new strategy in 2021/22. This progress was reflected in its audit outcomes, which had shifted from disclaimers to unqualified opinions as a minimum standard across all entities within the Group. Performance against the shareholder compact had also improved from 50% in 2020/21 to over 90% in 2023/24.

She reiterated that most reported irregular expenditures were historical and assured the Committee that all instances were being addressed as part of NECSA’s audit improvement plan. Management had implemented mitigation strategies, consequence management measures, and enhanced controls to prevent future occurrences.

She concluded by affirming NECSA’s commitment to compliance as it executes its strategy for sustainable business growth.

(See attached presentation for additional details.)

 

Deputy Minister Graham-Maré expressed pride in NECSA for these reasons. She noted that Pelchem, a subsidiary of NECSA, had historically operated at a loss but had recently achieved profitability for the first time. This turnaround was significant and reflected positively on NECSA's management and strategic efforts.

She also highlighted that NTP Radioisotopes, another NECSA subsidiary, supplied about 20% of the world's medical isotopes. This international success underscored NECSA's importance in the global nuclear medicine sector and was a source of pride for the Department.

Eskom's performance and audit progress

Mr Dan Marokane, Group Chief Executive Officer (GCEO): Eskom, introduced Ms Fathima Gany, Non-Executive Member and Chairperson of the Audit Committee, to present on the 2023/24 financial year.

 

Ms Gany presented the following key highlights to the Committee:

 

Board overview

The Eskom board was diverse, with Mr Marokane and Mr Calib Cassim (CFO) joining on October 31, 2022, during a period of intense load shedding. The board's three-year term concludes in September 2025.

2023/24 financial performance

Eskom experienced a challenging financial year. South Africa faced 329 days of load-shedding, with Eskom spending R33.9 billion on diesel for open-cycle gas turbines (OCGTs). The utility reported a loss before tax of R25.5 billion, and municipal arrear debt rose to R74.4 billion. The financial year 2025 had been remarkably better, with electricity available 96% of the time due to the generation recovery plan, and a R10 billion after-tax profit was expected, moving away from consecutive losses.

Systemic issues and interventions:

• Operational: Unreliable plants, grid constraints, and organisational culture. Interventions included a generation recovery plan, grid capacity allocation rules, and leadership development.
• Financial: Weak balance sheet, high debt, and tariff issues. Interventions involved the National Treasury debt relief programme and cost-reflective tariff structures.
• Sustainability: Outdated business model and fraud/corruption. Interventions included unbundling transmission, distribution, and generation, pursuing clean energy projects, and enhancing governance.

 

Strategy and audit progress:

Eskom aimed to lower the cost of doing business in South Africa while providing sustainable electricity. Strategic objectives include:

• Recovering and sustaining Energy Availability Factor (EAF) to 70%.
• Reducing municipal debt and energy losses.
• Driving clean energy projects.

Addressing Irregularities:

Eskom was actively addressing reportable irregularities from its latest audit, including:

• Breaches of environmental legislation.
• Non-compliance with record-keeping requirements.
• Failure to submit complete financial statements.
• Breaches of fiduciary duty relating to independent power producer (IPP) programmes.

Eskom implemented several measures to address irregularities, including strengthening the executive team and establishing a dedicated project management office. Proactive interventions for improved governance and control were focused on the audit recovery plan, the State Capture task team, and addressing security risks and threats. The audit recovery plan includes the procurement and SCM-audit readiness stream, the audit coordination stream, the audit recovery stream, and the governance stream. The State Capture task team pursued criminal charges, implemented consequence management, and sought civil recovery. Eskom was establishing partnerships and enhancing cybersecurity.

 

External audit readiness and progress

Mr Cassim, Eskom Group CFO, reported on Eskom's progress in external audit readiness through the audit recovery programme, as well as a backlog of over 1,000 historical issues, a supplier review of 375 forensic reviews (with 76 suppliers sanctioned and 42 suspended), and a supplier review of 375 forensic reviews.

