More than 18 months after the top of the monetary 12 months, a number of state-owned companies or enterprises (SOCs or SOEs) haven’t but revealed their results for the monetary 12 months to finish March 2021.
These embody the SA Post Office, PetroSA, Denel and Alexkor, whereas South African Airways (SAA) solely not too long ago revealed its 2018 figures.
In distinction, listed companies with March or June year-ends have all revealed their annual stories for the 2022 monetary 12 months; the JSE and shareholders count on to see results three months after year-end. Some SOEs have additionally already revealed their 2022 results, akin to Eskom, which is reliant on non-public traders buying their bonds to make sure funding.
Disarray
It is not any coincidence that the 5 state companies which can be derelict on this crucial side of company governance are in disarray. The rot begins when managers and administrators cease counting and begin hiding figures from stakeholders.
The declining fortunes of SAA proved this. It was finally put in enterprise rescue. Unfortunately, even now, taxpayers do not know of the monetary efficiency – and the extent of the corruption – over the last 4 years.
Read: The Zondo Report on SAA, SAAT and SA Express
SAA’s board did difficulty an announcement about its monetary stories not too long ago when it criticised the Auditor-General (AG) for making public statements concerning the airline’s lack of governance.
“The proven fact that the 2017/18 audited monetary statements had been finalised in 2022 just isn’t unreasonable given SAA’s historical past of not being a going concern on the time of the audit and SAA’s subsequent entry into enterprise rescue in 2019.
“Annual financial statements for the 2018/19, 2019/20 and 2020/21 financial years have been prepared, but external audits were not conducted as the airline was in business rescue,” it mentioned.
“The 2021/22 annual financial statements are currently being prepared and will be submitted timeously to the AG for audit.”
The argument that SAA couldn’t publish its results because it was not a going concern, and was waiting for authorities funding to make sure its standing as a going concern, was additionally put ahead by SAA’s earlier administration.
This argument is invalid. A steadiness sheet offers the monetary standing of an enterprise at a selected date and the revenue assertion reveals its efficiency throughout its monetary 12 months. Whether a going concern or not is irrelevant.
PetroSA
PetroSA confirmed to Moneyweb – a number of weeks in the past already – that it accomplished its financials for the 12 months to March 2021 and is awaiting the auditor’s report.
The figures for the 2020 monetary 12 months point out that the entity can be struggling to outlive. At least administration is sincere about its issues.
Chair Frans Baleni says within the 2020 annual report: “Without portray an unnecessarily gloomy image, you will need to state upfront that the business-as-usual method is not going to be of any assist if we hope to efficiently flip round this firm right into a sustainable enterprise.
“Any hope for a greater future requires an sincere appraisal of the present state of affairs, new mindsets, and sturdy inner engagements to map out a brand new path for the corporate. PetroSA is at present at a crossroad, a essential level within the firm’s historical past.
“We collectively need to do every little thing inside our powers to avoid wasting PetroSA and preserve it afloat or we’ll sink collectively. Primarily, the pure fuel wells, which for greater than twenty years had been a steady and cost-effective provider of pure fuel feedstock to our gas-to-liquid refinery in Mossel Bay, are near the top of their operational lives.
“This constitutes a severe risk to the sustainability of the present working mannequin within the absence of any reasonably priced different feedstock.
“Unfortunately, the prices of different feed shares are disproportionally greater than the price we’re used to and will increase our already excessive operational prices even additional.
“Issues of governance and leadership instability in the organisation have not helped to change the status quo and shift the business trajectory in the right direction.”
Read: PetroSA seeks CEO to guide revamp in SA
PetroSA reported a lack of R5.6 billion within the 12 months to March 2020 in comparison with a lack of R2.1 billion the earlier 12 months, whereas the AG famous in his report that the monetary place is “an area for concern”. Total group property decreased to R14.4 billion and internet asset worth fell to a destructive R4.5 billion.
SA Post Office
The SA Post Office is one other huge SOE that did not publish its annual report on time and one other with administration admitting to failures.
Chair Tia van der Sandt famous within the 2020 annual report that the Post Office skilled instability inside the management of the organisation.
“The place of CEO grew to become vacant in July of 2019, adopted by the suspension of the appearing CEO in December 2019 following a whistle-blower report. The key place of CFO has not been stuffed on a everlasting foundation and the COO place additionally doesn’t have a everlasting appointment. Key essential vacancies haven’t been stuffed.
“The SA Post Office has a status for its lack of ability to implement strategic initiatives. Capital injections have been utilised with out marked enhancements in monetary losses 12 months on 12 months.
“In addition to the above, a majority new board was appointed by the minister in the third quarter of the financial year, resulting in insufficient time to address key strategic issues,” says Van der Sandt.
The report states that the entity has an unsustainable value base, constructed up over time “without proper consideration for a workable operating model”.
“This as a result of years of growing losses that deplete cash reserves, which in turn have operational consequences resulting in the inability to implement initiatives,” says Van der Sandt.
