Eskom irregular expenditure exemption still ‘in play’

Acting Treasury director-general Ismail Momoniat said the controversial exemption from reporting irregular, wasteful, and fruitless expenditures remains “in play” despite being formally withdrawn.

The exemption would allow Eskom to avoid reporting irregular, wasteful and fruitless expenditures in the utility’s annual financial reports.

Treasury initially proposed this with the intention of tarting up Eskom for lenders – but withdrew the proposal only a few days later owing to widespread backlash and legal threats.

However, Momoniat told Business Times that the exemption has only temporarily been set aside to address concerns raised by the Auditor-General and to allow for public consultation.

The public can comment on the proposed exemption until 21 April.

Eskom and Treasury are not applying their minds

Wayne Duvenage, the CEO of Organisation Undoing Tax Abuse (OUTA), told Daily Investor that the organisation does not buy the fact that the exemption would help Eskom’s prospects with credit rating agencies.

He said that not disclosing information about irregular, fruitless and wasteful expenditures sends the “wrong message” to creditors.

“Credible rating agencies are looking at the entity’s ability to manage its cash flow and improve or sustain its ability to service its debt obligations,” he said.

“Making a decision to seek exemption from disclosing irregular fruitless and wasteful expenditure signals alarm bells for rating agencies.”

He said credible rating agencies are not so naive and can and will request this information anyway.

“Eskom and Treasury are not applying their minds on this issue,” he said.

Duvenage added that Transnet should not be exempted from the reporting requirements in the Public Finances Management Act (PFMA) either.

“The PFMA is there for precisely the need to ensure that State companies act even more cautiously when it comes to spending the public’s money, as these are generally entities with no competition for the public to choose from.”