The auditor-general is chasing R1.83bn in unpaid fees, raising fresh concerns over cash-strapped municipalities and failing state-owned companies.
Escalating debt owed to the auditor-general of SA (AGSA) by clients in the public sector reached R1.83bn at end-July, parliament’s standing committee on the auditor-general heard on Friday.
This marked a significant increase from R1.35bn recorded in March, underscoring persistent nonpayment by municipalities and state-owned enterprises (SOEs), and raising concerns about the sustainability of audit oversight in the public sector.
Led by accountant-general Shabeer Khan, the briefing outlined the composition of the debt, with R437m attributed to municipalities and R644m to SOEs.
Top defaulters named
Among the long-standing defaulters are:
- Denel (R82m)
- The SA Post Office (R63m)
- SA Express (R21m)
- Pelchem (R11m)
- Autopax (R6m)
- Mango Airlines (R2m)
Several of the entities are now in business rescue or liquidation, complicating recovery efforts and prompting consideration of write-offs.
In response to the growing arrears, National Treasury has invoked section 216 of the constitution, which authorises the withholding of funds from organs of state that breach financial management legislation.
This provision was operationalised in December 2024 when Treasury issued warning letters to 257 municipalities, resulting in the recovery of R460m.
Further enforcement occurred in March and July, when portions of the local government equitable share were withheld from non-compliant municipalities. Funds were released only on submission of proof of payment to AGSA and other creditors, compelling several municipalities to enter into payment arrangements.
Impact on services
While the committee welcomed these interventions, it expressed concern over the adverse effect on service delivery. Chair Wouter Wessels said the “withholding of equitable share allocations, though constitutionally permissible, must be balanced against the imperative to maintain essential services”.
The committee urged Treasury to explore alternative mechanisms for ensuring audit fee compliance, including improved budgeting practices and revised appropriation models that safeguard AGSA’s independence.
AGSA budget surprise
The presentation also highlighted AGSA’s consistent underestimation of its budget surplus, with actual surpluses far exceeding projections. In 2022/23, AGSA budgeted for a R27m surplus but realised R263m; in 2023/24, the budgeted surplus was R65m against an actual R370m.
Treasury recommended enhanced forecasting and consultation under section 23 of the Public Audit Act to ensure audit fees remain affordable and predictable.
The committee endorsed the collaborative monitoring framework between AGSA and Treasury, which includes tracking defaults, enforcing payment conditions and recommending write-offs for entities in liquidation. However, members cautioned that reliance on punitive measures alone may not yield sustainable compliance and called for systemic reforms in public financial management.
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