• FY24 audit findings overview: 1,079 audit findings were reported. 289 had been closed, while 730 remained open, and 60 were overdue.
• Progress on the audit recovery programme: Key Performance Indicators (KPIs) had been integrated into leadership performance agreements to enhance accountability, supported by an interactive dashboard for monitoring purposes.
• Enhanced supplier review process: An enhanced review process was implemented to accelerate supplier disciplinary processes to address and close state capture findings. Plans are to complete the outstanding referrals in the coming months.

Mr Cassim noted that all 19 suppliers listed in the Zondo Commission had been assessed and flagged, with 10 suppliers being prioritised for disciplinary actions. Five had been initiated, with the remaining five to follow soon.

(See attached presentation for additional details.)

 

Discussion

Mr H van den Berg (FF+; Northern Cape) referred to page 4 of the Eskom presentation, noting the reported 96% electricity supply availability in 2025. He acknowledged the high costs previously associated with this level of generation, as alluded to by the Chairperson, but commended the significant improvements outlined in the presentation. He emphasised the importance of such answers in the political sphere, and noted the apparent enforcement of discipline within Eskom.

Mr Van den Berg expressed his hope that the Auditor-General (AG) would consider these improvements in their upcoming report to Parliament, as the current report differed significantly from previous AG reports.

Regarding page 5, he welcomed the strategy of addressing the dysfunctional organisational culture by appointing strong and inspirational leaders at all levels. He expressed optimism that this approach could potentially spark a nationwide reform in employer and employee culture, and requested future updates on the initiative. Due to its size, he suggested that Eskom could influence critical mass countrywide, especially concerning financial issues like municipal debt.

He proposed direct billing to customers as a potential solution for Eskom's survival, and asked if Eskom was considering this or other alternatives.

Concerning fraud, corruption, and criminality, Mr Van den Berg sought information on measures being taken to manage these issues. Referring to the State Capture task team mentioned on page 10, he requested a clearer explanation of the information presented on page 12.

He welcomed Eskom's expansion of the distribution network to accommodate more renewable technologies. However, he raised concerns about proposed tariffs and grid-tie users, who felt penalised despite contributing to renewable energy efforts. He asked for input to share with these users, many of whom were now considering disconnecting from the grid entirely.

Mr Van den Berg commented that he had not learnt much about Eskom's operations, as the presentation focused primarily on auditing and financial jargon. He suggested that future presentations include information on Eskom's core activities, past failures, corrective measures, and mandates.

He referred to a Money Web article from February 13, which stated that President Trump had accused South Africa of involvement in activities with Iran related to nuclear technology and products. He asked whether NECSA was currently conducting any business with Iran. He requested a detailed accounting of all nuclear products and waste generated at Pelindaba and Koeberg, including whether these had been audited.

Mr P Mabilo (ANC; Northern Cape) expressed his appreciation to the Deputy Minister and echoed her positive outlook. He acknowledged the impressive financial outcomes reported before the Departments were reconfigured, and emphasised the importance of maintaining and not regressing from that level of performance.

He noted the positive stability at the governance and executive levels, recognising the progress made in overcoming past challenges related to state capture and corruption. He highlighted the Committee's concern regarding the ballooning municipal debt to Eskom, which he viewed as a serious risk. He inquired about implementing practical, innovative, and creative mechanisms to address this issue.

Mr Mabilo also raised the issue of Eskom's assets and liabilities, recalling a previous report indicating that Eskom's liabilities outweighed NECSA's assets by approximately R50 billion. He requested an update on the current situation and the concrete steps to address these challenges. He commended the business strategy as well-articulated, coherent, and easy to follow.

Regarding new investments and technology, he questioned the team's agility in keeping pace with technological advancements to avoid falling behind. He referred to Section 24 of the Constitution to address environmental concerns, emphasising the right to a pollution-free environment for future generations. He acknowledged Eskom as a significant polluter and inquired about the current status of addressing environmental concerns, particularly in light of the reality of climate change and its unpredictable weather patterns.

