C O M M I S S I O N O F I N Q U IR Y I N TO S TAT E C A P T U R E H E L D AT PA R K TO W N , J O H A N N E S B U R G 10 21 FEBRUARY 2020 D AY 2 1 7 20 21 FEBRUARY 2020 – DAY 217 PROCEEDINGS RESU ME ON 21 FEBRUARY 2020 C H A I R P E R S O N : G o o d m o r n i n g M r M b i k i w a , g o o d m o r n in g e v e r y b o d y. A D V M I C H A E L M B I K I WA : G o o d m o r n i n g C h a ir. CHAIRPERSON: Are we ready? A D V M I C H A E L M B I K I WA : W e a r e i n d e e d C h a ir. CHAIRPERSON: Thank you. M r S o k o m b e l a y o u a r e s til l u n d e r t h e o a t h y o u t o o k y e s t e r d a y. M R S O K O M B E L A : Ye s . C H A I R P E R S O N : Yo u u n d e r s t a n d th a t ? 10 M R S O K O M B E L A : Ye s C h a ir. CHAIRPERSON: Thank you. Let us proceed. A D V M I C H A E L M B I K I WA : Th a n k y o u C h a i r. M r S o k o m b e la w e fi n is h e d o ff y o u r e v i d e n c e y e s t e r d a y w it h y o u ta k i n g u s t h r o u g h th e e x t e n s iv e p r e p a r a to r y w o r k a n d w o r k d u r in g th e a u d i t th a t th e A u d i t o r G e n e r a l ’s o ffic e a n d y o u r t e a m i n p a r t ic u l a r d i d in t h e a u d i t o f th e 2 0 1 7 fi n a n c i a l y e a r. I w o u l d l ik e n o w t o tu r n t o t h e k i n d o f k e y a r e a s o f c o n c e r n t h a t y o u i d e n t if i e d in t h e c o u r s e o f th a t – o f t h a t a u d i t. W e p ic k t h a t u p a t y o u r a ffi d a v i t a t p a g e 3 4 . To s ta r t w it h c a n y o u e x p l a in t o u s h o w t h e A G ’s o v e r a ll a u d i t o p i n i o n d i ffe r e d f r o m t h a t o f th e p r e v i o u s fiv e y e a r s ? 20 M R S O K O M B E L A : T h a n k y o u C h a ir. Th e a u d i t o p i n i o n o f t h e A u d i to r G e n e r a l o f S o u t h A f r ic a i n 2 0 1 6 /2 0 1 7 r e g r e s s e d fr o m a n u n q u a l if i e d a u d it o p in i o n w i th n o fi n d i n g s fr o m 2 0 1 2 / 1 3 /1 4 /1 5 a n d 1 6 t o a q u a li fi e d a u d it o p i n i o n w i th f in d i n g s o n c o m p li a n c e w i th le g is l a ti o n a s w e l l a s fi n d i n g s o n p e r fo r m a n c e i n fo r m a t i o n o r p r e d e t e r m in e d o b je c tiv e s i .e . i t d i g r e s s e d fr o m b e i n g a c l e a n a u d i t to a q u a l if i e d a u d i t w i t h – w i th Page 2 of 121 21 FEBRUARY 2020 – DAY 217 s ig n if ic a n t a m o u n t o f fi n d i n g s C h a ir. C H A I R P E R S O N : D id t h e r o l e t h a t t h e A G p l a y – t h e a u d i t in g t h a t i t d i d f o r th e 2 0 1 6 /2 0 1 7 f in a n c ia l y e a r b e c a u s e I th i n k th a t i s t h e y e a r o n w h ic h w e a r e n o w – d id i t e n ta il s i m p ly a u d it i n g t h a t y e a r – a u d i t in g S A A f o r t h a t f in a n c i a l y e a r o r d i d t h e A G a ls o l o o k a t t h e y e a r s w h e n t h e a u d it i n g h a d b e e n d o n e b y P W C a n d N k o n k i a n d ta k e a v i e w whether they had a done a proper job? MR SOKOMBELA: C h a ir w h a t t h e – w h a t t h e s t a n d a r d s o r a u d i t in g s t a n d a r d s r e q u ir e u s to d o w h e n w e t a k e o n a n e w e n g a g e m e n t o r a 10 new audit is to perform some work on the opening balances i.e the r e a s o n w h y f o r t h a t is – is f o r u s t o d e te r m i n e i n t e r m s o f w h