Auditor-General Kimi Makwetu released the audit results of the country’s national and provincial departments and their entities for the 2017-18 financial year in Cape Town. Picture: Elmond Jiyane/GCIS

CAPE TOWN – The finances of state-owned entities had deteriorated and remained a risk to the economy, auditor-general Kimi Makwetu warned yesterday.

Makwetu's comments echoed Finance Minister Tito Mboweni's concerns raised in the  Medium-Term Budget Policy Statement last month.

The MTBPS flagged Eskom, SAA, Transnet and other SOEs as risks to the economy. In the audit outcomes report on the performance of SOEs, national and provincial departments, Makwetu found that the finances of the state entities had deteriorated. “The irregular expenditure of the SOEs we did not audit amounted to R28.4 billion, which included R19.6bn at Eskom and R8.1bn at Transnet,” said Makwetu. 

The SABC remains a going concern and has requested a guarantee of R3bn to stay afloat. The SABC is expected to suffer a loss of R803 million in March after it incurred a loss of R622m in the past financial year.

Makwetu also raised concerns about the state of SAA, SA Express and Denel. The three entities did not submit their audited financial results in Parliament because of going concern issues.

The irregular expenditure for the audited SOEs was R1.9bn and this was expected to rise significantly when the irregular expenditure of Denel, SAA, SA Nuclear Energy Corporation and SAX was included. 

Makwetu warned that ministers and boards of SOEs must keep an eye on the financial performance of their entities. “If they don't play oversight the ones in management teams do different things. That leads to the deterioration of things. This is where the leadership plays a role.” 

The auditor-general also said the SABC, PetroSA and the SA Post Office had expressed doubt whether they would continue in future without financial assistance.

Makwetu said SOEs played a key role in the economy and needed to be supported by the government, but at the same must be held accountable for how they used their money.

“There has been a number of positive changes to improve the oversight and governance of SOEs, including increased oversight by parliamentary committees and addressing the leadership challenges at board level.” 

Makwetu said the new powers from the Public Audit Act would enable him to deal with officials who failed to adhere to the Public Finance Management Act and National Treasury regulations. President Cyril Ramaphosa signed the new law on Sunday.