South Africa: Zondo Commission - AG Official to Testify That SAA Was in a 'Shambolic State'

21 February 2020

A business executive at the Office of the Auditor-General (AG) is expected to testify before the state capture commission on Friday that the AG found SAA in a "shambolic state" after it received clean audits for five consecutive years.

"Chair, the witness will speak to the role that private firms played when they were doing the joint audit of SAA. In the five years of audit work from 2012 to 2016, they received clean audits," said commission evidence leader, advocate Kate Hofmeyr.

"But the AG took over and found a shambolic state at the state-owned entity," she added.

The auditors for the cash-strapped airline at the time were PricewaterhouseCoopers (PwC) and Nkonki.

The appointment was split 60/40 in favour of Nkonki for the 2011/12 financial year.

Concerns

This joint relationship continued for four years, however, in the fifth year, SAA sought to appoint Nkonki as the sole auditor for the airline.

This was a concern for the AG's office.

On Thursday, the business executive, Polani Sokombela, testified: "We held a view that the appointment of Nkonki should follow a new procurement process - the 2011/12 procurement process was a joint appointment and it was for one year.

"The subsequent years were renewals but when you come in the fifth year and the other entity is taken out, to us, that signifies the end of the relationship and you need to start afresh and seek a new relationship."

In a meeting on September 15, 2015, the AG saw it fit to raise concerns about Nkonki's appointment as the sole auditor.

"I took it upon myself to send them the concerns and recommendations I made. I told them to reconsider the process that they followed to employ Nkonki as the sole auditors and they were welcome to resubmit," the witness explained.

"We also recommended that they should consider adopting a policy for the appointment and re-appointment of auditors," he added.

The airline submitted documents on December 14, 2015, including an excerpt of the draft minutes of the board meeting in which they confirmed the re-appointment of PwC and Nkonki in the 2015/16 year, based on a 50/50 split on the concurrence of the AG.

"Do I understand that this was SAA seeking to comply with your recommendations?" evidence leader advocate Michael Mbikiwa asked.

"Absolutely, my assumption is that they passed a new resolution to comply with the AG's concerns," Sokombela responded.

The commission has shone the spotlight on the role auditors at state-owned entities (SOE) and the public sector played.

Sokombela's testimony continues on Friday and he is expected to tell the commission what the AG found when SAA was audited for the 2017 financial year.

The business executive said his involvement with the troubled entity began around 2015.

"My involvement in the audit of SAA started when the entity was moved from the Department of Public Enterprises to National Treasury. [I think this was] around 2015.

"There were challenges as far as SAA is concerned. The business unit that I am responsible for is responsible for the audit of National Treasury," Sokombela said.

Fin24 reported the AG report tabled before Parliament in 2018 recorded that SAA incurred a net loss of more than R5bn.

In the report, AG Kimi Makwetu stated that the airline had incurred a loss of R5.57bn and its liabilities exceeded its assets by R17.8bn.

Fin24 also reported despite bailouts, the airline had failed to table its annual financial statements since the 2016/17 financial year.

News24

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