The AG mentioned in his report that he couldn’t categorical an opinion on the consolidated and separate monetary statements of the group due to the importance a number of issues. His record of issues as regards to governance inside the SA Post Office runs to eight pages.
It consists of gems like: “I was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.”
The Post Office incurred losses of R1.77 billion for the 12 months to finish March 2020 and present liabilities exceeded present property by almost R1.5 billion.
“The group and company were therefore commercially insolvent because they were unable to pay their debts as and when they were due, even though their total assets exceeded their total liabilities,” says the AG.
Denel
It isn’t a surprise that Denel fails at company governance too.
It has been within the information for years for all of the fallacious causes, akin to the shortcoming to pay salaries, failure to pay pension fund contributions and tax, and even utilizing cash that staff had voluntary saved themselves for year-end bonuses – whereas requesting taxpayer-funded bailouts.
Denel introduced on 11 August that the excellent salaries of present and former staff had been paid.
“All excellent salaries owed to staff of Denel have now been absolutely paid.
“We are happy to report that this course of has been accomplished. We even have cost plans in place for Sars (PAYE) and the pension fund.
“This demonstrates our commitment to the welfare of our employees and the high value we place on sound labour practices,” says Gloria Serobe, chair of Denel.
The money to pay the excellent salaries was obtained from extra funds within the Denel Medical Benefit Trust.
The belief was established in 2002 to make sure that Denel meets its medical help obligations in the direction of staff who joined the corporate earlier than 2002.
Serobe says a brand new restructuring plan is supported by the federal government and can create a self-sustaining enterprise with a major order pipeline.
However, the 2020 annual report painted a bleak image. “The 2019/20 monetary 12 months proved to be one other difficult 12 months for Denel, with a complete complete lack of R1.962 billion for the 12 months, in comparison with a lack of R1.469 billion (restated) within the earlier 12 months.
“This net loss can primarily be attributed to a delay in sales, an inefficient cost structure and poor programme execution. Denel has further been negatively impacted on by reduced margins due to labour under-recoveries as a result of lower operational activities and little to no production activity,” in accordance with the report.
It additionally reported that Denel obtained a R1.8 billion bailout from authorities, which went to pay long-overdue collectors, settle debt and restart operations that had slowed down considerably as a consequence of some suppliers requesting upfront funds.
“Despite the recapitalisation, Denel’s cash flows from operations remained negative at R811 million in delayed deliveries to customers due to poor contract and working capital management,” famous administration.
The report additionally disclosed that R3.2 billion of the whole debt of almost R3.7 billion on the finish of March 2020 was unconditionally assured by authorities. Denel spent R614 million on curiosity then, when rates of interest had been a lot decrease than at present.
Read:
The AG didn’t categorical an opinion on the consolidated and separate monetary statements of Denel for the 2020 12 months, itemizing 10 pages of issues.
“I’m unable to acquire enough and applicable audit proof to assist some of the important thing assumptions included within the administration’s going concern evaluation. Therefore, I’m unable to substantiate whether or not it’s applicable to arrange the consolidated and separate monetary statements utilizing the going concern foundation of accounting.
“The group did not include all irregular expenditure incurred in the notes to the consolidated and separate financial statements. This was because the group did not have adequate controls to maintain complete records of irregular expenditure” mentioned the AG.
The AG went additional: “I was unable to determine the full extent of the misstatement of the irregular expenditure disclosed at R3.19 billion (2018/19: R2.9 billion and 2017/18: R2.55 billion)” as a result of “it was impracticable to do so”.
Alexkor
It will be argued that the worst of the lot is Alexkor.
How troublesome can or not it’s to put in writing up the annual monetary statements for a small diamond mine?
Read: Alexkor teetering on the brink
Management did not publish results for the 12 months to finish March 2020, regardless of admitting the significance thereof to its shareholder (authorities), potential traders, National Treasury, main contractors, diamond entrepreneurs and the Richtersveld neighborhood.
“The report may also interest other stakeholders wishing to make an informed assessment of Alexkor’s ability to create sustainable value over time,” the administrators mentioned within the 2020 report.
In that 12 months, income declined by 19% to R170 million from R209 million within the earlier 12 months as results of vital declines in carat manufacturing and subsequently carat gross sales.
Production declined from greater than 48 000 carats to lower than 29 000 carats, which means that Alexkor misplaced out on rising diamond costs throughout this era.
Alexkor reported a lack of R109 million in 2020, with administration saying that materials uncertainties solid vital doubt on the corporate’s capability to proceed as a going concern as a consequence of its historical past of losses.
Once once more, the AG couldn’t give an opinion on the monetary statements as he had “not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion”.
The workplace of the AG additionally famous that Alexkor didn’t adjust to tax laws in that it didn’t submit an revenue tax return for the 2020 monetary 12 months, nor VAT returns.
Alexkor didn’t pay all PAYE quantities to Sars inside due dates and didn’t submit a royalty tax return for 2020.
