Millions Lost: South Africa's Auditor-General Forced to Write Off Debt

By Mpho Dube-Editor in Chief of The Azanian

The Auditor-General of South Africa (AGSA) is facing a significant financial blow, with approximately R40 million in debt owed by state-owned enterprises (SOEs) undergoing liquidation or business rescue proceedings set to be written off.

This amount is part of the larger R644 million owed to AGSA for auditing fees, which has raised concerns about the financial stability of the organization.

The debt crisis has been accumulating over time, with SOEs owing a significant portion of the R1.83 billion debt accumulated by government bodies. Denel, South African Post Office, and South African Express Airways are among the top debtors, owing R82 million, R63 million, and R21 million, respectively. Other notable debtors include Pelchem, Autopax, and Mango Airlines, with debts of R11 million, R6 million, and R2 million, respectively.

According to Shabeer Khan, South Africa's Accountant-General, the National Treasury has recommended writing off the R40 million debt, citing sufficient reserves to absorb the loss without impacting AGSA's surplus. "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," Khan explained.

The AGSA's funding model is premised on the organization 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 organization's debt book jumping from R1.35 billion to R1.83 billion between March and July 2025.

The financial struggles of SOEs have been well-documented, with many entities facing liquidity challenges and poor governance. The AGSA's 2023/24 report highlighted the financial struggles of many public entities, citing halted operations and inability to pay debts and obligations. The report emphasized the need for sustainable solutions to address these challenges.

"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, facing significant strain on the country's finances. The report noted that late submissions and poor quality of financial statements, continued high levels of non-compliance with legislation, and material irregularities identified at SOEs indicate continued shortcomings in governance and controls.

The AGSA has requested the National Treasury to recover outstanding debt owed by SOEs. However, the Treasury is not supportive due to the liquidation process. "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," Khan said.

The debt crisis facing AGSA raises concerns about the financial stability of the organization. With a significant portion of its debt owed by SOEs undergoing liquidation or business rescue proceedings, AGSA may be forced to absorb significant losses. The write-off of R40 million in debt will likely have a minimal impact on AGSA's surplus, but it highlights the significant challenges facing the organization.

In conclusion, the debt crisis facing AGSA is a significant concern that requires attention from the government and other stakeholders. The financial struggles of SOEs are a major contributor to this crisis, and addressing these challenges will be crucial in ensuring the financial stability of AGSA and other government organizations. By working together, it may be possible to find sustainable solutions to these challenges and ensure that government organizations are able to fulfill their mandates effectively.