e t h e r w e c a n r e ly o n t h e – o n th e o p e n i n g b a l a n c e s e s p e c i a ll y i n t h e b a l a n c e s h e e t o f th e b u s in e s s . C h a ir – C h a ir I – w e d i d n o t g o t o a n e x t e n t o f – o f o p i n i n g o n w h e t h e r t h e n t h e w o r k o f t h e p r e d e c e s s o r a u d it o r s w a s – w a s a p p r o p r ia t e . B e c a u s e t h a t w o u l d f a ll o u t s i d e o f o u r m a n d a t e . T h a t is th e m a n d a t e o f t h e in d e p e n d e n t r e g u l a to r y b o a r d f o r A u d i t o r s t h a t w o u ld r e v ie w w o r k a n d c o m e t o a c o n c l u s i o n w h e t h e r it w a s a p p r o p r ia t e o r n o t . H o w e v e r w h e n w e w e r e d o i n g o u r – o u r r e v i e w o f th e o p e n i n g b a l a n c e s w h a t – w h a t w e n o r m a ll y d o is – i s th e n to r e q u e s t fr o m t h e 20 m a n a g e m e n t o f S A A t h r o u g h t h e l e t t e r – w e w r i te t o t h e m f o r m a l ly f o r t h e m – f o r S A A m a n a g e m e n t t o a l lo w u s t o – t o r e q u e s t a c c e s s t o th e ir a u d it f il e a n d t h e w o r k in g p a p e r s o f t h e p r e d e c e s s o r a u d it o r s . S o t h a t w e c a n b e a b l e to – to g o t h r o u g h t h e ir o w n w o r k i n g p a p e r s w i t h a n o b j e c ti v e o f s e e k i n g r e l ia n c e o n t h a t w o r k . S o t h a t is – th a t i s th e – t h a t is t h e e x te n t C h a ir th a t w e g o i n to a n d t h a t is t h e e x te n t t h a t t h e Page 3 of 121 21 FEBRUARY 2020 – DAY 217 a u d it i n g s t a n d a r d s a l lo w s u s t o d o . CHAIRPERSON: I u n d e r s t a n d y o u e v id e n c e t o b e th a t t h e a u d i ti n g s t a n d a r d s a n d t h e w o r k t h a t y o u h a v e t o d o w h e n y o u – y o u a u d it fo r o n e y e a r d o e s r e q u ir e y o u t o h a v e a li m i t e d l o o k a t t h e w o r k d o n e b y y o u r p r e d e c e s s o r s a n d I t h i n k y o u s a y in g th a t y o u d o th a t i n o r d e r t o s e e w h e t h e r f o r p u r p o s e s o f y o u r p o r ti o n o f th e w o r k y o u c a n r e l y o n t h e ir w o r k . M R S O K O M B E L A : A b s o l u t e ly. C H A I R P E R S O N : Is t h a t r i g h t ? 10 M R S O K O M B E L A : A b s o l u t e ly C h a ir. C H A I R P E R S O N : Ye s . I t a k e i t th a t l o g ic a l ly th a t m e a n s y o u m a y fi n d o r a n y a u d i t o r w h o c o m e s i n m a y f i n d th e m s e lv e s i n a s i t u a t i o n w h e r e t h e y s a y h a v in g h a d th is li m i t e d l o o k w e d o n o t t h in k w e c a n r e ly o n o u r predecessors work. Is t h a t s o m e t h i n g t h a t d o e s h a p p e n fr o m t i m e t o ti m e ? M R S O K O M B E L A : A b s o l u t e ly C h a ir. C H A I R P E R S O N : It d o e s , y e s . MR SOKOMBELA: It does happen. C H A I R P E R S O N : Ye s , y e s . In t h i s p a r t ic u l a r c a s e d i d y o u f in d t h a t y o u 20 c o u l d r e l y o n y o u r p r e d e c e s s o r s w o r k o r w h a t – w h a t v i e w d id y o u t a k e a ft e r h a v i n g t h a t li m i t e d l o o k a t w h a t t h e y h a d d o n e ? M R S O K O M B E L A : C h a ir I t h i n k a s I s a i d a n d I w a n t to – t o s t a t e a l s o c a t e g o r ic a l ly t h a t th e w o r k