Lack of accountability crash-lands SAA
One of the most important clauses in our Constitution is found in section 59(2). This guarantees public access to the sitting of parliamentary committees unless it is reasonable and justifiable to exclude them.
Last week, there was a strange series of events when committee members wanted a presentation by SAA (South African Airways) to be held in secret because some of the information contained in the presentation was considered commercially sensitive.
Unable to reach a consensus, the meeting was abandoned without the presentation being made. Later on, sense prevailed when the Treasury intervened and made the disclosures public. Sadly, the picture painted by the financial statements is even more dire than expected.
SAA’s projected losses ballooned to R5.7bn for the 2017 financial year.
The reasons advanced for this – fewer passengers and a strong currency – are fundamental business risks for an airline that should be tackled and contained.
Given that SAA is on its seventh turnaround strategy, it is difficult to imagine a change in its fortunes anytime soon when even the most obvious risks seem to be beyond the scope of management to address.
Perhaps what South Africans should focus on in the financial statements are the multiple instances of zero accountability.
The annual report indicates that SAA has received R19bn in bailouts to date, without much value accruing to the fiscus. Rather, the continued pattern of losses grows larger each year.
In this report, and others in the past, SAA has always disclosed details of its turnaround plan. More importantly, it prepares forecasts for each year that are agreed upon by all stakeholders.
However, these are then always spectacularly missed.
For 2017, the forecast loss turned out to be only half of the actual loss. There is also the question of who prepared the audit report.
During the past year, the auditor-general has quietly removed PwC and Nkonki as the auditors of SAA and conducted the audit in-house. The reasons for the change are made obvious in the 2017 report. The auditor-general identified no fewer than eight major misstatements in the 2016 financial statements, and the previous audit conducted by PwC and Nkonki for a fee of R19m was a glaring example of sheer incompetence.
The problem with audit reports of such poor quality is that far too many stakeholders – lenders, for example —rely on them. When it then turns out that the reports themselves are far from reliable, a perception of crisis is hard to avoid.
In this instance, simply removing PwC and Nkonki from the audit falls short of the type of accountability we should be demanding from auditors.
In less than a year, the auditor-general has had to exclude KPMG and Nkonki from its supplier list and also dismiss PwC from the SAA audit. The reality is that while our public sector entities suffer from a long-standing crisis of credibility, private sector entities are not much better. In the midst of this crisis, the auditor-general has stood tall as one of the last remaining institutions of integrity and accountability.
The release of the municipal audit outcomes this week reinforced the reality that a general lack of accountability continues to cost us all.
When irregular and wasteful expenditure balloons more than 70% over 12 months, we must surely look at new ways of doing things.
Strengthening the powers of the auditor-general to more than just recommendations for corrective action is now more critical than ever. And that’s just a first step.