Gordhan’s hands full
ITS STATE-OWNED ENTITIES ARE ON THE LOOSE
The department of public enterprises manages Transnet, Alexkor, SA Express, Denel, Eskom and Safcol. And it has already filed its 2018 yearly report, even though Alexkor, SA Express, Denel and Safcol haven’t completed theirs.
The report doesn’t indicate the profitability nor the going-concern status of these state-owned enterprises (SOEs), disclosing only the “value” of its investment in each – which hasn’t changed in the year under review.
The state-owned enterprises’ strategic objectives, performance indicators, planned targets, and actual achievements set out in the report are meaningless, as they haven’t yet produced audited financial statements for 2018.
Disappointingly, the report also has no strategies to “overcome areas of nonperformance”.
Transnet – despite wasting billions on irregular, fruitless and wasteful expenditure, and suffering corruption – managed to make a R4.9 billion profit in 2018. It made R2.8 billion in 2017.
Irregular expenditure amounted to R8.1 billion (2017: R692 million), and fruitless and wasteful expenditure amounted to R23.5 million (2017: R22 million).
Total losses through criminal conduct amounted to R59.1 million (2017: R43.1 million). Auditors couldn’t verify the figures. There is material uncertainty as to whether Transnet can meet the going-concern test.
Power utility Eskom incurred a total comprehensive loss of R5.6 billion (2017: R6.4 billion); its current liabilities exceed current assets by R20.6 billion. Irregular, fruitless and wasteful expenditure amounted to R20.7 billion (2017: R4.4 billion).
The audit report said Eskom did not have “adequate internal control systems to identify, investigate and record all information as required by the PFMA [Public Finance Management Act]”. Minister Pravin Gordhan’s foreword to the department’s annual report was harsh: most SOEs are “on the brink of financial collapse and are operationally deficient because of state capture”.
Worryingly, government will be investing R368 billion in SOEs over the next three years; Transnet and Eskom will receive a significant share.
Surely, no SOE should receive a cent until they have a proper accounting system, efficient internal audit team, rigorous risk and governance controls ... and corrupt officials have been charged? There is some pie-in-the-sky dreaming in the report, in that South Africa can look forward to a “cost-effective electricity supply, and efficient freight logistics and port infrastructure.
“New energy capacity will be built, and ports and rail infrastructure will be upgraded”.
Gordhan is intent on “conducting forensics and ensuring consequence management” and boards and executive management will be held to account when performance standards, ethics and corporate governance collapse.
The new boards are to “address the malaise, the depth of corruption and criminal behaviour that seems to have become endemic in these institutions”. Appointing new boards is the first step. Gordhan has a tough task. Over the next year, we should see sluggish inept officials crumbling before his steely gaze and sharp questioning. Sadly, getting these zombie SOEs back on their feet will cost taxpayers dearly.