EDITORIAL: Eskom exemption: Treasury needs to communicate better

The Treasury did itself no favours with a hopelessly late communications strategy for the release at the weekend of a government gazette which seemed to grant Eskom a three-year exemption from reporting on any corrupt, fraudulent, irregular or wasteful expenditure.   

With no explanation forthcoming, the inevitable assumption was that the government planned to use the state of disaster to give the power utility carte blanche to hide any dodgy procurement deals.

As it turns out, the exemption has more to do with the dysfunctions caused by the Public Finance Management Act (PFMA) and the auditor-general’s often nit-picking approach to state-owned enterprise audits than it does with any desire for secrecy on the part of Treasury or Eskom.

The PFMA requires public entities to declare any “fruitless and wasteful” expenditure, along with any that’s “irregular” for whatever reason. They also obviously have to declare fraud or corruption, as any private company would.

The auditor-general tends to treat any of these as grounds for a qualified audit, even purely technical irregularities where there’s no fraud or misconduct. For Eskom or Transnet, a qualified audit risks breaching covenants with lenders and causing a default and makes it all but impossible to borrow new money. That’s the problem the limited exemption was designed to address. It applies only to fruitless, wasteful or irregular spending, which would now not attract a negative audit finding. Fraud or misconduct still definitely would. Transnet was granted a similar exemption last year. Both entities still have to report transparently on any and all spending.

Why Treasury took its time to issue a statement explaining this in the first place is a mystery. It sure needs to step up its comms.