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Public Finance Management Act (PFMA)

The board is the accounting authority in terms of the PFMA and Eskom is listed as a Schedule 2 public entity. This Act also applies to subsidiaries and entities owned or controlled by Eskom. They are also classified as Schedule 2 entities.

The PFMA regulates financial management and governance. Eskom ensures that all directors and employees are aware of the provisions of the PFMA through regular training programmes.

Directors comply with their fiduciary duties as set out in the PFMA. Board responsibilities are also specified in the PFMA.

Integrated risk management (IRM)

The effective management of risk is central to the achievement of Eskom’s vision of together, building the power-base for sustainable growth and development in South Africa. By understanding and managing risk, we can provide greater certainty and security for our employees, our customers and all our stakeholders.

The Eskom board, through the risk management committee, acknowledges its overall accountability for ensuring an effective results-driven, IRM process. Exco has implemented a risk monitoring system that enables management to respond appropriately to all significant risks that could impact on business objectives.

Responsibility for the management of risk resides with line management in all divisions and projects. Those accountable for the management of risks also ensure that the necessary controls remain in place and are effective at all times. Control effectiveness focuses on improving our ability to manage risk effectively, so that we can quickly and confidently act on opportunities to improve and sustain the quality and continuity of supply, create value and achieve sustained growth.

Risk management in Eskom is performed at departmental, regional, divisional and subsidiary level and is reported upward to corporate (bottom-up). After consolidation of these integrated risk reports, Exco and the board risk management committee review and evaluate the risk profile to determine the major operational, strategic and business continuity risks (top-down).

  Please click here for detail on the governance of risk.


Ethical business conduct

Eskom commits itself to the highest standards of ethical conduct in its business dealings, underpinning its key value of integrity.

The ethics office assists the chief executive in setting the framework, rules, standards and boundaries for ethical behaviour, and provides ethics training and an advisory service to employees, assisting them in dealing effectively with ethics issues and ethical dilemmas in the workplace.

A key milestone for the past financial year was the implementation of Eskom’s code of ethics, “The Way”, throughout the organisation, through various communication initiatives. The objectives of the communication campaign were to reach all employees, including temporary and contract employees, simultaneously, and to provide them with creative material that will ensure a comprehensive understanding of the code, its purpose, and how it is applied in the workplace.

The implementation was further enhanced through staff dialogue sessions facilitated by managers, to encourage staff interaction on the code of ethics, and to discuss and resolve specific ethics issues within the work environment.

  Please click here for detail on ethics awareness.


Internal control

Management is charged with the responsibility of establishing an effective internal control environment, including adequate internal financial controls. In addition, operational control systems are developed and maintained on an ongoing basis to provide reasonable assurance to the board regarding:
  • the integrity and reliability of the financial statements
  • the safeguarding of its assets
  • the economic and efficient use of resources
  • the verification of the accomplishment of established goals and objectives
  • the detection and minimisation of fraud, potential liability, loss and material misstatement
  • compliance with applicable legislation and regulations .

These controls are contained in organisational policies and procedures, structures and approval frameworks, and they provide direction, establish accountability and ensure adequate segregation of duties. They each contain self-monitoring mechanisms.

The board ensures that an effective internal control framework has been established. The Assurance and Forensic department, the internal audit function, monitors the operation of the internal control systems and reports findings and recommendations for improvement to management and the audit committee.

The audit committee monitors and evaluates the duties and responsibilities of management, and of internal and external audit to ensure that all major issues reported have been satisfactorily resolved. Finally, the audit committee reports all important matters considered necessary to the board.

Assurance and forensic

During the period under review the corporate departments of audit, technical audit, technical investigations as well as forensic and anti-corruption were integrated into the Assurance and Forensic department (AFD).

In line with the requirements of the PFMA and good governance, AFD provides the audit committee and management with independent, objective assurance, consulting and forensic services designed to add value to and improve Eskom’s operations. The department brings a systematic, disciplined approach to the evaluation and improvement of the effectiveness of risk management, control and governance processes.

AFD is governed by international standards and best practices, published by recognised professional institutes.

