A South African Airways flight takes off. (Photo: SAA) “As the minister responsible for SAA, I am not happy to have any entity under my authority that receives a disclaimer audit opinion... and it is beyond unacceptable to have repeat disclaimers,” Transport Minister Barbara Creecy explained to the parliamentary portfolio committee on transport in her opening statements.
The candour and admission came as a bit of a shock to committee chairperson Selelo Selamolela, who was actually asking if there were any absentee apologies from the department’s side – notably the director-general, who was in the simultaneous standing committee on public accounts session with Transnet.
Another revelation from the presentations was made by South African Airways board chair Sedzani Mudau, who described the resignation of outgoing group CEO John Lamola as something “that we did not anticipate”.
However, the chair emphasised that despite the unexpected nature of the resignation, the organisation had strong internal talent to rely on, allowing them to promptly appoint an interim CEO from within the group to maintain stability.
This does fly somewhat in the face of Lamola’s own statement that he resigned “for personal reasons following months of contemplation and discussions with both the Minister and the board”.
Not out of the woods
Speaking of the outgoing CEO, Selamolela did make a note that Creecy and Deputy President Paul Mashatile were both cleared by the Public Protector of any wrongdoing in Lamola’s appointment.
But that is in the past now. Today was all about the state of SAA’s finances and a litany of Auditor-General disclaimers, perhaps most damning being a conclusion that “SAA is a going concern with material uncertainties,” warning that the entity faces significant conditions that could threaten its survival within the next 12 months.
/file/dailymaverick/wp-content/uploads/2024/10/Barabara-Creecy-4822.jpg "Minister of Transport Barbara Creecy. (Photo: Phando Jikelo / Parliament of SA)")
The situation was described as being even more opaque at SAA Technical, where the AG stated:
“We are unable to confirm whether it’s a going concern... Reason number one is that the financial statements, they were so severe that we could not even audit most of the things.”
Among the chief challenges is what the AG team said of the quality of financial documentation… which is “severely compromised”. The AG also corroborated Daily Maverick’s reporting on the nature of the profit the group achieved. Except, of course, for the misunderstanding around the R1-billion in shares, which Lamola did correct in his statement.
Key to the AG presentation was an admission that all the audited entities (even the much-lauded Air Chefs, helmed in the previous financial year by incoming group CEO Matshela Seshibe – who was on hand to give an abridged overview of SAA’s financials after a thorough case by the auditors) “submitted … inferior quality financial statements for at least a period of seven consecutive financial years”.
The presentation added that, “record management and the quality of the source documentation with regards to the audit… it remains something that is of a significant concern”.
Growing concern
It was, however, the statements about irregular expenditure that are most concerning and painted the bleakest picture of the empire Lamola leaves behind.
The AG reported a significant rise in irregular, fruitless and wasteful expenditure. This was largely driven by payments made on expired contracts and transactions with suppliers who had no formal contracts in place.
A critical driver of these financial failures was said to be “a culture of impunity”.
To quote the AG team:
“The major cause for irregular expenditure is due to the lack of of consequence management. Hence, employees are not following disciplined processes.”
A further observation, that “people are free, to some extent, to not follow the discipline processes because they know that there [aren’t] any accountability mechanisms that are in place to hold them accountable”.
It was probably this part of the assessment that inspired committee member Stanford Gana to call for an immediate escalation to SIU investigations and Scopa hearings so that “we can see orange overalls for those responsible… Because people spent the money, not machines”.
Creecy responded by calling for calm and giving the current management team an emphatic vote of confidence to continue into the next audit and show positive results.
One can only give the minister the benefit of the doubt as the Department of Transport wrangles all the demons in its portfolio of SOEs. Maybe there will be a silver lining to these dark clouds. DM