Why did PwC not identify corruption at SAA?

The question is to what extent auditors have facilitated state capture and corruption.
Negligence, or something more sinister? The auditors’ appointment was irregular, they were paid close to R70m by the taxpayer-funded airline over four years, and they gave its financials a clean bill of health. PwC Tower in Midrand pictured. Image: Moneyweb

South African Airways (SAA) continues to make headlines for all the wrong reasons.

While government seems determined to ensure that its business rescue process goes ahead and is successful, some of the factors that contributed to the dire state of affairs at the airline were heard at the Zondo Commission of Inquiry into State Capture last week.


The PwC audit partner assigned to the SAA audit for the years 2014 to 2016, Pule Mothibe, testified at the commission on Thursday and Friday (July 16 and 17). SAA was audited by joint auditors Nkonki Inc and PricewaterhouseCoopers Inc (PwC) for the years 2012 to 2016.

The commission last dealt with the aviation industry in February 2020, when it had begun looking at the role of auditors in the SAA-run companies.

Mothibe was expected to shed light on a question the commission had been pondering. As evidence leader Kate Hofmeyr put it: “If corruption and looting was potentially taking place in our public institutions in the past – how was it that the auditors did not pick it up?”

In the five years that Nkonki and PwC audited SAA, PwC never picked up on anything untoward, and gave the SAA financials a clean bill of health. 

PwC’s audit work

Mothibe defended the audit work carried out by PwC:

  • On the allegation that PwC did not identify any deficiencies in material controls in 2017, he replied: “We did not identify any deficiencies in internal control that we considered sufficiently significant for inclusion in this report.”
  • When asked to explain why the irregular expenditure significantly increased from 2016 to 2017, Mothibe maintained that the irregular expenditure identified by the Auditor-General (AG) was peculiar to 2017. “The audits for 2015 and 2016 were correct.”
  • He was absolutely clear that PwC would never take on an audit that it could not deliver on. “We identified deficiencies, we raised them with management and the audit committee, but we did not elevate them to the audit report.”
  • Mothibe: “We did the work but we failed to report it.”

Hofmeyr was persistent and frequently had to resort to: “Mr Mothibe, that was not my question.”

Irregular audit appointment

Nkonki and PwC were appointed to audit SAA for the year 2011/2012. However, they continued to audit the company for the next four years without SAA having gone out on tender. Thus, the ‘appointment’ of Nkonki and PwC for the next four years was irregular in terms of the Public Finance Management Act.

Conflict of interest

The joint audit partner, Nkonki, made two payments totalling R312 500 to Kwinana & Associates, the audit firm belonging to SAA non-executive director Yakhe Kwinana.

Kwinana was also chair of the SAA audit and risk committee, which determines the audit fees to be paid – in this case, to Nkonki and PwC.

Yakhe Kwinana, the former SAA board member and audit committee chair whose audit firm received payments from SAA’s auditors. Image: Supplied

PwC had also entered into joint work arrangements with Kwinana & Associates, and put in bids to conduct ‘services’ for three other state-owned enterprises. The bid for the Passenger Rail Agency of South Africa (Prasa) was successful, and entailed work performed on asset verification. It was paid R6 million for this.

There was much obfuscation and avoidance of direct answers from Mothibe. At the end of the day, it smacks of conflict of interest.

The audit fees paid to Nkonki and PwC for those four years amounted to R69.7 million. 

Material irregularities not identified in audit report

The 2016 audit report did not mention the following irregularities:

Air Chefs

SAA embarked on a tender process to procure a caterer. A third party named LSG Sky Chefs won the tender. SAA, ignoring the tender process, then withdrew the contract from LSG Sky Chefs, and awarded it to Air Chefs, an internal company. SAA was in breach of the tender process and would be liable for costs. Thus, SAA acted unlawfully, and this constituted a material irregularity.


The R1.8 billion Swissport contract should have been identified as a red flag because there was litigation around it, it did not have the requisite licence, and it had taken a number of years for the contract to be concluded.

Further, the Swissport contract had not followed proper procurement processes and had been concluded in contravention of National Treasury regulations.

