South Africa’s Auditor-General forced to flush millions down the drain

The Auditor-General of South Africa (AGSA) will need to write off around R40 million of debt due to several state-owned enterprises (SOEs) being in business rescue or undergoing liquidation proceedings.

This R40 million forms part of the R644 million that South African SOEs owe the Auditor-General for auditing fees.

This was revealed by South Africa’s Accountant-General, Shabeer Khan, in a presentation to the Standing Committee on the Auditor-General on 12 September 2025.

In South Africa, AGSA’s funding model is premised on the organisation being commercially viable and financially independent.

Therefore, it charges government bodies like SOEs fees for its audit services. This model is considered crucial in ensuring AGSA’s independence.

However, many of these government bodies owe AGSA significant sums, with the organisation’s debt book jumping from R1.35 billion to R1.83 billion between March and July 2025.

SOEs owe R644 million, or 35%, of this total debt. To make matters worse, R183 million of this debt is owed by public entities that are either liquidated or undergoing business rescue proceedings.

This includes Denel (R82 million), the South African Post Office (R63 million), South African Express Airways (R21 million), Pelchem (R11 million), Autopax (R6 million) and Mango Airlines (R2 million).

Khan explained that these entities are either in business rescue, liquidation, or financial distress. Entities in liquidation owe around R40 million.

This is of grave concern to AGSA, which said this inability to settle audit fees continues to undermine its financial stability.

Khan explained that the National Treasury is engaging with some of these entities to explore ways to settle this debt.

For example, he said the Treasury has engaged extensively with Denel over the past few months to set up a payment arrangement.

“They have defaulted, but they have committed to see that payment arrangement out with the Auditor-General,” he said.

The debts owed to AGSA by SOEs that are liquidated or under business rescue can be seen in the table below.

Written off

Despite the threat this significant debt burden places on AGSA’s financial stability, Khan said the National Treasury recommended that the outstanding debt for SOEs in liquidation, which amounts to R40 million, be written off.

“They will have to, unfortunately, write them off. They will have to engage the liquidation process, and any amount that’s not recovered through the liquidation process will have to be written off,” he said.

“Even with those amounts being written off, they did form part of the impairment budget as well as the impairment provision on the financial statements.” 

“And there are sufficient reserves to write these off, which will not have a negative or significant impact on the surplus of the Auditor-General.”

Khan further explained that AGSA formally requested the National Treasury to ring-fence and recover outstanding debt owed by SOEs, including those in business rescue and liquidation.

However, he said the National Treasury is not in support of this, as some of the entities are liquidated.

“Unfortunately, because of the liquidation process that’s currently in process, Treasury cannot then support or ringfence these debtors or pay the Auditor-General for these debts,” he said.

The Auditor-General’s 2023/24 report on SOEs in South Africa revealed the financial struggles at many of the country’s public entities.

“SOEs have a developmental mandate and, at the same time, need to remain commercially viable to ensure that they can sustain themselves without having to rely on government guarantees,” AGSA said. 

However, SOEs are in serious financial difficulty and face liquidity challenges, which have halted operations and prevent them from paying their debts and obligations as they fall due. Both problems stem from the slow and ineffective implementation of turnaround plans.”

“Ailing SOEs place further pressure on government by needing bailouts and through potential future obligations because of guarantees.”

Specifically, AGSA highlighted that late submissions and poor quality of financial statements, continued high levels of non-compliance with legislation, and the material irregularities identified at SOEs indicate continued shortcomings in governance and controls.

“Based on the audited 2022/23 consolidated financial statements of departments, the total bailout given to state institutions is R402.2 billion,” it said. 

“The new administration should focus on finding sustainable solutions at those SOEs that are placing severe strain on the country’s finances so that they can fulfil their mandates and make a positive contribution to South Africa and its people.”