51. Information required by the Public Finance Management Act
  Losses through criminal conduct and irregular or fruitless and wasteful expenditure

In terms of the significance and materiality framework as approved by the shareholder, any losses due to criminal conduct or irregular or fruitless and wasteful expenditure, that individually (or collectively where items are closely related) exceed R25 million must be reported.

Irregular or fruitless and wasteful expenditure

Total irregular expenditure incurred was nil (2013: R20 million) (excluding non-compliance with the PPPFA discussed below) comprising six incidents. For these incidents disciplinary action has been taken.

PN Energy Services SOC Limited (PNES)

PNES is a wholly owned subsidiary of Eskom. The operations of the company were closed down in 2010, and it did not operate in the 2011 to 2014 financial years. The board of PNES investigated potential irregular and fruitless and wasteful expenditure suffered by the company during the 2009 and 2010 financial years. Eskom is taking further action against all the parties involved into the alleged breach of fiduciary duties and conflict of interests.

Preferential Procurement Policy Framework Act (PPPFA)

Eskom’s exemption from the PPPFA expired on 7 December 2012. Eskom paid R22 million (2013: R447 million) for the year ending 31 March 2014 on contracts that were entered into between 8 December 2012 to 31 March 2013 that were not recalled or corrected. The amount paid during the current year is below the significance and materiality framework threshold as approved by the shareholder. Eskom will continue to meet its obligations under these contracts until expiry of the contract. All these transactions have taken place in the normal course of business and have been subject to Eskom’s approved procurement policy.

Incidents of fruitless and wasteful expenditure below the materiality threshold

There were no material incidents of fruitless and wasteful expenditure suffered by the group during the reporting period. The aggregate of other fruitless and wasteful expenditure which individually (or collectively where items are closely related) were below the materiality threshold was R47 million (2013: R38 million) comprising 354 (2013: 254) incidents of which 7 (2013: 5) incidents account for R35 million (2013: R24 million). In all instances management has instituted preventive and corrective measures as considered appropriate, including disciplinary action.

Criminal conduct

Conductor theft

Losses due to conductor theft (including theft of copper cable, transformers and tower-related structures) totalled R68 million (2013: R51 million), and involved 7 166 (2013: 5 187) incidents. Actions to combat these losses are managed by the Eskom Network Equipment Crime Committee in collaboration with affected state-owned companies and the South African Police Services. The combined effort resulted in 316 (2013: 321) arrests. Stolen material worth R7 million (2013: R5 million) was recovered.


During the reporting period no significant incidents of fraud occurred. Eskom concluded 4 (2013: 3) investigations into fraud involving an amount of R7 million (2013: R1 million). The existing internal control measures in the affected areas as well as similar areas have been reviewed and enhanced to prevent a possible reoccurrence. Disciplinary, criminal as well as civil proceedings have been instituted against those involved.