By Bhargav Acharya and Kopano Gumbi
JOHANNESBURG (Reuters) -South Africa’s Eskom said on Friday that auditors have questioned the utility’s ability to survive as a going concern citing past financial irregularities.
The country’s only power producer has struggled for years to meet electricity demand with outages at its ageing coal-fired power stations hitting record levels this year.
On Friday it posted a net loss of 12.3 billion rand ($719 million) for the year to March and warned it expected a loss of more than 20 billion rand in the coming year.
President Cyril Ramaphosa’s administration has been trying to reform Eskom, but progress has been slow.
Auditors Deloitte & Touche LLP in a report said there is “a material uncertainty relating to Eskom’s ability to continue as a going concern,” the utility said in its annual financial report.
The auditors cited “various irregularities reported in prior financial periods”, it added.
The auditors also found the utility had failed to take corrective measures after breaching the National Environment Management Act and that due to a backlog of forensic cases, “management is not meeting the requirements of the National Treasury Regulations”.
They also said that some financial documents had been “purposefully destroyed in a fire” when requested for audit purposes and that Eskom failed to investigate the incident.
In response, Eskom said it was investigating the incident and was finalising a disciplinary process against an individual.
“Once completed, a disciplinary process will be instituted against the employee,” Eskom said.
Its annual report showed gross debt and borrowings of 396.3 billion rand, down from 401.8 billion a year ago.
“We are only able to continue as a going concern on the basis of the support that we received to date from government and the continued support that is earmarked going forward,” Chief Financial Officer Calib Cassim said at a briefing following the results.
In October, the Treasury confirmed it would take on between one third and two thirds of the utility’s debt with details of the restructuring expected in the national budget due in February.
Eskom CEO Andre De Ruyter resigned this month saying a lack of political support had made his position “untenable”.
This year’s unprecedented power cuts have led to public frustration and have damaged businesses.
($1 = 17.1026 rand)
(Editing by James Macharia Chege and Jason Neely)
