Reporter’s Parliamentary Notebook: Lynne Brown confident as annual report season raises governance issues

Public Enterprises Minister Lynne Brown appeared before MPs after the Office of the Auditor-General had highlighted that Eskom’s irregular expenditure sky-rocketed to R4.043-billion in the 2016/17 financial year, up from R106-million the previous year. Transnet’s irregular expenditure ballooned from R25.1-million in the 2015/16 financial year to R922.5-million a year later. And fruitless and wasteful expenditure by both entities also swelled over the past two years.

Both state-owned entities (SOEs) are at the heart of State Capture claims. Transnet stands accused of giving tens of millions of rand in kickbacks to Gupta-associated companies in its Chinese locomotives tender. Eskom is under fire for a series of coal contracts with Gupta-associated companies in which a National Treasury investigation identified various violations of the power utility’s own procurement and board approval processes, according to a briefing to Parliament’s public spending watchdog, the Standing Committee on Public Accounts (Scopa), earlier this year. And Eskom is burnt for its off-the-book dealings with Gupta-linked Trillian Capital Partners and global consultancy McKinsey, which had been declared invalid by National Treasury about two years ago.

In a political embarrassment, Brown on Wednesday bluntly said she had been “lied” to last year when requesting information on the Trillian/ McKinsey/ Eskom dealings and that she regarded those lies as “an assault on our democratic system of governance”. Yes, she had received a report on Tuesday night on how these lies came about, but that report would not be made public – at least not right away – as it would be sent to the Public Enterprises Department’s governance unity, “the ethics committee” and the Public Protector.

Meanwhile, the Office of the Auditor-General distanced itself from the annual report of Denel because of “technically incorrect” financial statements. Denel, which falls under the public enterprises portfolio, is the state-owned armaments developer that contracted yet another Gupta-linked company for its controversial VR Laser Asia joint venture that was ultimately canned by National Treasury.

Annual reports must be tabled in Parliament within six months of the end of the financial year on 31 March in terms of the Public Finance Management Act (PFMA) and are part of the national legislature’s constitutional oversight responsibilities.

But the 2017 annual report season hasn’t gone that smoothly. Transport Minister Joe Maswanganyi had to ask National Assembly Speaker Baleka Mbete for a postponement of the tabling of the annual report of several entities in his portfolio. This included not only e-toll entity, the South African National Roads Agency (Sanral), due to delays in finalising its financial statements pending a reworded government guarantee, but also the Passenger Rail Authority of South Africa (Prasa).

In 2016 the Prasa train coach tender earned Gupta-linked companies R51-billion, according to amaBhungane, for the Spanish-manufactured coaches that turned out too high for domestic rails. The delay in submitting the Prasa annual report, according to Maswanganyi’s letter to Mbete published in the Announcements, Tablings and Committee Reports (ATC), or Parliament’s record of work, is linked to the Office of the Auditor-General awaiting a legal opinion as to whether the Prasa acting CEO can accept the audit report in the absence of a properly constituted board.

That Prasa is without a permanent CEO and board – in this there is little difference to Eskom which has several acting executives and, according to Brown on Wednesday, is set to have a permanent board only in November – is inextricably linked to the political machinations around State Capture. The previous transport minister dismissed the entire board as it was briefing Parliament earlier this year on some of the entity’s dodgy dealings. Former Prasa board chairperson Popo Molefe took the board’s dismissal to court.

What is still missing, days after the legislated tabling deadline, are the letters from Finance Minister Malusi Gigaba requesting a postponement of the tabling of annual reports by the South African Revenue Service (SARS) and SAA.

Daily Maverick understands a letter with regards to SARS, whose boss Tom Moyane is at the centre of the controversy over auditor KPMG’s report into the so-called rogue unit, had to be withdrawn due to a wrong date. The reason for the delay? SARS is in dispute with the Auditor-General, it emerged in the finance committee. Gigaba’s letter with regards to SAA refers to the national airline’s inability to finalise its annual financial statements timeously.

SAA, under board chairperson Dudu Myeni, who is also chairperson of the Jacob Zuma Foundation, received a total of R5.2-billion in government bailouts to pay due loan instalments, and for working capital, amid ongoing financial and governance turbulence. The legality of these bailouts will be discussed on Thursday in Parliament’s finance committee, which had requested a legal opinion. The bailouts – R2.2-billion at the end of June and R3-billion at the end of September – were made by Gigaba under Section 16 of the PFMA that allows him to release funds from the national purse of taxpayers’ monies “to defray expenditure of an exceptional nature which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future parliamentary appropriation of funds”.

And while the finance committee is looking at SAA, there’s no decision yet on whether it will engage KPMG, particularly around the so-called SARS rogue unit report, as the auditing firm appears before Scopa on Thursday.

On Tuesday the finance committee heard from the Independent Regulatory Board for Auditors (IRBA) that it was still busy investigating KPMG for its role at Linkway Trading, associated with the R30-million of taxpayers’ money spent on the 2013 Gupta family wedding at Sun City to which guests were flown in at the military Waterkloof Air Force base. The probe could be extended to the so-called rogue unit report, IRBA told MPs on Tuesday, because it now had confirmed that a registered auditor had signed off on it.

Elsewhere on the parliamentary front, the trade and industry committee will hold a Rule 227 inquiry into how much localisation existed in the Transnet Chinese locomotive tender won by China South Rail (CSR). DA MP Dean Macpherson on Wednesday said it was crucial, given government’s local content policy. “Unless someone is measuring what these companies do against government policies and audits, how would we know,” he told Daily Maverick. “I’d like to get this started as soon as possible.”

What is scheduled to start in a week, after delays over terms of reference and resources, is the public enterprises inquiry into Eskom contracts and dealings. This was initiated in late June after an institutional directive to it and the transport, mineral resources and home affairs committees to “urgently probe” State Capture claims and report back to the National Assembly. The public enterprises committee is the only one to date taking steps.

The #GuptaLeaks emails have drawn a web of connections between the Gupta family, its various companies, business associates and senior officials, particularly in state-owned entities (SOEs), and politicians.

Amid the political machinations around State Capture a tendency has emerged to shop for investigations and reports that are more palatable. Hence, the contemplated SIU Eskom probe, or the court challenge by Zuma against the public protector’s remedial action of a commission of inquiry headed by a judge appointed by the Chief Justice. Until the court processes, which start later this month, run their course, there cannot be any such State Capture commission of inquiry. DM

Photo: Public Enterprises Minister Lynne Brown (EWN)