Mr Mabilo welcomed the infrastructure rollout, especially in the Northern Cape and Northwest provinces. Concerning smart meters, he acknowledged reports of bottlenecks and teething problems. He inquired about the factors inhibiting a massive rollout of smart meters, which would help stabilise income and minimise fraud. He also asked about developing internal capacities to address vandalism, theft, and fraudulent activities, considering the entity's collaboration with law enforcement agencies.

Ms Boshoff directed her initial questions to NECSA, followed by those for Eskom. She echoed the Chairperson's emphasis on the importance of using acronyms and requested that the team submit reports on time with a dedicated page explaining all the acronyms used.

She inquired about NECSA's historical irregularities and expenditures, and questioned the justification for retaining senior officials implicated in procurement violations and irregularities, especially since some were still under investigation. She acknowledged NECSA's efforts, but stressed the need for concrete steps to recover outstanding funds related to long-outstanding debt. She further asked why the Committee should be confident that the audit plan would be effectively implemented, given the recurring issues of irregular expenditure, lack of consequence management, and disclosure failures.

Ms Boshoff also sought clarification on the referral of certain issues to the National Treasury. She asked for specifics on the guidance or intervention being sought, and whether this referral was being used as a delaying tactic to avoid decisive internal action.

Addressing the Deputy Minister, she said that Eskom's repeated breaches of the PFMA and environmental laws violated Section 195 of the Constitution. She inquired about the steps the Deputy Minister was taking to enforce legal compliance in her capacity as executive authority and whether she had failed in her fiduciary duties under the Executive Members Act.

She indicated that some of her questions would be submitted in writing, for a response within seven to 10 days.

Ms Boshoff reiterated her concerns about environmental criminality, asking whether the executive had faced any criminal sanctions for sustained environmental law violations since 2021, or if these violations were tolerated as "business as usual." She also asked if the Department had considered any personal liability for board members under the National Environmental Management Act (NEMA) for Eskom's ongoing non-compliance.

Referring to the United Democratic Movement's (UDM's) comments on state capture, Ms Boshoff inquired about the progress of civil and criminal proceedings against those implicated in the Zondo Commission report. She asked what the Ministry was doing to enforce the recovery of public funds from firms like McKinsey, KPMG, and Deloitte and if these firms were being politically protected.

She asked why the legal separation of Eskom's entities had not been completed, what was causing the delay, and what the minister's contingency plan would be if the unbundling failed. She also inquired whether this plan had been shared with the President or Cabinet.

She sought clarity on the R8.5 billion secured through the Conference of the Parties (COP) for the just energy transition programme, which various countries, including the United States, had supported. She asked if the United States could retract its initial agreement and the implications of such a retraction for the country.

Mr Pienaar sought clarity on some irrelevant points in the report. He would start by commenting on Eskom and referring to the digitisation of switchboards, saying they were still using mechanisms from the 1980s, with literal levers to control the energy grid. He asked when to expect a digitised system for the country's energy monitoring and distribution.

He emphasised that while generating electricity was essential, it was ineffective without a modernised grid infrastructure to distribute it. Upgrading the energy grid would cost approximately R440 billion, and he questioned how this shortfall would be addressed. He stressed the urgency of finding funding solutions, including private sector involvement, to avoid stagnation over the next decade.

Mr Pienaar also pointed out that municipal debt was a critical issue contributing to Eskom's challenges. He asked for details on strategies agreed upon between Eskom, the Ministry, and the Department of Finance, to address this debt and when these plans would be implemented. He emphasised that resolving municipal debt was crucial for Eskom’s sustainability.

He referred to Eskom’s exemption certificates concerning sulfur dioxide emissions, noting that emissions at certain power stations, such as Matimba and Medupi, far exceeded permissible levels, with figures ranging from 3,500 mg/Nm³ to 4,000 mg/Nm³, compared to the limit of 500 mg/Nm³. He questioned why commitments tied to World Bank funding for flue-gas desulfurisation (FGD) plants at Kusile and Medupi had not been fully realised, and asked for timelines on these projects.

