ASHA SPECKMAN: 'So what?' attitude to AG will help to sink us
Auditor-general Kimi Makwetu could have a career in the movie business if he is ever so inclined. His audit report on government departments and institutions reads like the script of a horror movie.
It had me wondering what it means for SA's remaining investment-grade credit rating.
If we do lose Moody's investment-grade rating, the government's creditworthiness will sink further into the abyss of junk, a status that other countries rated sub-investment grade have found results in higher borrowing costs and weaker currencies.
This would hurt already burdened South Africans who are eager to see the back of a tough year that included a VAT hike, an unprecedented surge in fuel prices and retrenchments.
S&P Global Ratings and Fitch Ratings have already graded SA junk.
The impact of that was muted, because the economy was still able to benefit from a global appetite for emerging-market assets.
But should Moody's become the third agency to rate us junk, many investors will have to dump South African bonds because they are not mandated to hold sub-investment grade assets. They will sell those bonds to speculative buyers who will likely demand a premium to hold the debt.
Makwetu's report should be a concern for our rating status because it highlights nearly R80bn of irregular expenditure.
Ratings agencies consistently flag the drain of state-owned enterprises (SOEs) on the country's finances. The AG does not audit Eskom, which reported irregular expenditure of R19.6bn, or Transnet, with its R8.1bn in irregular spending.
Despite being infamous for poor financial management, Eskom is trying to persuade the energy regulator to grant it a 15% tariff increase in each of the next three years.
Besides the problems in the government, the AG found that the SOEs it does audit continued to regress.
There is significant doubt that the SABC and the South African Post Office can continue operating without financial assistance, Makwetu said. He is clear that the financial future for most SOEs is bleak.
Makwetu notes some positives. Parliamentary committees have improved their oversight of SOEs.
But the tangible consequences have yet to be seen, because as Makwetu points out, most of the recommendations from his previous reports have not been implemented at SOEs.
It's alarming when he says there has been blatant disregard of his office's recommendations and, as a result, improvement in accountability for spending in the government and SOEs has been limited.
The Public Audit Act, which has been finalised, will give the AG greater powers to step in where recommendations are ignored and refer the offending department or SOE for investigation.
This is essential, particularly as critical SOEs teeter on the brink, making my blood run cold.