SAA irregular expenditure soars to R44.5 billion

South African Airways’ irregular expenditure skyrocketed from R22 billion to R44.5 billion for the four financial years between 2018 and 2022.

The Auditor-General revealed this in a report presented to Parliament’s Standing Committee on Public Accounts (Scopa) this month. 

The Auditor-General told Scopa that it had completed audits for the four financial years up until the 2022/2023 financial year. 

SAA received audit disclaimers for all four years due to material misstatements in the company’s financial reports. 

The Auditor-General cited poor record-keeping and inadequate governance as reasons for the material misstatements. 

SAA continues to fail to comply with procurement and contract law, as irregular expenditure over the four audited years rose from R22 billion to R44.5 billion. 

This is not even the complete picture, as “The group did not include all irregular expenditure incurred in the notes to the financial statements due to inadequate controls to maintain complete records of irregular expenditure,” the Auditor-General’s report said. 

“In addition, we were unable to obtain sufficient appropriate audit evidence to confirm irregular expenditure incurred.”

This was again due to poor record-keeping at SAA. 

“Failure to implement consequence management encourages a culture where the disregard for legislation, policies, and procedures thrives,” the report said. 

This comes after SAA posted a loss of R150 million for the first three months of its current financial year. 

The National Treasury revealed this in its report to Parliament’s Standing Committee on Appropriations earlier this year. 

SAA Technical was the only subsidiary to report a profit of R4.4 million, while its other subsidiaries reported losses – including Mango, Air Chefs, and SAA itself.

The company’s total revenue of R1.1 billion was 22% less than the budgeted R1.4 billion due to lower demand for domestic and regional travel over the last three months. 

National Treasury estimated the average load factor for the first quarter was 60% for domestic travel and 49% for regional travel.

Furthermore, SAA cancelled flights in June due to aircraft maintenance and the unavailability of spare aircraft. 

The entity underspent by 25% on operational expenses, but the costs incurred were still higher than the revenue generated.

Operating costs were R17 million. The reasons for increased operating costs were a R2.6 million SARS penalty for late submission not budgeted for and a labour cost of R5.2 million higher than budgeted.

Material cost was R14.6 million higher than budgeted due to subcontracting costs and freight charges. However, energy costs were R4.7 million below budget. 

Mango has been under voluntary business rescue since July 2021 and has not flown since. 

Air Chefs generates approximately 80% of its revenue from SAA and supplies in-flight catering to Mango. The entity realised a loss of R1 million, mainly due to increased expenses.