Mr Pienaar criticised Eskom’s reliance on diesel generators, which cost billions of rands annually, calling it unsustainable and contradictory to claims of progress toward sustainability. He argued that these funds would be better spent on renewable energy projects like solar plants, and called for greater honesty in reporting on Eskom’s challenges and solutions.

He raised concerns about potential associations between South African entities like NECSA and Iran. He requested transparency regarding any past or present engagements with Iranian companies or entities, emphasising the importance of accountability and public trust in such matters. He urged clear answers and actionable plans to address these pressing issues.

Mr Farmer commented on Mr Pienaar's remarks, suggesting that they might lead consumers to expect imminent electricity price increases. He complimented Eskom on their progress, while acknowledging that challenges remain. He expressed satisfaction with the report as a foundation for future engagement with Eskom.

He then asked the Minister or Deputy Minister about the composition of the Eskom board and sought assurance that the board equitably represented the country in terms of race and demographics.

He addressed the questions raised about Eskom's dealings with Iran, which he characterised as political posturing based on the statements of a foreign president. He requested that the Chairperson rule these questions out of order, deeming them inappropriate for the Committee's focus.

Ms S Sithole (ANC; North West) inquired about NECSA's decline in audit outcomes, which had been attributed to organisational culture, compliance and leadership changes. She asked what remedial actions NECSA had undertaken, and why the unqualified audit opinions received by two subsidiaries could not be replicated across the entire organisation. She advised NECSA to develop a clear communication strategy regarding implementing nuclear technology to enhance South Africa's energy capabilities.

Regarding Eskom, she said that while she had previously commended Eskom for its work in addressing load shedding, her positive sentiments had been challenged by a recent experience with load shedding.

Ms Sithole inquired about companies, beyond those identified in the Zondo Commission, that Eskom was investigating for misconduct. In addition, she requested a breakdown of Eskom's arrests, categorised by province or municipality. She recommended that Eskom management develop a communication strategy to clarify the distinction between blackouts, load shedding, and load reduction for the public.

Ms M Kennedy (EFF) began by commending NECSA for its progressive improvement in audit outcomes, expressing hope for continued progress towards unqualified audits.

Turning to Eskom, she raised concerns about the escalating debt of approximately R95 billion owed by municipalities. She requested information on the impact of this debt on Eskom's operations and the public, as well as plans to address the issue. She also sought to understand the effectiveness of debt relief programmes and the role of municipalities in this context.

She inquired about consequence management following instances of fraud, corruption, and criminality within Eskom and asked whether any progress had been observed in this area.

The Chairperson thanked the Members for their comments, questions and concerns. He acknowledged the right to decline to answer any new questions unrelated to the presentation. The question regarding Iran was political, and it was the Deputy Minister's prerogative to respond.

The Chairperson raised a concern about the gender representation within the executive team, noting that only three of the 12 members were female. He contrasted this with a previous meeting, where NECSA's presentation team had been predominantly female, encouraging the Committee.

He also emphasised the importance of clarity in the use of acronyms. He requested that all acronyms be clearly defined in future presentations and reports, citing "RMIF" as an example of an undefined acronym.

He stressed the importance of clear communication so that anyone referring to the meeting would understand the terminology. He also encouraged the team to help the Committee understand distribution, transmission, and generation terms.

In closing, the Chairperson alluded to the evolving international relations, particularly regarding Iran, and reiterated that the Deputy Minister had the autonomy to decide whether or not to address the question about engagements with that country.

 

Responses

 

Eskom

 

Mr Marokane thanked the Committee for their feedback and observations regarding Eskom's progress, assuring them that the positive messages would be conveyed to the dedicated teams working to deliver results under pressure. He also offered to provide Ms Sithole with a detailed breakdown of prosecutions by province, and a comprehensive list of companies being prosecuted, beyond those implicated in the Zondo Commission, clarifying that the list included approximately 130 entities. He said they were happy to make a written submission to the Committee.

Addressing concerns about gender representation, he said that the executive committee (EXCO) had three female members out of nine or ten, and two permanent invitees who were female -- Ms Khulu and Ms Ureka Rangasamy (Chief Internal Auditor). He emphasised that these invitees had direct access to the audit committee, strengthening governance. While acknowledging room for improvement, he said that Eskom aimed for 50% gender representation by 2030 and was actively working to achieve this across all levels. The board and its human resources (HR) committee monitored performance in this area.

