The commission of inquiry into state capture will on Thursday question how auditors as watchdogs did not pick up the alleged corruption, looting and potential state capture at state-owned enterprises (SOEs), specifically South African Airways (SAA).
The chairperson of the commission, Deputy Chief Justice Raymond Zondo, will on Thursday hear aviation-related testimony from PricewaterhouseCoopers (PwC) auditor Pule Mothibe.
Evidence leader at the commission, advocate Kate Hofmeyr said it was important for the commission to ask the question how private auditors PwC and Nkonki failed to pick up alleged corruption, looting and potential state capture at SAA for a period of five years before the auditor-general of South Africa (AGSA) took over the auditing of the SOE in 2017, finding its finances in a “shambolic” state.
Hofmeyr said Mothibe was an audit partner at PwC from 2014 to 2016.
She said auditors have a particular role to play in the public sector, which is to assess the levels of an SOE’s compliance with legislation and the public finance management act (PFMA), which sets the test for regular procurement at SOEs.
The evidence leader said the question the commission will deal with during Mothibe’s testimony is whether PwC and Nkonki had properly discharged their obligations while auditing SAA.
The first aspect of Mothibe’s evidence is expected to deal with the four latter years of PwC and Nkonki’s joint auditing contract at SAA when the two firms were appointed without procurement processes being followed, against the advice of the SOE’s bid adjudicating committee as well as legal advice, said Hofmeyr.
Mothibe’s testimony will also explore why both firms had joint business relations with SAA officials and made payments 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 that approved the payment of auditing fees paid to auditors, said Hofmeyr.
Hofmeyr said another question that would be dealt with is why not one of the transactions which had flags indicating it may be fraud, corruption or possible state capture had not been identified as reportable irregularities by the two auditing firms, adding that a failure by auditors to adhere to the obligation to report reportable irregularities is a crime.
The commission will have to determine whether in any way the alleged corruption, fraud and state capture at SAA was facilitated by its auditors due to the latter’s negligence or “something more sinister”, Hofmeyr said, adding that even if it was due to negligence, “it is still important to expose that because public funds were used to pay them”.
Hofmeyr said the commission’s final recommendations could include that the AGSA audits all of the country’s SOEs, be better capacitated to do so or that the AGSA apply stricter measures when approving external firms to audit SOEs.
Watch the proceedings live courtesy of the SABC: