Electricity Minister will ask for Eskom to be exempt from Public Finance Management Act rules

Minister of Electricity and Energy, Kgosientsho Ramokgopa, said he will ask the National Treasury to exempt Eskom from the Public Finance Management Act (PFMA) rules.

He shared this information during a discussion at the Unisa Graduate School of Business Leadership on Eskom’s future.

The Public Finance Management Act (PFMA) is legislation that regulates financial management in the government and public entities.

The PFMA establishes financial management standards across the national and provincial spheres to ensure that state funds are used effectively.

Eskom is classified as a major public entity under the Public Finance Management Act, which means it must comply with strict financial controls.

It cannot raise debt, issue guarantees, or enter into significant financial obligations without authorisation from the Minister of Finance and the National Treasury.

Eskom’s procurement must follow fair, equitable, transparent, competitive, and cost-effective processes.

Any deviations or emergency procurement decisions require formal applications, Treasury notifications, or specific exemptions.

Ramokgopa argued that these stringent requirements are putting Eskom on the back foot in a competitive electricity market.

“To liberate Eskom from the PFMA is a submission I will make to the cabinet. However, before I get there, I will engage with the Minister of Finance,” he said.

He explained that they have agreed on unbundling and that Eskom will no longer be vertically integrated.

That means there are now multiple actors on the generation side which will compete in South Africa’s wholesale electricity market.

“However, Eskom does not have the flexibility that private sector actors enjoy because it is subject to the PFMA,” he said.

“If Eskom sees an opportunity, it will not be able to compete with Independent Power Producers (IPPs) at the necessary speed because it must comply with the PFMA.”

He explained that the same holds when Eskom identifies a technological opportunity that could advance its interests.

“It is forced to go out to the public market to source partners, whereas other market participants in the same domain are not subjected to those restrictions,” he said.

That situation, Ramokgopa explained, creates an uneven and unfair playing field for Eskom to compete in.

“We need to level the playing field. Having agreed on liberalisation and codified it into law, Eskom must be freed from those constraints,” he said.

He explained that when the original Eskom legislation was envisioned, this competitive dispensation simply did not exist.

“Now that market liberalisation is codified into law, Eskom must be afforded the same flexibility as its competitors,” Ramokgopa said.