CABINET ministers will have to report regularly to Parliament on the billions of rand in government guarantees, indemnities and securities they issue to state-owned entities (SOEs) from this month to reduce the risk to public finances.
Finance Minister Enoch Godongwana has issued an instruction to ministers, directors-general of national government departments and boards responsible for 200 major and national public entities and national government business enterprises.
The list includes some of the country’s biggest and most troubled SOEs, such as Eskom, Transnet, SA Airways, Denel, SABC, Road Accident Fund, Rand Water and the Passenger Rail Agency of SA, among others.
According to the instruction issued by Godongwana dated August 16 and which took effect on October 1, ministers who have issued or requested his concurrence for the approval of guarantees, indemnities and securities that bind the national revenue fund to a financial commitment incurred or to be incurred by the national executive will have to report quarterly to the National Assembly on the guarantees, indemnities and securities’ status.
Godongwana told his colleagues that over the past several years, the government, through Cabinet, has issued significant amounts of guarantees to some of the 200 major and national public entities and national government business enterprises listed in the Public Finance Management Act.
”These guarantees have greatly increased the risk to the fiscus, while a number of controls have been implemented to improve the financial performance of public entities in order to reduce the likelihood of the guarantees issued to these public entities being called, and the likely impact of those calls on the fiscus, the risks remain high,” he said.
Godongwana said the requirement to report quarterly during each financial year was a measure to improve transparency with regard to the issuance guarantees, indemnities and securities for ministers who have requested his written concurrence for their issuance.
In terms of the instruction, reporting ministers must provide the value of the guarantees, indemnities and securities, purpose, date request was granted or refused, as well as reasons and, if granted, the conditions, if any.
Ministers must also reveal the total value of guarantees, indemnities and securities they have issued and the payments required.
Last month, ANC MPs in the National Assembly rejected the Public Finance Management Amendment Bill introduced by the DA’s Alf Lees that would have forced Godongwana to table a report in Parliament setting out his decision to approve or reject a guarantee, indemnity or security and the reasons no less than 30 days after it has been granted or refused following a request.
Government guarantees are issued to allow SOEs to borrow on the strength of their balance sheets, use the guarantees, in exceptional cases, to support restructuring objectives and meet international obligations, among other principles.
During Godongwana’s Budget Speech in February, the budget review stated that the total amount of approved guarantees to public institutions was expected to decrease by R81.4 billion to R478.5bn by the end of the following month, when Eskom’s R350bn guarantee framework agreement expired.
The power utility was then not allowed to draw down on any new guarantees from April this year with the introduction of its debt relief arrangement.
This week, the National Treasury announced that it was extending its municipal debt relief support programme for a month until October 31 to accommodate more municipalities.
Treasury said 136 of the country’s 257 municipalities owed Eskom R58.5bn in arrears debt as of March 31.
By September 22, nearly 40 municipalities had applied to be part of the Eskom municipal debt relief support programme, and 28 had been approved, while another nine were still being assessed.
An additional 25 applications were resting with their respective provincial treasuries for submission for approval.