The government is exposed to guarantees of R328bn with several state-owned enterprises (SOEs) at risk of defaulting on their debts, which would put additional strain on the fiscus, auditor-general Tsakani Maluleke said on Wednesday.
The shambolic financial situation of most SOEs are a headache to the fiscus. Finance minister Enoch Godongwana has told them to “jack up their own capacity” and bring in the private sector if they want to receive bailouts from the state to boost their ability to invest in public infrastructure.
At the October medium-term budget policy statement Godongwana granted Transnet, Sanral and Denel a total of R33bn to repair their ailing balance sheets.
The government has also committed itself to taking over a significant chunk of Eskom’s R392bn debt.
Financial difficulties at these entities also disrupted the delivery of essential services such as electricity, payment of social relief grants, rail infrastructure and water supplies.
“Eskom is the single biggest fiscal risk to the National Revenue Fund, accounting for over 80% of government guarantees to state-owned enterprises,” said Maluleke.
“The audit revealed that most state-owned enterprises are still battling with going-concern challenges, with three having disclosed material uncertainties about whether they would be able to continue operating,” the auditor-general said in a statement released soon after tabling her consolidated general report on national and provincial outcomes for 2021/2022.
These are the Independent Development Trust (IDT), Land Bank and Agricultural Development Bank, as well as SA’s public broadcaster, the SABC.
She said the SA Post Office (Sapo) and SA Nuclear Energy Corporation received modified audit opinions because they did not have sufficient evidence to show that they would be able to continue operating.
“Their continued going-concern challenges, coupled with successive losses, indicate that their turnaround plans are either not effective or not fully implemented,” she said.
“State-owned enterprises should not rely on government bailouts because they are expected to implement sustainable turnaround plans that will ensure creation of public value.”
The SA National Road Agency (Sanral) set out to upgrade, refurbish and maintain 7,995km of road but only 744km has been seen to in three years.
She said the Passenger Rail Agency of SA (Prasa) intended to modernise 33 railway stations and “none have been achieved” since 2019.
Maluleke said of the nine provinces audited, the Western Cape performed the best with 17 clean audits, 15 of which were consistent over the past three years. She said the “robust control environment” in the Western Cape showed “a solid and consistent pattern of good financial governance”.
She reported “timeous submission of quality financial statements by all auditees, except for Wesgro, which was qualified due to asset management issues”.
In Gauteng, 65% of the financial statements were free from material misstatement but she remained concerned about procurement, contract management and performance.
The auditor-general was heartened by four Eastern Cape entities’ upgrade to clean audits. This record eleven clean audits amounts to only 52% of the province’s auditees.
The Free State rose from no clean audits in 2018/2019 to three in 2021/2022.
Clean audits were issued to 13 entities in KwaZulu-Natal, which account for 11% of the province’s budget.
Limpopo backslid from the previous financial year, with the transport and community safety among those departments in the province that came short.
Mpumalanga’s auditing outcomes stagnated “largely because provincial leadership failed” and six auditees — that is 38% — filed credible financial statements.
Mpumalanga health, education, public works, roads and transport scored unqualified audits because they were allowed to make corrections.
Clean audits in the Northern Cape rose from two in 2018/2019 to four in 2021/2022 including the premier’s office and provincial treasury while only one entity in the North West obtained a clean audit.
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