Annual report suggests Transnet’s wheels are coming off

The Transnet 2018 annual report shows the group to be in a precarious position, despite its press release dated August 20 proclaiming sterling results.

Transnet is limping along with inadequate internal control systems, scanty record-keeping and no proper procurement systems. Nor does it have appropriate risk management activities to prevent irregular expenditure or properly monitor supply chain management.

The external auditors, SizweNtsalubaGobodo, further identified a number of reportable irregularities. These include material misstatements in the annual performance report in regard to reported performance information, operational excellence and socioeconomic development outcomes. There was also a lack of audit evidence to verify performance achievements.

Irregular expenditure for the year was R8.1 billion, while the auditors could not ascertain if this amount was “complete or accurate”.

Fruitless and wasteful expenditure amounted to R23.5 million (2017: R22 million). Total losses through criminal conduct amounted to R59.1 million (2017 – R43.1 million). Procurement processes also often flouted Public Finance Management Act prescripts as in the previous year.

The qualified audit report places bilateral and syndicated loans amounting to R15.8 billion at risk of being withdrawn. This has raised uncertainty over whether Transnet is at risk of not meeting the going concern test.

The board of directors, who had not approved the financial reports prior to submission as required, were given a damning report: “They did not always exercise oversight responsibility regarding the prevention, identification and reporting of irregular expenditure, performance and compliance with related internal controls.”

The new audit committee has acknowledged “lapses in financial discipline”.

A Transnet statement on August 16 said letters of intention to place on suspension were served on Transnet CEO Siyabonga Gama, engineering chief executive Thamsanqa Jiyane and executive manager Lindiwe Mdletshe for possible misconduct.

– Moneyweb