State companies are bleeding South Africa dry – and barely keeping record

The South African government has been handing over billions of rands in bailouts to state-owned enterprises over the years – yet only a handful are bothering to complete their audits on time.

Last week, the Auditor General of South Africa (AG) delivered some good news in its assessment of national and provincial government performance for the 2022/23 financial year, with the number of public entities with clean audits rising from 126 to 147, whilst the number with disclaimers dropped from 14 to five.

Business Leadership South Africa CEO Busisiwe Mavuso said that the improvement in the performance of provincial governments was the best takeaway one could glean from the report – but the records from state-owned enterprises (SOEs) has left a lot to be desired.

While there are some positives – like Gauteng seeing improvements for five of its entities with only one regressing, and KwaZulu-Natal seeing nine improvements – the number of entities that had not completed their audits rose from 12 to 31, with a concerning number coming from SOEs.

South African Airways, Eskom, Denel and Alexkor had outstanding audits, resulting in no audit outcome at all.

Regressions were also seen in the Land Bank (from a clean audit to a financially unqualified opinion with findings) and the SABC (from a qualified audit opinion with findings to a disclaimed opinion).

Overall, the only SOE to get a clean audit was the Development Bank of South Africa (DBSA).

“The performance of the SOEs remains a critical problem for our country, and the AG’s report makes clear that accountability for their management and reporting on finances and performance is a key part of the failings,” Mavuso said.

Moreover, the AG reported that a quarter of auditees provided unreliable, incorrect or no evidence for the achievements they reported. For example, the Department of Health had four disclaimed opinions and one outstanding audit out of 10.

Nothing in return

The state of bookkeeping at the South African government is concerning, especially considering how much money is pumped into these public organisations.

Looking at SOEs in particular, public enterprises minister Pravin Gordhan recently said that over R230 billion has been given to SOEs in bailouts from 2018/19 to 2022/23 – with only R1 million given in dividend payouts from SA Forestry Company Limited (SAFCOL).

Eskom received the majority of the government bailouts, taking in R181.6 billion over the five years.

SAA was in second with R37.1 billion in bailouts, whilst only Alexkor and SAFCOL were the only two SOEs that Gordhan mentioned that didn’t need saving from the state:

source:State companies are bleeding South Africa dry – and barely keeping record – BusinessTech