R170 million wasted by state-owned enterprises

South Africa’s state-owned enterprises (SOEs) reported R169.91 million in fruitless and wasteful expenditure in 2024, with the actual figure likely far higher.

Finance Minister Enoch Godongwana revealed this figure in response to a recent Parliamentary question from DA MP Farhat Essack.

Essack asked the minister how the National Treasury will ensure accountability in SOEs, particularly with regard to fruitless and wasteful expenditure.

He further asked what specific interventions have been implemented to prevent the recurrence of financial mismanagement in SOEs, and requested a total breakdown of funds lost due to mismanagement in SOEs.

Godongwana explained that the Public Finance Management Act (PFMA) establishes a framework for financial management and accountability in the public sector.

This legislation delineates the responsibilities of the boards of public entities as accounting authorities and their corresponding executive authorities.

As shareholder representatives, these executive authorities are responsible for overseeing their public entities and ensuring the effective and accountable management of public funds.

They must also align public entities with national priorities and monitor their performance via shareholder compacts and key performance indicators.

Under the PFMA and its regulations, the relevant executive authority must investigate if the accounting authority or any of its members is accused of financial misconduct.

Following this, they must ensure appropriate disciplinary actions are taken if the allegations are proven.

“The National Treasury would then provide the necessary assistance to the relevant executive authority via various means, including proper interpretation of relevant provisions to support the investigation,” Godongwana explained.

Furthermore, the National Treasury is tasked with monitoring the financial health of SOEs, ensuring their operations are sustainable and that they do not pose undue risks to the fiscus. 

This involves assessing their financial statements, corporate plans, including capital structures, and overall performance to identify potential fiscal risks. 

Fruitless and wasteful

Godongwana explained that the National Treasury has taken several steps over the past few years to strengthen financial oversight at SOEs.

For example, in 2023, the National Treasury arranged a training workshop presented by the IMF regarding managing fiscal risks related to SOEs. 

In addition, the National Treasury issued Instruction No. 09 of 2020/21 in September 2020, titled ‘Minimum Criteria for the Consideration of Requests for Guarantees, Securities, Indemnities and Restrictions on Borrowing’. 

“These criteria ensure that any fiscal commitments are necessary, strategically aligned, and financially sound, thus strengthening financial oversight,” the minister explained.

The National Treasury also issued Instruction No. 4 of 2022/23, ‘PFMA Compliance and Reporting Framework’, to help accounting authorities with streamlined principles on identifying, recognising, and reporting irregular expenditure.

“In implementing the PFMA Compliance and Reporting Framework, the National Treasury provided information sessions to all PFMA institutions on the framework,” he said.

However, these steps have seemingly been insufficient, as South Africa’s SOEs reported R169.91 million in fruitless and wasteful expenditure in 2024 alone.

It should be noted that the actual figure is likely far higher than R169.91 million, as several SOEs did not report their fruitless and wasteful expenditure in 2024.

This includes Alexkor Limited, Broadband Infrastructure Company, DENEL, and South African Airways, which all made no submissions.

The worst offender for wasteful spending in 2024 was the South African Broadcasting Corporation, which reported R60.24 million in fruitless and wasteful expenditure.

This is followed by the South African Post Office with R42.81 million, and the Independent Development Trust with R34.97 million.

Godongwana explained that Chapter 6 of the PFMA Compliance and Reporting Framework provides for the recovery process that must be followed where losses have been incurred.

Paragraph 6.1 of the framework provides that, when it is confirmed that the irregular or fruitless and wasteful expenditure resulted in an institution suffering a loss, the accounting authority must recover such amounts from those responsible.

“When the accounting authority becomes aware of the loss, the accounting authority must, in writing, notify the official responsible of the loss and the amount thereof be paid within 30 days,” Godongwana explained. 

“If the amount of a loss is irrecoverable from a responsible official, the accounting authority may write off the loss in accordance with the debt write-off policy of the public entity.”

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SOEs’ wasteful spending in 2024

Below is the breakdown of fruitless and wasteful expenditure incurred in 2024 that Godongwana included in his response.

State-owned enterprise	Value
Alexkor Limited	No submission
Air Traffic and Navigation Services Company Limited	R2.92 million
Airports Company of South Africa Ltd	R109,000
Armaments Corporation of South Africa Limited	R45,000
Broadband Infrastructure Company (Pty) Ltd	No submission
CEF (Pty) Ltd	R12.05 million
DENEL	No submission
Development Bank of Southern Africa	_
Land and Agricultural Bank of South Africa	R556,000
SA Forestry Company Limited	R4,000
South African Airways Limited	No submission
South African Express (Pty) Limited	No submission
Telkom SA Limited	_
Trans-Caledon Tunnel Authority	_
ESKOM	R1 million
Independent Development Trust	R34.97 million
South African Broadcasting Corporation Limited	R60.24 million
South African Nuclear Energy Corporation Limited	R214,000
South African Post Office Limited	R42.81 million(Draft AFS)
Transnet Limited	R15 million
Total	R169.91 million

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