Picture: GETTY IMAGES
Picture: GETTY IMAGES

The DA has proposed an amendment to the law that governs the management by the government and its entities of their finances. 

The proposed amendment to the Public Finance Management Act will require greater parliamentary oversight over decisions taken by the government with regard to requests for guarantees, indemnities or securities.

The amendment bill, proposed by DA deputy finance spokesperson Alf Lees, comes at a time when the government guarantees to state-owned enterprises (SOEs) have mounted considerably. These guarantees are treated as contingent liabilities and pose a risk to the fiscus should any of the financially struggling SOEs default on their debts.

The issue has been flagged as a concern by credit ratings  agencies. Total government guarantees amounted to R463bn in August, of which R350bn is to Eskom, R39bn to the SA National Road Agency (Sanral), R25.7bn to the Trans Caledon Tunnel Authority and R19bn to SA Airways.

Currently the extent of the government guarantees is only disclosed either by way of parliamentary questions or annually in the main budget.

“This lack of transparency is clearly a high risk and needs to have some sort of parliamentary oversight,” Lees said in an interview on Thursday.

“The DA believes that there must be complete transparency of the issuing of the government guarantees and that parliament must be given the opportunity to at the very least be aware of the mounting risks and if it wishes to act to put brakes on the issuing of the government guarantees.”

Lees noted that former finance minister Nhlanhla Nene told the commission of inquiry into state capture that “the way guarantees work cuts out parliamentary scrutiny”.

The bill provides that the minister of finance must table a report in parliament setting out the decision to approve or reject a guarantee, indemnity or security within 30 days of the decision being taken. The report must detail the value of the guarantee, indemnity or security requested and the reasons for granting or refusing it, among other things.

The memorandum to the bill notes that guarantees, indemnities or securities can have a significant impact on the economy but there is insufficient provision in the act for parliamentary oversight of decisions on whether or not to grant them.

The act currently grants any cabinet member the power to issue a guarantee, indemnity or security with the written concurrence of the minister of finance. It requires that the cabinet member report any circumstances that resulted in a payment being made under such an instrument to the National Assembly, but Lees notes that this reporting is after the fact.

“Should these instruments be subject to public scrutiny from the outset, many of the risks that these instruments pose to the economy may be addressed timeously,” the memorandum to the bill notes.

“The purpose of the bill is to extend parliament’s oversight capacity in relation to the granting or refusal of government guarantees, indemnities and securities in terms of the act,” the memorandum adds.

ensorl@businesslive.co.za

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