Treasury's stealth bailout strategy exposed in Instruction Note 4

10 August 2023

The DA takes note of and is deeply concerned by the Financial Mail's revelation that Treasury has issued Instruction Note 4 2022/23 - a sweeping exemption that absolves all State-Owned Enterprises (SOEs) from reporting irregular, fruitless, and wasteful expenditure.

The PFMA rules, which require SOEs to report any material losses through criminal conduct and any irregular expenditure, have been conveniently blamed by struggling SOEs for their failures.

Instruction Note 4, which extends to all SOEs and provincial treasuries, now represents a dramatic overhaul in accounting for such irregular expenditure and allows it to go unaudited.

This means that the stain of past misconduct can be entirely erased, and the board of the SOE can "condone" or pardon previous contraventions of the Public Finance Management Act (PFMA). This effectively hides irregular expenditure from the public eye and allows management to escape accountability for past misconduct. This alarming development follows a similar exemption granted to Eskom (now overturned), which also allowed the entity to conceal such expenditure in its accounts.

This dishonest development follows a similar exemption granted to Eskom (now overturned), which also allowed the entity to conceal such expenditure in its accounts. Last year, Eskom alone had "irregular spending" of R67 billion.

The result of erasing these numbers from the accounts is that it undermines efforts to recover lost funds and hold those responsible accountable. This instruction by Treasury fundamentally undermines the principles of transparency and accountability.

The regulation will also enable SOEs to attract more funding under false pretenses, as it would make them appear more viable and financially attractive than they actually are. It is fundamentally dishonest and misrepresents the true financial health of these entities and the burden they place on taxpayers. By distorting audit outcomes in this manner, the Treasury is enabling a culture that is not only unethical but will also threaten the integrity of our financial system.

This revelation is a serious indictment on the part of Treasury and reveals a covert bailout strategy for SOEs, contrary to Finance Minister Godongwana's firm stance against any further bailouts.

Minister Godongwana must rescind this instruction immediately, and SOE financial statements must be corrected to reflect accurately what has occurred. South Africans deserve better. We cannot allow our country's future to be held hostage by a culture of corruption and mismanagement.

The DA stands firm in our commitment to hold the government accountable for its actions and to fight for a transparent, efficient, and effective public sector.

Issued by Dion George & Ghaleb Cachalia, DA, 10 August 2023