Gordhan's portfolio vows progress on SOEs, as dept's own audit outcomes slip

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Minister of Public Entreprises Pravin Gordhan says they are not going
to liquidate SAA and business rescue practitioners must turn it
around. Photo by Misheck Makora
Minister of Public Entreprises Pravin Gordhan says they are not going to liquidate SAA and business rescue practitioners must turn it around. Photo by Misheck Makora
  • The Department of Public Enterprises told Parliament on Wednesday that it is turning the corner on its ailing entities.
  • The department regressed from clean audits since 2015-16 to an unqualified audit with findings in 2019-20.
  • The department received an unqualified audit due to material misstatements identified on financial statements submitted for audit.

 


After years of financial trouble and flailing audit outcomes in its care, the Department of Public Enterprises has, itself, experienced a slip in its audit outcomes for the 2019/20 financial year, but the department told Parliament on Wednesday that it is turning the corner on its ailing entities.

The Department of Public Enterprises regressed from clean audits since 2015-16 to an unqualified audit with findings in 2019-20, due to material misstatements identified on financial statements submitted for audit.

From Eskom's R450 billion debt whole, to Denel's repeated troubles with paying salaries, to SA Express being driven to liquidation and the ongoing business rescue process as South African Airways, there is no shortage of trouble at South Africa's state-owned enterprises.

Briefing Parliament's Portfolio Committee on Public Enterprises through a virtual meeting on Wednesday morning, Deputy Minister of Public Enterprises Phumulo Masualle said entities had to work in a very constrained environment but board announcements are expected to be made in the coming weeks.

Minister of Public Enterprises Pravin Gordhan himself was absent from the meeting as he was meeting with Cabinet at the time.

"We continue working hard on fixing Denel. Management has an order book and innovative partnerships to ensure it is executed.

"The SA Express liquidators have announced their preferred buyer and there are some legalities involved. We expect to hear from them soon. They are seeking to fulfil the remaining requirements of the liquidators," said Masualle.

Director General of Public Enterprises Kgathatso Tlhakudi said roadmaps for each state-owned enterprise under the department are either draft or in progress and MOIs have been drafted for each one.

Member of Parliament for the Democratic Alliance Ghaleb Cachalia took a dim view of the department's commitments, saying the state-owned entities under the department continue to drain the fiscus of funds with no end in sight.

"There are no green shoots. Eskom has loss of R20 billion. Denel can't pay salaries. Transnet has the most expensive ports in the world. To top all of this off the vanity project that is SAA continues to suck up billions in public funds," said Cachalia.

Deputy business executive at the office of the Auditor General Fhumulani Rabonda said areas of material misstatement in audited financial statements were subsequently corrected by management, which is why the department got an unqualified audit with findings instead of a qualified audit opinion.

"The relationships and transactions between Department of Public Enterprises and state-owned enterprises was not adequately disclosed. There has also been an impairment of investments and contingent liabilities," Rabonda said.

Rabonda said the department regressed in the preparation of regular, accurate and complete financial and performance reports that are supported and evidenced by reliable information, but maintained good risk management, record keeping, monitoring of compliance and leadership.

"The department was unable to maintain those positive audit results from previous years. The regressed audit opinion comes from misstatements that the department managed to correct," Rabonda said.

He said the Department of Public Enterprises realised an accrual adjusted deficit for the year due to the impairment of investments relating to state-owned entities that are experiencing financial difficulties.

"The assurance levels of internal audit regressed, and senior management remained unchanged due to the misstatements identified during the audit process in both the financial statements and reporting on performance information," he said.

He said the Auditor General's office recommended the review of the final annual financial statements should include a review of classes of transactions, account balances and disclosures made in the financial statements against the requirements of the modified cash standard.

Rabonda said these recommendations would ensure that the financial statements comply with the requirements of the modified cash standard.

The Department incurred R821 000 in irregular expenditure from previous years, which was condoned and R712 000 fruitless and wasteful expenditure which was investigated with outcomes and recommendations pending.

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