ALL around us are failing state owned enterprises (SOEs) in an era where the administration of President Cyril Ramaphosa was touted as one which would “clean up” the corruption inherited from the Zuma era. But alas! Wednesday was proclaimed to be the worst financial health of our SOEs. The Auditor General Kimi Makwetu announced the worst audit outcomes for SOEs ever. “None of the SOEs managed to obtain a clean audit opinion, with the Post Office slipping back to a qualified audit opinion & the Development Bank of Southern Africa regressing from a clean audit in 2017-18 to a financially unqualified opinion with findings in the year under review,” he said.
The auditor general’s report further says: “The overall audit outcomes of the SOEs regressed when compared to the previous year and significantly regressed over the last five years. Confidence in the ability of the executives tasked to manage the affairs of SOEs has similarly regressed over the past years. Turnaround plans initiated almost on an annual basis had almost no impact in restoring the SOE environment, as executive and management instability makes it impossible to hold those responsible accountable’ he said.
It wasnt even 24hrs later that Makwetu’s contention regarding the inability of executives tasked to manage SOEs and the inability to hold them responsible was displayed in front of parliamentarians when the Passenger Rail Agency of South Africa (Prasa) appeared before the Standing Committee on Public Accounts (Scopa) on Wednesday.
What emerged was nothing short of a scandal which, if we lived in a country serious about serving its people and not one in which comrades served each other, those responsible would be fired.
Scopa heard that the Prasa interim board, which was appointed in March 2018 by the former Transport Minister Blade Nzimande, had flouted all corporate governance processes. The agency did not maintain complete governance records, including minutes of board meetings and those of its subcommittees and the executive committee.
The public accounts body heard that the Prasa board held several meetings during the year under review but there were no minutes and the resolutions taken could not be established but the board members were remunerated for the attendance of the meetings. The net effect was a negative impact on the audit which had resulted in the Auditor General giving a disclaimer opinion: “Prasa did not maintain complete governance records, including minutes of meetings of the board, sub committees and executive committee. This has had a negative impact across the audit as resolutions and decisions taken could not be confirmed, including those taken subsequent to year-end”.
A disclaimer is given when the institution being audited gives insufficient documented evidence to enable the auditor general to form an opinion. The AG said Prasa’s audit outcome for the current financial year has regressed to disclaimer after two financial years of a stagnant position of a qualified audit opinion with findings. He said Prasa had failed to comply with supply chain management legislation when awarding contracts for large infrastructure related projects which continued to trigger irregular expenditure resulting in Prasa being consistently ranked as one of the top offenders with regards to irregular expenditure in the public sector.
The interim board has blamed the mess on the previous board and executives but Scopa would have none of it. The members of parliament (MPs) made it clear that this interim board was there at the time when documentation required by the AG was not provided. They said the board should take responsibility.
Makwetu found Prasa had inadequate accounting records, an unconvincing fixed asset register as there was no information to support the assets. “Some assets were not recorded in the asset register, while others were registered but could not be verified,” Makwetu said. For 2018 financial year, the AG said he could not get sufficient audit evidence for fare revenue or revenue by alternative means.
“Board, you got a disclaimer, you’re a mess – a total mess,” said the head of Scopa Mkhuleko Hlengwa – a statement which even Transport Minister Fikile Mbalula could not disagree with.
ANC MP Mervyn Dirks said where he came from, a disclaimer opinion from the AG was cause for an immediate dismissal. He said Mbalula must take action against the interim board or face Scopa. But will he or can he?
It was also recommended that he appoints a permanent board, a question I put to his spokesperson Ayanda-Allie Paine just over a week ago. I asked when the Minister would announce the permanent board and when the contract for the general overhaul (GO) of trains would be announced given that the winning bidder was supposed to have been announced in February this year. To both questions, she said she would get back to me but hadnt done so by the time this article was published.
Service providers who entered into contracts with Prasa for the previous GO tender and have submitted bids for the current tender, have been in limbo as the interim board’s tenure has expired and not many decisions are being taken. Some of the companies I spoke to on condition of anonymity have had to pay staff for doing nothing while waiting for the outcome of the tender and others have had to lay-off staff as a result of the delay in the announcement of the winning bidder.
Mbalula in media reports, said there had been improvements in the rail passenger service since the inception of the war room project launched in August. He said the overall performance of trains arriving on time had increased and there had been no fatal crashes since inception.
There have been three suspensions out of 30 executives implicated in wrongdoing, Scopa was told. On the upside perhaps, there have been appointments made in recent months including filling the position of chief financial officer – a position that was vacant since 2014.
But there’s the big question of when a permanent board will be announced for the stability of the Prasa. Scopa recommended it be done expeditiously. We wait and see.