SAA grounded by maladministration
GOVERNANCE: DIRECTORS MUST BE HELD TO ACCOUNT
Auditor-general is commended for having carried out a proper audit.
SAA reluctantly published its audited 2016-2017 annual report in April 2018, as it was winding up the 2017-2018 financial year. The auditor-general (AG) delivered a damning qualified report, indicating “a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern”.
Perturbingly, the AG had finalised and signed off the report on December 8, 2017. Then finance minister Malusi Gigaba requested parliament to approve the delay in filing the report, citing “technical accounting matters” which hadn’t been resolved.
In a climate of no corporate governance, “technical accounting matters” can’t explain away the substantial restatement of financial figures, the inability to verify certain assets and values because of a lack of evidence and not meeting the going concern test.
The fact that the new board of directors spent four months delaying the publishing of this report meant they didn’t immediately start addressing critical concerns which are further eroding the business.
PwC and Nkonki, joint external auditors of the 2015-16 annual report, only identified R5.4 million irregular expenditure and R7.3 million fruitless and wasteful expenditure. They signed an unqualified report and were satisfied that SAA met the going concern test.
A new board was appointed in October 2017. They perhaps spoke too soon when they avowed to take “SAA to new heights and are dedicated to returning the airline to financial viability”. It will take much more. Tough decisions must be made and those responsible for running the airline into the ground should be charged.
On July 3, 2017 I wrote that the SAA was spiralling out of control and required at least R44.5 billion to wipe out the accumulated loss and the debt. SAA continued its downward trajectory, requiring constant government bailouts.
The current operating model can’t turn SAA around and produce enough cash flow to pay finance costs, let alone pay back debt. The business model isn’t the sole problem. SAA must urgently address the following:
Hold employees responsible for maladministration and theft to account. They shouldn’t be allowed to resign (with full pension benefits) before they’re charged;
Implement proper administration, asset management, financial, accounting, internal reporting and record-keeping systems;
Restructure the internal audit committee, hire competent staff, and introduce an internal training programme;
Overhaul procurement; implement proper control systems;
Introduce proper systems to monitor and control the loyalty programme; Abolish freebies, Introduce effective human resource management systems; and
Hold directors responsible for reporting on financial results within stipulated time periods.
Fixing SAA will take more than ad hoc government bailouts.
Curson is a CA(SA) with post graduate qualifications in tax and international tax.