Eskom spent R840m on flats for staff, but no-one can live in them An official from the auditor-general's office says it was 'actually very difficult to get credible answers' to how the costs went from R160m to R840m Eskom squandered more than R800m building flats for construction workers at its Kusile power station but parliament was told on Wednesday that the flats were uninhabitable. The company had budgeted R160m for the Wilge Residential Development Project, a few kilometres from Kusile. Now, some nine years later, MPs heard on Wednesday that R840m was spent, that the project remains incomplete and that the units are uninhabitable. This emerged during a meeting of parliament's public accounts watchdog Scopa, as the auditor-general tried to explain Eskom's fruitless and wasteful expenditure which shot up from R8m in 2018 to R2.9bn in 2020. Eskom's wasteful expenditure was R538m in 2019 and jumped by R2.4bn to R2.9bn in 2020. The AG's Siyakhula Vilakazi explained that, in the main, about R2.1bn of this expenditure was a result of poor contract management, which consisted of over-payments and projects that were never finalized. "One that saddens me, or was a lowlight for me, as part of the R2.4bn increase was the money spent on building the Wilge flats," said Vilakazi. He said the flats were built next to the Kusile power station as they were meant to house the technicians who were going to be working there. But the flats never got finished until the technicians started leaving. Vilakazi said the budget for the flats was R160m and the actual expenditure when the project was stopped was around R840m. "How the budget ballooned from R160m to R840m ... it's actually very difficult to get credible answers to that," he said. "That building has been impaired down to zero because where it is sitting now it's very difficult to get tenants who would be willing to pay market-related rentals. It is also not in a state or condition where people can live in it," said Vilakazi. For someone to take over that building, Eskom would have to pay them, he said. Eskom had promised to conduct investigations, added Vilakazi. The Mail & Guardian reported in October 2019 that Eskom entered into a contract with the Liviero Group to construct the Wilge flats in July 2012. The paper reported that the group has since gone under voluntary business rescue, and one of its companies has been liquidated. The flats are incomplete and unused, while workers travel up to 50km a day to work at Kusile.

question 1

Using an appropriate definition of risk management, analyze and discuss the major challenges that have placed a renewed focus on risk management. Demonstrate your understanding of these challenges by linking your discussion to the case study.