Parliament, Wednesday, 23 October 2019 – A joint meeting of the Standing Committee on Public Accounts (Scopa) and the Standing Committee on Appropriations has expressed concern about the performance of departments and state-owned entities (SOEs) in the 2018/19 audit outcomes.
The committees received a briefing from the Auditor-General of South Africa (AG), Mr Kimi Makwetu, on the 2018/19 audit outcomes. What has been of great concern is the financial state and management of SOEs. Out of the 14 SOEs audited by the AG, 11 of those obtained poor audit outcomes, mainly as a result of non-compliance with supply chain management processes.
It is also worrying to learn that in the 2018/19 financial year, guarantees amounting to R446 billion were issued to 11 SOEs, including SOEs that are not audited by the AG. The total government exposure relating to these guarantees amounted to R328 billion. Of the total cumulative guarantees issued ending 31 March 2019, R350 billion was issued to Eskom, with a R286 billion exposure as at March 2019. These guarantees or bailouts for SOEs increase the budget deficit of the fiscus, government debt and borrowing costs, which result in downgrades from rating agencies.
It is also concerning that there are departments and SOEs that have not submitted their financial statements to the AG. Among the culprits that have not submitted is South African Airways (SAA), which has not submitted financial statements for two financial years. As a result of this non-submission, no auditing work has been done for 2019 at SAA due to the outstanding information. This shows the disregard of SAA for the law and sets a wrong precedence of normalising the non-submission of financial statements. The committees are unhappy with the lack of consequences for this non-submission of financial statements by SAA, other departments and SOEs. This is why Scopa is scheduled to hold hearings with all the departments and SOEs that have not submitted financial statements for 2018/19.
The committees have also noted that the annual irregular expenditure increased from R50.97 billion to R61.35 billion. Compliance with key legislation slightly regressed from 71.5% to 72.1%. Most common non-compliance areas are in the area of the quality of financial statements, management of procurement and contract management. Another common area of non-compliance is in irregular, fruitless and wasteful expenditure. The increase of irregular expenditure is testament to this. Effecting consequences has also been flagged by the AG as a common area of non-compliance.
The committees found some comfort with the fact that the annual fruitless and wasteful expenditure decreased from R2.57 billion to R1.42 billion. The annual unauthorised expenditure decreased from R2.13 billion to R1.65 billion. It is important that this kind of expenditure continues to decrease until it is eliminated completely. Consequence management will be instrumental in ensuring that fruitless, wasteful and unauthorised expenditure becomes a thing of the past.
ISSUED BY THE PARLIAMENTARY COMMUNICATION SERVICES ON BEHALF OF THE CHAIRPERSON OF SCOPA, MR MKHULEKO HLENGWA AND ACTING CHAIRPERSON OF SCOA, MR XOLISILE QAYISO.
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