Regarding Eskom's business performance, Mr Marokane said financial sustainability hinged on maintaining an uninterrupted electricity supply, selling electricity, and receiving payments from municipalities while managing costs effectively. The percentage of time with uninterrupted electricity served as a key indicator. In the past year, electricity has been uninterrupted for 96% of the time, with the 4% disruption from January to March contributing to the remaining reduction. This performance, he argued, resulted in increased revenues and reduced diesel spending. Diesel spending had been R16 billion less than the previous year due to improved performance from the coal power stations.

To increase transparency, Eskom issued a two-page "power alert" every Friday at 5:00 pm, detailing unit statuses, capacity, energy availability factor, operational challenges, and diesel spending. He claimed this transparency had reduced criticism about excessive diesel usage. He also noted that many diesel suppliers had gone out of business last year due to Eskom's reduced diesel purchases. While acknowledging that further improvement was needed, he emphasised the goal of reducing diesel spending to below R10 billion by relying more on coal and nuclear power plants. Diesel was currently being used during maintenance to improve the reliability of the coal fleet. The strategy was focused on expanding renewable energy programmes through a separate Eskom entity, utilising existing land, skills, and partnerships, without adding debt to the balance sheet. This aligned with the reforms led by the ministry. There was a request in the market for private sector participation in the rollout of the transmission development plan (TDP).

Mr Marokane also highlighted the opportunity for private sector participation in the rollout of the TDP, emphasising that the implementation of these reforms has not yet happened. The ministry was working with Eskom in this regard. In the meantime, the National Transmission Company of South Africa (NTCSA), an Eskom subsidiary, remained responsible for delivering.

Regarding revenue recoveries, he said the National Treasury was working on a credit enhancement vehicle to reduce the need for state guarantees, which should encourage private sector investment. The goal was to reach 14,000 MW, delivered through the NTCSA and private sector initiatives, focusing on coastal provinces with abundant sun and wind resources. Eskom continued to fix existing generation assets, build its own renewables, and support transitional communities.

The rollout of smart meters was a key strategic focus, enabling improved revenue recovery in both Eskom-served areas and municipalities. A three-year programme aimed to deploy six million smart meters. He referred to the Sol Plaatje municipality in the Northern Cape, which had successfully implemented 15,000 smart meters in three months with a R100 million grant, improving revenue collection. He also had a conversation with the municipal manager this past week. He was looking at how they could collaborate better to assist them in improving the collection and quality of service to their customers.

Mr Marokane said that the current plan was not successful in addressing the issue of municipal payment levels. Eskom was implementing "active partnering" with municipalities, where Eskom works with the municipality to run the electricity department by consensus. The electricity revenue was ring-fenced and accessible to Eskom. The revenue comes in; they could pay Eskom and the other costs of municipalities. This involved assessing and improving management capabilities, focusing on metering for large users, and rolling out meters to individual households.

He said that municipalities would be able to pay them and also use their money for other things. He emphasised that this issue was no longer just an Eskom problem but a national one. It undermined the impact of the debt relief programme, Eskom's ability to borrow to grow its business, and the sovereign entity's creditworthiness. He requested the Committee's assistance in ensuring compliance from their respective municipalities.

Mr Marokane then deferred to Mr Cassim to discuss the balance sheet and assets, and to Ms Khulu to address questions related to security and combating fraud and corruption. He mentioned that Mr Len de Villiers, Chief Information and Technology Officer, was focused on enhancing technology across the business, including cyber security and enabling industry reforms.

Mr Cassim clarified that the acronym RIMF stands for Risk and Integrity Management Framework.

Addressing the issue of municipal debt, he highlighted the significant increase in debt owed by metro municipalities. It had risen from R141 million three years ago to R12 billion currently. He emphasised the importance of addressing debt from these larger metros, as it significantly impacts Eskom's sustainability. He also noted the importance of adhering to payment agreements.

