Eskom exemption: If rating agencies don’t pay attention, surely potential investors will

We wonder if there is some “firepool logic” at work in the National Treasury’s decision to exempt Eskom from having to declare, in its annual financial statements for the next three years, losses incurred in “irregular, wasteful and fruitless expenditure.”

The rationale from our government money boffins is that complying with the Public Finance Management Act requirements on reporting these losses could result in Eskom getting a “qualified audit opinion”.

This, in turn, “may have a negative outlook on the entity’s corporate rating and credit assessment with the credit rating agencies”.

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Okay, now we’re lost. You’ve announced that Eskom can hide these losses from the auditors. So, presumably, the ratings agencies have seen this and will, for the next three years that the Eskom exemption is in place, regard with the proverbial pinch of salt any set of financial statements emerging from the corporation? You’re cooking the books and you tell the whole world you’re cooking the books?

There may, indeed, be some arcane financial reason for doing this but it smacks to ordinary people – taxpayers – that this is a cover for current and future looting.

Although it is not quite comparable, the Phala Phala affair leaves a similarly bad taste: a head of state is allowed, by his ruling party, to escape thorough scrutiny over what, prima facie, looks like a dodgy set of circumstances. And that’s being charitable…

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The message which is being sent out to the world, as far as we can see, is that normal accounting standards have been waived in the case of this country’s biggest state-owned enterprise. Surely, that state of affairs cannot be ignored.

If ratings agencies don’t pay attention, surely potential investors will. Those investors will see that the accepted legal, financial and ethical safeguards protecting business are somewhat flexible in the eyes of our government.

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