The cash-strapped SAA awarded tenders but failed to follow up with signed contracts for the winning bidders, the state capture commission of inquiry heard on Friday.
A witness from the Auditor-General South Africa (AGSA) told the commission that SAA's legal division and the office of the company secretary were "severely incapacitated".
"The legal division and the office of the secretary of the company, they were severely incapacitated. In the legal department... there were no contracts signed. That is not how it is done. That was a big risk for SAA because if you do not have a contract with your suppliers, how are you going to control them? But they were paid on the basis of a letter awarding the tender," Polani Sokombela, a business executive at the AGSA, testified.
Commission chairperson, Deputy Chief Justice Raymond Zondo, asked how long the practice of issuing tender award letters without concluding contracts continued.
Sokombela replied: "For some years, chair. SAA had a big contract register but for most of those we could not find the signed contracts. The credibility of the contract register itself was questionable."
Consecutive clean audits
Zondo questioned why the previous auditors did not pick this up over five years.
"They ought to have picked it up but I do not know what the circumstances were. But when we arrived, the situation was quite dire.
"I cannot think of any basis of not having a contract. However, I do not know what the approach was," he said.
The AGSA took over the auditing of SAA in the 2016/17 financial year.
Prior to that, the audits were handled by PricewaterhouseCoopers (PwC) and Nkonki. From 2012/12 onward, the entity received consecutive clean audits from the private firms.
"Is the financial state SAA was in - in the 2016/17 financial year - reconcilable with the clean audits given for five years," Zondo asked the witness.
"Chair, on whether the opinion was valid - these were credible firms and they were not found to have any challenges through the quality [of auditing]. However, we did identify errors in the previous years' statements that were corrected.
"Chair, I do not know if the previous auditors were able to identify the errors or not. What I do not want to do is to speculate," the witness responded.
The witness is expected to delve into the role the private firms played when they were doing the joint audit of SAA as well as what the AGSA found following the five years of audit work, from 2012 to 2016, during which the entity was given clean audits.
The inquiry continues.