A risk-based audit approach is followed by assurance and forensic. The audit plan is based on the risk assessment and other considerations, such as the achievement of organisational business objectives. The audit plan is updated as required (minimum quarterly) to reflect significant changes in the risk profile resulting from changes in the business operations, changes in customer needs or regulatory requirements.

AFD is supported by the board and audit committee and is authorised to have unrestricted access to all functions, records, property and personnel. External auditors independently audit and report on the financial statements.

Security risk management

The board ensures that an integrated crime-prevention plan is implemented to minimise exposure to criminal acts, particularly fraud. The security risk management department addresses these threats. Its work covers crime prevention, detection, response and investigation.

Where serious fraud, corruption and irregularities are suspected, forensic investigations (a department of assurance and forensic) establish the facts to enable management to deal appropriately with the matter and prevent a recurrence.

Nuclear safety

The nuclear safety assurance function is kept independent from the electricity production function by dividing Eskom’s nuclear infrastructure into two. The nuclear business area is directly accountable to the chief officer (Generation business) for all aspects of electricity production at Koeberg power station, including safety. The Nuclear Safety and Assurance section, a separate department in the Generation business with its own technical experts and resources, provides independent assurance on nuclear safety and compliance with licence requirements.

In line with international best practice, Eskom has a three-tier system of nuclear safety governance. The sustainability committee of the board (the top tier) dedicates several meetings a year to nuclear matters. The meetings are attended by international nuclear experts who bring a broad perspective to the deliberations. The middle tier, the nuclear management committee presided over by the chief officer of the Generation business, monitors, reviews and makes recommendations on issues such as nuclear policy, standards, benchmarks and rules and Eskom’s overall business requirements. The third tier, the safety review committees, brings together experts from various parts of Eskom to evaluate nuclear safety issues and make recommendations to senior management and other tiers.

Corporate citizenship and sustainability

In Eskom’s view, being a good corporate citizen means that its business must be run in an ethical manner that takes into account its impact on all stakeholders. In addition, it means that Eskom needs to contribute to the realisation of the hopes and aspirations of South Africa.

This includes contributing to a safe working environment, environmental responsibility, promoting Accelerated and Shared Growth Initiative for South Africa (AsgiSA) and corporate social responsibility and improving the life of all South Africans.

The chief executive, as chief safety officer and chairman of Exco’s sustainability and safety subcommittee, is accountable for overall sustainability and safety performance.

The sustainability and safety subcommittee guides our strategy and sets performance targets on sustainability, occupational health and safety and environmental matters, in line with Eskom’s safety health and environment policy, the National Environmental Management Act, (107 of 1998), as amended and the Occupational Health and Safety Act, (85 of 1993), as amended. Strategies are reviewed and approved by the sustainability committee of the board.

Exco’s operations subcommittee assesses occupational health, safety and environmental performance and reviews major incidents to ensure that corrective action is taken.

The objective of government’s AsgiSA programme is to promote economic growth and halve poverty and unemployment by 2014. Eskom’s contribution to this initiative as well as rural development is centrally coordinated and facilitated through the Corporate Services division. Eskom’s most significant contribution to AsgiSA is through its core business of supplying reliable electricity. Eskom also leverages associated activities, including its corporate social investment (CSI) programmes, for the development of the disadvantaged.

Eskom’s CSI contributes to the development of the disadvantaged and promotes, inter alia, skills development, job creation, education and health. Many CSI initiatives are executed by the Eskom Development Foundation.

Subsidiaries

The Eskom Enterprises (Pty) Limited group, a wholly owned subsidiary of Eskom Holdings, provides lifecycle support and plant maintenance, network protection and support for the build programme for all Eskom divisions. It also has subsidiaries in South Africa, Mali and Uganda. All of the Eskom Enterprises group companies are governed by independent board structures with their own internal control. Eskom Enterprises and its wholly owned subsidiaries are subject to Eskom group policies, governance and financial control. The directors are accountable to Eskom as shareholder through the shareholder compact.

Eskom’s other wholly owned subsidiaries – Eskom Finance Company (Pty) Limited, Eskom Development Foundation, Escap Limited and Gallium Insurance Company Limited are governed by independent boards. The directors are accountable to Eskom through the shareholder compact.

The subsidiaries comply with the PFMA and Companies Act, or their equivalent legislation where they are foreign-registered, and follow good governance principles.

 
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