Looking at Eskom's 2024/25 financial year, he said that debt had risen from approximately R74 billion to nearly R100 billion. Eskom could not act as a bank to municipalities. He outlined the key components for Eskom's financial sustainability—managing cost efficiencies, recovering efficient costs through regulatory mechanisms (including covering the cost of capital), and benefiting from debt relief. He said that potentially reducing the R400 billion debt to R250 billion would be possible, although current projections were closer to R300 billion.

Regarding the balance sheet, Mr Cassim explained that at its peak, Eskom's debt service commitment to the state was nearly R500 billion, with R108 billion for interest and capital maturities annually. He indicated that this was unsustainable, leading to the need for government support and relief totaling approximately R496 billion cumulatively, including the current R250 billion. The goal was to reduce annual interest and maturity payments to around R50 billion. He noted that doubtful collections from municipalities and metros meant that Eskom could recognise revenue only once in their bank account, resulting in R8-9 billion not reflected on the top line in recent years.

Addressing Ms Sithole's question about assets and liabilities, he reported that for the group results for March 2024, current assets were less than current liabilities, necessitating debt relief. This was reflected in the audit report's emphasis on 'going concern'. He clarified that Eskom was not insolvent, as total assets exceeded total liabilities, reflecting an equity amount of R223 billion as of March 2024. He also noted that the R250 billion debt relief was used for debt service commitments, per the conditions. During the debt relief window, Eskom had not accessed capital markets, and they intended to continue this for the fourth year before potentially approaching debt capital markets again.

Mr Cassim reiterated Mr Marokane’s point that OCGC spending had dropped from R34 billion to about R18 billion from 2024 to 2025, but was still high, and further improvements were needed. He said Eskom's determination was reconciled to utilising OCGTs at a 4% load factor.

Addressing Mr Pienaar's question about flue-gas desulfurisation (FGD) stacks, he said that Eskom was replacing temporary stacks with permanent ones. While FGD implementation at Medupi was estimated to cost R40-50 billion, Eskom was exploring alternatives and would engage with committees and the World Bank.

Regarding Ms Boshoff's question about COP financing, he said that although the US had rejected their component of the initial $8.5 billion (now grown to about $12 billion), sufficient funds remained from other funders and partners to assist with the just energy transition, particularly for expanding the grid through a public participation framework.

Finally, Mr Cassim reiterated that the generation recovery plan approved by the board was a two-year plan and that audit recovery would take two to three years to complete.

Ms Khulu addressed the questions regarding theft, vandalism, and internal capacity to manage these issues. She acknowledged that while internal capacity building was a work in progress, Eskom had received significant support from the South African National Defence Force (SANDF) and the South African Police Service (SAPS) in various areas. She assured the Committee that internal capacity was improving.

In response to Ms Boshoff's question about implicated suppliers and specific amounts, she suggested providing a written response with figures for each company, including Deloitte, McKinsey, and others, to ensure accuracy.

Ms Khulu then addressed fraud prevention measures, highlighting consequence management, awareness programmes, and supplier discipline. She explained that the Special Investigating Unit (SIU) managed related cases with a disciplinary tribunal to handle cases involving implicated employees. Forensic investigation reports informed consequence management.

She noted a significant increase in the number of declarations of interest responses received, which had been verified for potential conflicts. Any identified conflicts were investigated, proving to be a useful measure. Employees under investigation or who had left the system had been flagged to prevent their return, and any reapplication triggered a reopened investigation.

Ms Khulu explained that profiling preliminary reports and individuals had been crucial, as lifestyle audits revealed discrepancies between employees' earnings and assets. This had improved Eskom's investigation efforts, which were monitored by the audit and risk committee. A forensic catalyst report detailing ongoing investigations and turnaround times was submitted quarterly. She emphasised the duty to report wrongdoing through fraud and awareness programmes.

Ms Gany referred to the impact of illegal connections and phantom tokens, which resulted in non-paying customers drawing electricity at Eskom's expense. This cost was reflected in Eskom's books.

