SAA’s finances still turbulent
• Issues have to be dealt with if the airline is to be a going concern. auditor-general’s office warns MPs
Though SAA managed to table four financial years’ of annual reports and financial statements to parliament before the end of last year, the office of the auditor-general (AG) remains concerned about problems hindering the airline’s ability to guarantee continued operations as a going concern.
That’s the grim warning to parliament’s portfolio committee on public enterprises by officials from the office of the AG on Wednesday after the national carrier tabled annual reports and financial statements for 2018/19, 2019/20, 2020/21 and 2021/22 in December last year.
The reports showed that during the four financial years, SAA suffered a loss of R23.5bn with fuel, employee compensation, aircraft leasing, accommodation and refreshments among the biggest cost items.
AG head of portfolio Thami Zikode said told the committee that while material uncertainty did not necessarily mean SAA would return to business rescue, certain issues had to be dealt with if it was to be a going concern.
“All those audit opinions are disclaimed. And yes, we are saying a disclaimer is an opinion, but when you look at the report, we are saying we cannot form an opinion because we could not access the financial statements we needed.
“And this is the worst audit opinion you can get,” he said.
Senior manager at the AG’s audit office Thato Kunene said the root cause of the disclaimer was inadequate monitoring and oversight due to the lack of effective governance structures and instability in leadership.
He also blamed the impact of the business rescue process, weaknesses in the control environment, inadequate policies and procedures, and a lack of proper record keeping and audit action plans to address previous audit findings.
“The audit outcome[s] for SAA subsidiaries are similar to those of the holding company and they present a regression from a qualified audit opinion to a disclaimed audit opinion, with exception of Mango, which was disclaimed in 2017/18.
“The outcome is also mainly attributable to material misstatements in the financial statements submitted for audit, material findings on compliance with applicable legislation, as well as material findings on the audit of predetermined objectives,” Kunene said.
He added that SAA’s ability to continue as a going concern was affected by slow progress in an expansion plan and continued dependency on funding from the government to finalise the business rescue plan.
Uncertainties about the finalisation of the government’s sale of a 51% stake and the expected capital investment from the equity partner were also raised.
Kunene said the AG was not comfortable with the status of SAA’s Mango unit as a going concern because the budget airline’s business rescue plan remained unimplemented.
“There was a time when we were called before the committee and we were told the board was running away. But that was because we were trying to find that information and it had become difficult to retrieve,” deputy minister of public enterprises Obed Bapela said.
SAA interim chair Derek Hanekom said the national carrier’s 2022/23 report was with the AG as management continued to work on resolving legacy matters and planning the airline’s future.
“From my point of view ... the board will serve until the equity partner is on board. This board has served for 10 months. The financial statements are not a pretty picture. The AG has done what they need to do and they are correct. We are not disputing that,” Hanekom said.
“This board has worked hard to get to the point where these reports could be presented.
“We are submitting the corporate [plan] for the five years ahead, starting on April 2024; we are submitting it today [Wednesday] as required by the Public Finance Management Act. And the AG is correct, once you have a plan on the table, the implementation should be monitored by the shareholder.”