However, the Swissport arrangement did not trigger any concern for PwC. Swissport had also been paid every month with no contract in place.

Hofmeyr referred to an article published by Moneyweb in 2015 that would have alerted PwC to the Swissport irregularity – if it had read it.

Mothibe replied that reading media articles is not a mandatory audit evidence-gathering procedure.

Insufficient financial records

When the office of the AG took over the audit for the 2016/2017 financial year, it found the financials to be in a shambolic state.

Irregular expenditure had shot up to R113.6 million (2016: restated to R73.8 million), and fruitless and wasteful expenditure was R 46.2 million (2016: restated to R16.6 million). The AG issued a qualified report, and stated that a “material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern”.

Polani Sokombela, who led the AG audit for SAA’s 2017 financial year, explained in his evidence that when they asked for tender documents to be located, they couldn’t be found. The AG said it was a systematic failure, they couldn’t find contracts that were in the contracts register, and that the problem was so big that it must have been like that in the previous years.

Hofmeyr asked Mothibe about the state of SAA’s financial records: “If there were not sufficient records, was this endemic, or did this only occur in 2017?” Mothibe replied that if they found deficiencies, they alerted management and the board.

According to Mothibe nothing was material enough to “elevate to the audit report”. 

Did PwC do a good job?

Zondo asked how the auditors could have given SAA a clean bill of health.

“How could it be? In light of what I was hearing, how was it possible that for four years or more, year in year out, the auditors could not find anything wrong? There were serious irregularities happening, how is it possible that the auditors didn’t pick these things up?”

Mothibe replied: “Chair, we did look at procurement and contract management. We did identify deviations. We sought responses from management to understand what [had] happened so that we can appropriately report on that. We discussed with those concerned with governance, the audit committee.

“We should have included these non-compliance matters in the audit report. Chair, it is important for you to know that we did the work, and we did identify these issues.” 

‘To what extent have auditors facilitated state capture?’

This question was posed by Hofmeyr. She further asked that, if this is so, is it because of mere negligence, such as auditors not doing their jobs, or something more sinister than that?

She noted that public funds were used to pay the auditors, and therefore this should be exposed. “The public deserves better from a public watchdog than substandard work.”

The full extent of how auditors have, knowingly or unknowingly, aided and abetted state capture is yet to be seen.



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The PwC guys were quick to point out audit failures by Deloitte at Steinhoff and African Bank and KPMG with the forensic work at SARS and the roque unit. Now it appears their work was also sub-standard. Why don’t they do the honourable thing and return the fat fees which they earned for this shoddy work? Can E&Y maintain a clean reputation?

The author answers her own question.

Because R69.7 million was paid in audit fees for 4 years work. That impressive looking building did not pay for itself.

Maybe a lifestyle audit for Mr Mothibe might provide another reason.

If the appointment of the auditors is irregular, the pricing excessive and there are conflicts of interest then the process of auditing is part of the corruption goals of the ANC.

The large auditing firms who have been caught out in such criminal activities should be sanctioned from auditing and public entity or loose their Licence.

Also, does not say much for the SAICA asleep at the regulatory wheel.

There is sufficient evidence that the named auditing firms were complicit in State Capture.
Now it is time to start prosecuting and getting our money back. This government is totally corrupt. The majority must vote them out. It is the only solution.

For as long as there is proportional representation the voters are restricted to vote for party. The MPs are chosen only by the party mafia and only answerable to these gangsters. The people are left with no MP and are unable to get rid of the rubbish. They cannot see how they have been robbed because no one tells them. So they keep voting party and the nation keeps going down faster and faster.

Fully support this view; when the public reads or hears in the financial media “unqualified’ the opinion MUST follow an audit of the HIGHEST standards. NOT one in which an auditor “raised matters” verbally with the company without spelling out in the opinion in writing, WHAT exactly these matters were. These matters, big or small, must be reported in the opinion!
Finance journalists in future should also interrogate the individual auditors at firms to find out more about the opinions they write, especially for government entities.
If the opinion states “unqualified” the auditor must be asked what additional steps he/she took to make sure it’s not “unqualified’ as in the case of SAA.
The same goes for other categories such as “qualified” etc
Auditors must become far more accountable – also to the wider public!