She built upon Ms Khulu's comments on consequence management, stressing the importance of addressing criminality, fraud and corruption. While significant investments had been made to combat these issues, she highlighted the need to balance retrospective actions with proactive measures to prevent future incidents.

Ms Gany stressed that Eskom's power lay in its ability to hold its employees and suppliers accountable in accordance with its own policies and procedures. While Eskom collaborated closely with law enforcement authorities, she clarified that convictions fell outside its direct control. The public often misinterpreted Eskom's role in securing convictions, when its primary responsibility was to enforce its internal policies and procedures. Once a matter became criminal, Eskom handed it to law enforcement authorities.

Mr De Villiers said the newly established technology division had taken a completely new approach to managing audit findings, resolution and remediation across the organisation, encompassing traditional information technology (IT) and operations technology (OT). He clarified that the consolidation of IT and OT was essential due to the pervasive nature of cybersecurity risks, which did not differentiate between IT and OT systems. To address this, Eskom had implemented comprehensive oversight for cybersecurity, deploying new systems, reviewing policies, and implementing tracking systems to monitor networks, systems, data centres, and all technology instances.

He highlighted the rollout of new endpoint security systems to protect all of Eskom's endpoints, hoping these measures would substantially improve the risk profile.

He said written responses would be provided regarding rooftop connections and how municipal debt delayed the unbundling of the distribution business.

 

NECSA

Mr Davic Nicholls, Chairperson, NECSA, apologised for his late arrival due to flight delays and a car accident. He also apologised for the absence of the Group CEO, who was in China with the Minister.

He acknowledged that NECSA had prepared for an audit finding feedback session. To address concerns about NECSA's role, he explained that NECSA existed under the Nuclear Energy Act 46 of 1999, succeeding the Atomic Energy Corporation and the Atomic Energy Board (established in 1948). NECSA served as the national research and development centre for nuclear technology.

He outlined NECSA's key activities, including fulfilling governmental nuclear obligations under international conventions, decommissioning facilities built in the 1980s, and conducting nuclear research and development. He highlighted NECSA's commercial activities, particularly its role as a major global supplier of radiopharmaceuticals through its subsidiary, Nuclear Technology Products (NTP). He also discussed Pelchem, a company dealing with specialty fluorochemicals.

Regarding international collaborations, Mr Nicholls said that all foreign engagements adhered to intergovernmental agreements and International Atomic Energy Agency (IAEA) safeguards. He assured the Committee that the location and management of nuclear waste and materials were closely monitored.

Responding to Ms Boshoff's question, he clarified that the current board was appointed in January 2020, following the departure of the previous board. Since then, NECSA has undergone significant leadership changes, including appointing a new CEO, CFO, and managing directors for both subsidiaries. He emphasised that the current team was not the same as the one from five years ago. He added that restructuring the organisation had gone well, with no failures in the Labour Court.

He noted the steady improvement in NECSA's audit findings and intended to achieve a clean audit across the board.

Regarding energy policy, Mr Nicholls said nuclear energy was a major, credible option for dispatchable baseload power with low carbon dioxide (CO²) emissions. He suggested two options -- a Koeberg-type reactor, and small modular reactors (SMRs). He proposed partnering with an external entity to build the first SMR on the NECSA site, with subsequent units potentially constructed by Eskom on existing coal-fired power station sites in Mpumalanga. This would prevent the decommissioning of existing infrastructure.

Ms Hawadi was given the platform to summarise and address the remaining questions.

She began by responding to Mr Van den Berg's inquiry about NECSA's integrated development plan (IDP), stating that NECSA had five key focus areas:

• financial recovery and sustainability;
• research and innovation;
• profitable commercial enterprises;
• business community continuity and efficiency; and
• talent excellence and high-performance culture.

These contributed to the positive results of the presentation.

Ms Hawadi acknowledged Mr Mabilo's compliments on NECSA's performance, and welcomed the positive feedback. She addressed Ms Boshoff's question about acronyms, noting that the only acronym used in the presentation was "IT," referring to Information Technology.

