PUBLIC Enterprises Minister Malusi Gigaba has fired the board of the embattled state-owned regional carrier South African Express after the airline was unable to present him with audited financial statements at its annual general meeting on Monday.
"The AGM was unanimous in their view that the failure of the company to present audited financial statements at the meeting is irregular," the department said in a statement issued on Monday.
"There is a need for a more hands-on shareholder oversight of the regional airline and it is in lieu of the current challenges that it is prudent to review the board. The shareholder has therefore announced a new board of directors due to the high turnover of the previous board, which saw a record number of nonexecutive directors’ resignations," the statement said.
The airline’s management, board and external auditors have been battling since November last year to reconstruct the company’s accounts. SAX was obliged to withdraw its financial statements in November last year after it came to light that they were unreliable. One of the major issues with the accounts involves an error in the treatment of an amount of R32m for VAT that the company would not have been able to claim from the South African Revenue Service (SARS).
At the AGM, Mr Gigaba also sacked Nkonki Incorporated, the airline’s external auditors, which have questioned the quality of the information that has been shared with them by the airline’s management.
Nkonki had been the external auditors since 2002 and had filed two “reportable irregularity” reports to the Independent Regulator of the Board of Auditors since last year, after South African Express had breached the Companies Act and the Tax Act by failing to prepare financial statements and to correctly account for value-added tax.
Nkonki partner Steven Firer said the firm was relieved it would no longer be involved in auditing the carrier. It had been unable to express an opinion on its financial statements.
“We will not be staying on to do their audit for 2012. We are pretty happy about that because of the high engagement risk … there are just too many things that could go wrong. We can’t put our firm in that position again,” he said.
The relationship between the three parties deteriorated to the extent that Mr Gigaba has asked the auditor-general to take over the audit of the company’s statements for the 2011-12 year as well as 2012-13.
The inability of the board and its management to present financial statements for the year ended March 31 2011 was described by Mayihlome Tshwete, a spokesman for the Department of Public Enterprises, as irregular.
"The irregularities relate to noncompliance, misstatement of financial statements and evidence provided to the auditors which, in their opinion, did not meet the auditing standards. This has led to an adverse opinion from the Nkonki Auditors," the department said.
The department has been embarrassed by the publicity over the scandal at the airline.
Andile Mabizela, who has a strategy, aviation and legal background, has been appointed as chairman of the new board.
The new board, whose primary mandate is to turn the airline around, will retain Bridget Ssamula, the only member to stay on, "for the purpose of ensuring continuity and institutional memory", the department said.
The new board members announced are: Ezrom Mabyana, Karabo Tshailane-Nondumo, Neo Priscilla Moshimane, Shumani Tshifularo, Nosipho Gxumisa, George Mothemba and Noni Dibate.
The dissolution of the board came as a surprise to some of its members.
Former chairwoman Lillian Boyle, who had been available for reappointment, said: “I feel a bit distraught. This was a removal of those who believed they were doing right and doing the right things in terms of governance and in getting the company back to where it should be.”