A definite drop in professional standards to accommodate the RET – Radical Economic Transformation bunch; from gate-keepers to enablers.

You are correct Niel but the ANC government had treated the majority like mushrooms. The norm to them is being kept in the dark and being fed manure……………….

It’s all about billable hours …! Maybe clients should not pay for their own audits as this could become a conflict of interest. If audits are meant to be independent and objective, shouldn’t someone like SARS be the watchdog paying the auditing bills? Seems like auditors are too keen to please their clients.

And the clients are so keen to have a friendly relationship (golf, expensive banquets, gifts) instead of a strictly business relationship.
And the auditors are as keen.
How can a firm like Tongaat Hulett have the same auditors for over a hundred years without developing close friendships – and when the lack of auditing results in the collapse of the company, the previous director and head of the audit committee is appointed as head of IRBA.
The auditing profession, not only in South Africa, but world wide, has become something of a joke.(A very expensive joke)
And their consulting divisions have been exposed as dishonest rip-off
In the 2020 Budget Speech the Minister of Finance, Tito Mboweni, said Parliament has adopted legislation to support the Independent Regulatory Board for Auditors and that further legislation is planned.
Wrong move.
Replace IRBA with something competent.

Auditors, even audit managers are normally youngsters with limited work experience. If the partners aren’t actively involved then it becomes a tick and bash exercise.

So what is your point. That this was not pure corruption but an admin oversight.

@Senzo. For such big audits there is an audit partner responsible.
The audit partner is paid big bucks for this. However they may choose to look the other way on findings (raised by his subordinates) and not report on them . This is what generally what happens.

Funny how the rest of the country new that SAA was and still is corrupt, just not the auditors.

” Rien ne réussit comme le succès’’ (Nothing succeeds like success)
Ange Pitou by Alexandre Dumas (1854)

KPMG – at the heart of the ‘’cover-up” – and brilliantly described by the late Barry Sergeant in his ‘’Kebble Collusion’’
The KPMG Services, forensic report for JCI, dated May 8, 2006, was destined (as it has) to become the most controversial document in the entire aftermath of the Kebble saga.
KPMG successfully redefined the meaning of ‘’conflict of interests’’.

The minority Randgold shareholders did attempt to ‘’reverse’’ this view and conduct in court against Investec, JCI, Western Areas, and T-sec recently.

Apologies …..not Western Areas, yet!

At this point, being an auditor is like being an ANC cadre – see no evil, hear no evil.

I have for many, many years been critical of the service and role of the audit profession. The audit work is generally superficial and does not ask the right questions. They have hidden behind the statement ” audit based on information provided by management” If the management are corrupt are they really going to tell you what has been done ?
The exposure of the failings of the big 4 has, for the first time in about 40 years, panicked the audit profession to now start digging a bit deeper.

The audit form do have good risk management practices but the over arching incentive to charge more billable hours, increase staff utilisation and maintain/grow market share means they will get caught or turn the blind eye. The culture of audit firms should be relooked..hierarchical role structures that reward obsequious behaviour rather than innovation. All of the BiG 4 are run like army camps…brown nosing is the way to get up the ranks.

Im soooooo GLAD i did not join these fools!

Im also GLAD they got caught out!

Once the auditors realised that there was massive corruption going on at Eskom and absolutely nothing was being done about it, the obvious way forward was to follow the old adage …… “if you can’t beat them, join them” …. and so the boodle kept rolling in.

I’ve worked with PWC a few times. These days when I see them I run. I will turn down a job where they are involved.

What are auditors supposed to do again?
They appear to have lost their way…

As someone who started my career in the audit profession I am not in any way surprised in the absolute failure in auditing that has come to the fore over the past couple of years. While in auditing I met people with the “acclaimed” CA qualification with masters and MBAs to go with it and these people had absolutely no logic. Oh yes they could almost recite IFRS word for word and could spin some elegant audit reports, but they could not see the most glaring deficiencies that exist in a process even when pointed out to them. All that they cared about was if IFRS and the system description was adhered to, not actually trying to think like a criminal on how the process could be abused while technically still adhering to policies and procedures.

End of comments.



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