By Lehlohonolo Lehana.
The Auditor-General of South Africa (AGSA) presented their findings to Parliament’s Standing Committee on Public Accounts (Scopa), on the financial performance of both South African Airways (SAA) and the Passenger Rail Agency of South Africa (Prasa).
SAA entered business rescue in December 2019 and emerged from the process in April 2021.
Both state-owned enterprises (SOEs) have been the recipients of significant government bailouts over the years.
During the meeting, AGSA executive Fhumulani Rabonda informed the parliamentary committee that audits conducted on SAA were only up until the 2021/2022 financial year, which ended March in 2022.
The audit for the 2022/2023 financial year was still in progress but nearing completion.
“The anticipation is that by latest mid-October, we must be done with the audit for the financial year that ended on 31 March 2023,” he said.
The audit for the 2023/2024 financial year has not yet begun, as SAA has yet to submit its financial statements to the Auditor-General’s office.
“That’s another backlog that we are dealing with,” Rabonda added.
AGSA senior audit manager Thato Kunene indicated that of the R38.1 billion that SAA received since 2018, R27.6 billion was deposited post the business rescue process.
Kunene also discussed SAA’s audit results over a four-year period, noting that the overall outcome was a disclaimer.
“From our side, we were unable to get sufficient audit evidence to express whether the financial statements can be reliable or not, so that was the biggest stumbling block that we had.
“This was due to the lack of adequate skills and capacity to prepare credible financial statements and to support the audit process.”
According to Kunene, SAA’s irregular expenditure rose from R22 billion in the 2017/2018 financial year to R44.5 billion by the 2021/2022 financial year.
“This disclaimed audit opinion paints that SAA has an environment that is failing to implement robust financial management systems and credible records.”
The auditor-general recommended that key policies and procedures that drive financial and record-keeping functions must be reviewed and updated or designed and implemented where they did not exist.
“The board and management must ensure that strict consequence management practices are ingrained in the culture of SAA. Officials who transgress or permit non-compliance must be held accountable for their actions.”
Meanwhile, Prasa recorded irregular expenditure of R3.8 billion in the 2022/2023 financial year, an increase from the previous year, largely due to noncompliance with supply chain management processes.
The AG’s team led by the head of portfolio from the national audit portfolio of the AG’s office Andries Sekgetho.
The audit outcome included the annual financial statements and status of compliance with legislation and reporting of performance. These against predetermined objectives for the 2022-23 financial year.
Sekgetho gave a brief in terms of funding for the year under review. He said Prasa received government subsidies from the Department of Transport amounting to R7,2-billion. These were for operations, as well as R12,3-billion for capital expenditure during the 2022-23 financial year.
In addition, Prasa generated revenue of R119-million in fare revenue. Operating lease rental income of R620-million. Other income of R181-million and interest received of R1,7-billion, according to Sekgetho.
“Prasa continued to fail to prevent irregular as well as fruitless and wasteful expenditure in 2022-23. Irregular expenditure increased from R3,3-billion in 2021-22 (this figure was restated from a previously reported R1,1-billion). It increased to R3,8-billion in 2022-23. Irregular expenditure continued to be caused mainly by SCM [supply chain management] non-compliance. During the year, one of the major awards was also found to be irregular through the audit process. It was the general overhaul contract,” said Sekgetho.
AG recommended that Prasa board should urgently stabilise the executive management by filling key vacant positions with permanent appointments. Fast-track its infrastructure modernisation programme to ensure effective deployment of new trains to improve service delivery.