Eskom Puts South Africa's Finances at Risk: Auditor-General

(Bloomberg) -- The finances of Eskom Holdings SOC Ltd., Transnet SOC Ltd. and other companies owned by South Africa’s government have deteriorated to such an extent that they now pose a significant risk to the nation’s finances, the auditor-general said.

“State-owned companies are not applying proper accounting controls and the ministries responsible for oversight of these entities” are not doing a proper job, Kimi Makwetu told reporters in Cape Town on Wednesday.

The Trans-Caledon Tunnel Authority, Alexcor Ltd. and Broadband Infraco were also identified as being in parlous financial states, while there were doubts that the South African Broadcasting Corporation, PetroSA, and the South African Post Office could continue operating without government assistance, Makwetu said. He expressed concern that audits still had to be undertaken on South African Airways, SA Express and armaments group Denel SOC Ltd.

Key highlights of the Auditor-General’s annual report on government departments and state-owned companies:

• Just 23 percent of national government departments obtained clean audits in the year through March, down from 30 percent the year before.
• Unauthorized expenditure rose 38 percent to 2.1 billion rand ($151 million), while fruitless and wasteful expenditure surged more than 200 percent to 2.5 billion rand.
• Government entities incurred 51 billion rand in irregular expenditure. That excludes 28.4 billion rand in irregular expenditure by state-owned companies that aren’t audited by the Auditor-General.
• Contracts worth 6.5 billion rand couldn’t be audited due to missing or incomplete information.
• National and provincial government departments are facing an increased risk of litigation, with almost a third of them facing claims exceeding 10 percent of their next year’s budgets. The claims aren’t budgeted for, meaning the successful ones will have to be settled using funds earmarked for other purposes, Makwetu said.

To contact the reporter on this story: Paul Vecchiatto in Cape Town at pvecchiatto@bloomberg.net

To contact the editors responsible for this story: Karl Maier at kmaier2@bloomberg.net, Mike Cohen, Ana Monteiro

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