Categories: GovernmentNews
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2023-12-06 12:21 PM

South Africa’s SOE Financial Accountability

    • Audit Performance: The Auditor General's report reveals improvements in government entities' audits, with an increase in clean audits and a decrease in disclaimers. However, state-owned enterprises (SOEs) lag behind, with a notable number failing to complete audits, raising concerns about accountability and financial reporting.
    • SOE Financial Aid and Accountability: Despite receiving substantial bailouts from the government, many SOEs struggle with financial mismanagement. The article underscores the significant sums allocated to SOEs, particularly Eskom and South African Airways (SAA), and emphasizes the lack of dividends received, suggesting inefficiencies in their financial operations.
    • Need for Enhanced Oversight: The article stresses the critical need for greater transparency, accountability, and improved financial management within SOEs. It highlights the urgency for the South African government to implement stronger measures to ensure prudent financial oversight, minimize risks, and enhance accountability to protect public funds and promote sustainable growth.
By Miriam Matoma

In recent years, the South African government has allocated billions of rands in bailouts to support state-owned enterprises (SOEs), yet the effectiveness and accountability of these funds have raised significant concerns. The Auditor General of South Africa (AG) presented a mixed bag of results in its evaluation of the national and provincial government performances for the 2022/23 financial year, shedding light on both improvements and persistent challenges within the system.

The positive aspect of the AG’s report highlighted an increase in the number of public entities achieving clean audits, rising from 126 to 147, and a reduction in entities receiving disclaimers from 14 to five. This improvement, particularly in provincial governments, was lauded as a promising development by Busisiwe Mavuso, the CEO of Business Leadership South Africa. However, the spotlight turned to the disconcerting records of state-owned enterprises.

While certain regions, such as Gauteng and KwaZulu-Natal, showcased improvements in some of their entities, the number of entities failing to complete their audits escalated from 12 to 31. Alarmingly, a significant portion of these incomplete audits stemmed from SOEs, including South African Airways (SAA), Eskom, Denel, and Alexkor, resulting in no audit outcomes at all.

Further setbacks were noted in the Land Bank, transitioning from a clean audit to a financially unqualified opinion with findings, and the South African Broadcasting Corporation (SABC), regressing from a qualified audit opinion with findings to a disclaimed opinion. Remarkably, the only SOE that attained a clean audit was the Development Bank of South Africa (DBSA).

Addressing these concerns, Busisiwe Mavuso emphasized, “The performance of the SOEs remains a critical problem for our country, and the AG’s report underscores the necessity for accountability in their management and financial reporting.”

The AG’s report additionally revealed that a quarter of audited entities provided unreliable, incorrect, or insufficient evidence for their reported achievements. Notably, the Department of Health received four disclaimed opinions and encountered one outstanding audit out of ten.

The inadequate state of financial management within South Africa’s government institutions is a cause for apprehension, especially concerning the substantial financial injections allocated to these public organizations. Focusing on SOEs, Public Enterprises Minister Pravin Gordhan disclosed that over R230 billion had been channeled into SOEs as bailouts between 2018/19 and 2022/23. Astonishingly, a mere R1 million in dividends was received, coming solely from SA Forestry Company Limited (SAFCOL), indicating minimal returns on these investments.

Eskom, receiving the lion’s share of government bailouts amounting to R181.6 billion over five years, topped the list, with South African Airways (SAA) following closely behind at R37.1 billion in bailouts. Notably, Alexkor and SAFCOL were the only two SOEs that did not require state intervention, as highlighted by Gordhan’s report.

The financial breakdown of bailouts and dividends from 2018/19 to 2022/23 revealed a staggering contrast, underlining the urgency for a more robust accountability framework within these enterprises.

The ongoing challenges and inadequate financial management practices in SOEs continue to pose a substantial risk to South Africa’s economic stability. It remains imperative for the government to ensure greater transparency, accountability, and prudent financial oversight to safeguard public funds and drive sustainable growth within these crucial sectors.

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Miriam Matoma

Miriam is a freelance writer, she covers economics and government news for Rateweb. You can contact her on: Email: Twitter: @MatomaMiriam