Regarding revenue collection, she said that NECSA had established a task team that meets weekly to follow up on long-outstanding debtors. They had seen progress in financial recovery and were working to prevent recurrences.

Ms Hawadi also addressed Ms Sithole's question about declining audit outcomes. She clarified that NECSA's audit outcomes had actually improved significantly, with two entities now receiving unqualified audit opinions. This improvement was attributed to the rollout of standards of excellence in subsidiary entities.

Finally, she responded to Ms Boshoff's question about engagement with the National Treasury. She assured the Committee that NECSA was not using referrals to the National Treasury as a delaying tactic. Instead, these referrals were necessary due to threshold issues, and the National Treasury had provided clarity on these matters. The Auditor-General was satisfied with this approach

.

Concluding Remarks

 

Iran and nuclear programme

The Deputy Minister clarified that Iran had no significant nuclear programme, suggesting the issue had been exaggerated. She emphasised that South Africa was a founding member of the IAEA and an original signatory to the Non-Proliferation Treaty. It had dismantled its nuclear weapons, and its current nuclear activities were focused on energy and non-weapons applications, particularly medical research. Any information sharing would be limited to these peaceful purposes and would pose no threat to global security.

Environmental concerns and emissions

Addressing Ms Boshoff's question on emissions, she said that the Minister of Environment had issued a report regarding the extension request for emissions waivers. Eskom was currently deliberating on this report, though its options were limited. She emphasised that while non-compliant with stricter standards, Eskom's current operations were still legal under the existing waiver. However, she acknowledged the serious health impacts, noting a 6% higher death rate around power stations due to emissions. The government explored alternative approaches, such as the Clean Development Mechanism, to address emission concerns.

Unbundling of Eskom

Ms Graham-Maré explained that municipal debt significantly delayed the unbundling of Eskom's distribution arm. For distribution to be unbundled, it had to be a going concern, which was challenging, given the current debt levels. She said the newly enacted Electricity Regulation Act (ERA) guided the unbundling process. Progress had been made with establishing the National Transmission Company, while plans for generation and distribution unbundling were still in development.

 

Gender equality initiatives

She highlighted the long-standing Eskom Women Advancement Programme (EWAP), which had successfully promoted women to leadership positions, including power station managers. She mentioned that NECSA was reviewing its gender strategy for the next five years, with gender and youth development being a strong focus of her office.

Municipal debt and support

Deputy Minister Graham-Maré provided context on the municipal debt issue, noting that Eskom had an 88% recovery rate from municipalities that received its services. However, 71 municipalities were currently on debt relief programmes, with 14 failing. She criticised the National Treasury's debt relief programme for imposing strict requirements without adequately capacitating municipalities to meet them.

To address this, she announced the formation of a small task team involving her office, National Treasury, Eskom, and Department officials. This team would assess individual municipalities to identify specific challenges and provide targeted support. The goal was to find ways to capacitate and resource struggling municipalities, recognising that a one-size-fits-all approach would be ineffective.

Investigations and prosecutions

Finally, the Deputy Minister referred to a recent presentation by the SIU to the Portfolio Committee in the National Assembly regarding their work on Eskom-related issues. She suggested that the current Committee might benefit from a similar presentation to gain insight into the complexity and volume of work involved in these investigations, which would help to explain why prosecutions often take considerable time.

The Chairperson thanked the Deputy Minister and Group Chief Executive and requested that the remaining questions be answered in writing.

With the Committee's agreement, he proposed reviewing the 2024/25 report from the mining health and safety perspective within five minutes, to inform questions for the upcoming meeting with the Minister of Mineral Resources and Energy.

Mr Farmer voiced opposition, and was seconded by another Member. The Chairperson acknowledged the Committee's decision to defer the report.

He thanked the Deputy Minister and Group Chief Executive, commended their action-oriented and hands-on approaches, and expressed enthusiasm for future collaboration. Regarding nuclear issues, the Chairperson offered to organise an informal session for Members to learn more about NECSA's work and to address any concerns about cooperation between South Africa and Iran.

The Chairperson adjourned the meeting.