Auditor-general Kimi Makwetu: SAA had a net loss of R5.6bn
Auditor-general Kimi Makwetu has questioned why South African Airways (SAA) did not report reasons for not adopting a resolution to file for business rescue while the company was in financial distress, as required by the Companies Act.
In a damning audit report for 2016-17 — for the first time tabled in Parliament separately from the SAA annual report, which is late — Makwetu says SAA posted a net loss of R5.6bn for the year and at the end of the period its liabilities exceeded its assets by R17.8bn.
This was a deterioration of R5.4bn on the previous year. There was a “material uncertainty” about the ability of the airline to continue as a going concern, the report said.
In late 2017, the government injected R10bn cash into the national carrier and, in addition, extended R19bn in guarantees to the airline.
Makwetu gave a qualified audit opinion for both SAA and subsidiary Mango.
SAA has not yet tabled its 2016-17 financial statements, which were due in September. This prompted Makwetu to submit the audit reports independently of the annual report, contrary to the norm of including them in the annual report.
Former finance minister Malusi Gigaba had to ask National Assembly Speaker Baleka Mbete twice for extensions for the tabling of the SAA annual report, saying that “technical accounting matters” raised by the auditor-general had not yet been resolved.
In a letter to Mbete, Makwetu said the Public Finance Management Act required that the annual report, audited financial statements and audit report of state-owned entities be tabled within one month of the accounting authority receiving the audit report.
This had not happened, which was why he had been compelled to table the SAA and Mango audit reports independently. The auditor-general report on SAA notes that six successive years of operating losses eroded its capital base.
“The history of losses, lack of capital and volatility in exchange rates along with maturing loans and working capital deficiencies indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern,” wrote Makwetu.
Leadership instability had also contributed to the decline in the internal control environment. Among accounting and record-keeping deficiencies was SAA’s failure to maintain complete records of irregular expenditure, as well of wasteful expenditure. There were also deficiencies in the accounting for property, aircraft and equipment, valuation of inventory and maintenance costs.
DA MP Alf Lees said the audit reports were “a damning indictment on the management and status of SAA and Mango”.