The auditor-general (AG) has laid bare the rot within state-owned carrier South African Airways (SAA), saying the group is weighed down by “inferior” financial statements, revenue leakages, significant internal control deficiencies and billing inefficiencies.
A team from the AG’s office briefed parliament’s portfolio committee on transport on SAA’s audit outcomes for the 2024/25 financial year.
SAA and its subsidiary SAA Technical (SAAT) received a disclaimer with findings during the period under review. A disclaimer means auditors could not obtain sufficient evidence to form an opinion, signalling that financial statements were so bad they could not be relied on.
Another subsidiary, Air Chefs, improved from a disclaimer to a qualified opinion with findings. Mango, which is currently under business rescue, and another subsidiary, Share Trust, had outstanding audits.
Business Day reported in February that the SAA group made a net profit of R155m in the year to end-March 2025 and the SAA airline a R30m profit for the same period.
This marked the second year of profit for the airline since it exited business rescue in April 2021. SAA generated revenue of R8.8bn, a 35.89% year-on-year increase on the R6.5bn generated in the 2023/24 financial year.
SAA’s cash and cash equivalents position stood at R1.9bn at the end of the reporting period. The airline had no interest-bearing borrowings at year-end and R6.6bn in equity.
However, the AG team told parliament the SAA group posted annual irregular expenditure of R474m (2023/24) and R504m (2024/25), while annual fruitless and wasteful expenditure stood at R1m (2023/24) and R2m during 2024/25.
On Tuesday, the senior manager at the AG’s audit office, Thato Kunene, said it was worrisome that the SAA and SAAT audit outcomes had remained stagnant for seven consecutive financial years.
This reflected a concerning lack of progress, and the stagnation was largely attributable to a weakened control environment across the entities.
“At SAA, although a disclaimer of opinion persists, the audit has progressed from prior outright limitations of scope arising from non-submission of information to disagreement-based qualifications in certain areas. This reflects a partial improvement in the quality of financial reporting,” Kunene said.
He said SAAT continued to represent a high-risk environment that required urgent intervention from governance structures. These issues identified reflect systemic process and control deficiencies rather than isolated incidents, indicating pervasive weaknesses across the organisation, Kunene noted.
Key controls and process deficiencies identified included billing inefficiencies and revenue leakages. There were significant delays exceeding 90 days in invoice processing due to weak internal controls and poor co-ordination between operations and the finance function.
There was also a late submission of billing documentation, resulting in incomplete audit trails and reduced ability to substantiate charges. Kunene said there was insufficient monitoring and tracking of the inventory usage within the production environment, limiting accountability over stock movement usage within production environments.
“SAAT continues to process payments for goods and services without obtaining adequate proof of delivery,” Kunene said, adding that the group’s financial statements had been of inferior quality for seven consecutive years.
“Reports submitted to us had material issues relating to lost and mishandled baggage. Operating profit ... errors in annual performance reports erode accountability, lead to poor decision-making based on unreliable data, undermine public trust, and can result in a general inability to achieve strategic goals,” he said.
Kunene noted, however, that the group’s revenue had been increasing significantly, and that it had no long-term loans.
It was recommended the group should develop and enforce a records management policy, digitise critical manual records and provide staff training to ensure systematic backup and compliance.
The board needed to ensure that the loss control function was established for all entities as required by the Public Finance Management Act. Management, under the oversight of the audit committee, needed to initiate a comprehensive review of operational processes to assess the potential for revenue leakages.
Comprehensive policies and standard operating procedures needed to be developed across all business areas to ensure consistency, accountability and operational efficiency.
SAA acting group CEO Matshela Seshibe said: “We are not disputing the [AG’s] figures. We are all accepting the outcomes; it’s all really about what we are going to do next. We have highlighted the areas where there was misalignment and disagreement. At the end of the day the action plans are going to talk in ensuring those numbers agree.”
During 2024/25, approval was granted to SAA to increase its fleet to 21 aircraft. By the end of the 2024/25 financial year, 14 of these aircraft were in service, serving 16 destinations. Currently, the airline flies 19 aircraft.
SAA has rebuilt its network to 17 routes. In April 2024, it resumed flights to Perth, Australia. It also launched international routes to Lubumbashi (Democratic Republic of Congo) and Dar es Salaam (Tanzania).
Business Day
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