PricewaterhouseCoopers’ (PwC’s) auditing obligations at South African Airways (SAA) on Thursday came under the spotlight at the commission of inquiry into state capture.
After the lunch adjournment, the commission heard how PwC’s auditing partner at the airline, Nkonki, in August 2015 paid a sum of R300 000 to Kwinana and Associates, an auditing firm owned by former SAA non-executive director Yakhe Kwinana, who was also the chair of SAA’s audit and risk committee.
The monies were supposedly meant for a fund that had been deregistered in 2011, the commission heard.
Evidence leader at the commission, Advocate Kate Hofmeyr did, however, accept that the commission could not determine whether the money paid by Nkonki to Kwinana’s auditing firm and ultimately into her personal account, was meant for the deregistered fund and had been paid to the former non-executive director against the intention of PwC’s partner.
Hofmeyr, however, questioned the witness at the commission, PwC auditor Pule Mothibe whether he would regard the “gratuitous” payment Nkonki had made to Kwinana’s entity as a compromise of its auditing partner’s independence when conducting its auditing work.
Mothibe responded by saying he would have sought advice.
Hofmeyr further asked Mothibe whether he would have been concerned by the payment if he had known that Kwinana had motivated that Nkonki receives SAA’s auditing work for the next five years, to which Mothibe said it would have been and he would have raised this matter.
Ahead of the lunch adjournment, the commission heard that Kwinana’s entity had entered into a joint business venture with PwC.
After the lunch adjournment, the commission heard that Nkonki had made a payment to Kwinana’s entity and that Mothibe had said in his statement to the commission that he was of the view that Kwinana should have declared the payments from the two auditing firms and recuse herself when decisions were taken to appoint the two auditing firms as this amounts to a conflict of interest.
Mothibe told the commission that it should have been Kwinana’s fiduciary duty for her to disclose the possible conflict of interest, which “would have been best practice”.
Mothibe, however, pointed out that PwC had not determined whether Kwinana had declared the payments and recused herself from the decision making process of appointing the auditing firms because it took comfort in that SAA had followed due process in awarding the auditing contract and that she, Kwinana, would not have had “excessive influence” on the committee which collectively appointed the auditors.
The chairperson of the commission, Deputy Chief Justice Raymond Zondo questioned Mothibe whether his response was suggesting that Kwinana needed not to have recused herself from the committee.
“No, I am not suggesting that chair,” Mothibe responded, later conceding that Kwinana should have recused herself from the committee and declared her dealings with PwC and Nkonki.
The commission also dealt with the awarding of a three-year R85.8 million catering contract to LSG Sky Chefs.
The board later took a decision to withdraw this contract and award it to SAA’s subsidiary Air Chefs following former SAA board chair Dudu Myeni‘s parliamentary appearance where she was grilled about the contract, the commission heard.
The board took the decision against legal advice that withdrawing the LSG Air Chefs contract could lead to financial loss to the airline, the commission heard.
Mothibe told the commission that when auditing, he viewed this decision as a business decision the board had taken to insource.
He accepted, however, that the withdrawal of the said contract should have “sounded an alarm” for failing to comply with the Public Finance Management Act (PFMA) but said at the time of auditing he did not have the full details he has come to learn of at the commission.
Mothibe is expected to conclude his testimony on Friday.