t h a t w e d i d w i t h I t h in k w i t h u s r e v i e w i n g th e opening balances was for our own purposes. It was not for the purpose o f o p in in g o r n o t . H o w e v e r C h a ir t o a n s w e r y o u r q u e s t i o n o n t h e w o r k Page 4 of 121 21 FEBRUARY 2020 – DAY 217 t h a t w e h a v e d o n e fo r – i n th e o p e n i n g b a l a n c e s f o r t h e p r e d e c e s s o r a u d it o r s th e r e w e r e s o m e is s u e s t h a t w e f o u n d . S p e c if ic a l ly is s u e s o f la c k o f d o c u m e n t a ti o n w h e r e w e c o u l d n o t d e t e r m i n e i n t e r m s o f h o w then certain account balances were tested. A n d th a t m a d e u s C h a ir p e r s o n to p e r fo r m a d d i ti o n a l p r o c e d u r e s a t S A A a n d th a t b e c a m e a v e r y p a i n f u l p r o c e s s a ls o fo r t h e m a n a g e m e n t t e a m a t S A A b e c a u s e I r e m e m b e r w e h a d t o a s k t h e m f o r a n e x a m p l e t o p r o v e t o u s t h e v a li d i ty o f t h e a ir c r a f t s t h a t w e r e s it t in g i n t h e b a la n c e s h e e t . Because when w e l o o k e d a t t h e a u d i t f il e s f o r th e p r e d e c e s s o r a u d i t o r s w e c o u l d n o t 10 fi n d i n t e r m s o f h o w t h o s e b a l a n c e s y o u k n o w h a v e b e e n s a tis f ie d . S o m e o f th e a ir c r a f ts e s p e c i a lly t h e a ir b u s e s w e r e b o u g h t I t h i n k s o m e ti m e a g o . I t h i n k a s f a r b a c k a s 2 0 0 2 i f I a m n o t m is t a k e n . S o t h e r e is a f i n d in g I th i n k i t i s p a r t o f t h e a n n e x u r e s f o r th e – i n my a ffi d a v it w h e r e w e h a d to u n f o r tu n a te ly r a is e t h a t fi n d i n g b e c a u s e t h e r e w e r e n o d o c u m e n ts . Yo u k n o w I th i n k t h e In t e r n a t io n a l S t a n d a r d s – t h e I n t e r n a ti o n a l Fi n a n c i a l R e p o r t i n g S t a n d a r d s f o r a n e x a m p l e r e q u ir e s t h a t a n a i r c r a ft s h o u ld b e – t h e r e s h o u ld b e [ i n d is t in c t ] o f t h e a ir c r a f t . Yo u c a n n o t h a v e a n a i r c r a ft a s a fu ll a ir c r a ft i n th e b a l a n c e s h e e t . Yo u n e e d t o c o m p o n e n t is e i t to e n s u r e t h e n th a t i t m e e t s t h e r e q u ir e m e n t s 20 o f t h e s t a n d a r d s . S o t h o s e w e r e t h e – t h o s e w e r e t h e l i m it a ti o n s t h a t – t h a t w e e n c o u n t e r e d w h e n w e l o o k e d a t t h e f il e . And at SAA then b e c a u s e w i t h s o m e o f t h e in f o r m a t io n w e c o u l d n o t fi n d w e e n d e d u p s a y in g p e r h a p s i f y o u c a n n o t p r o v e y o u d o n o t h a v e s o u r c e d o c u m e n ts m a y b e f o r – s in c e 2 0 0 2 m a y b e w e c a n lo o k a t th e y o u k n o w – a t t h e ir o w n E R P S o lu t io n t h e y a r e u s i n g S A P t o m a y b e to c h e c k p u r c h a s e Page 5 of 121 21 FEBRUARY 2020 – DAY 217 o r d e r s b e c a u s e a t l e a s t th e r e c o r d i s th e r e . And then we ended up s a y in g p e r h a p s le t u s g i v e y o u th e n I th in k n o r m a ll y i n S o u t h A f r ic a i t is a b o u t s e v e n y e a r s a t l e a s t m a y b e le t u s g iv e y o u a l e e w a y t o s a y m a y b e g iv e u s t h e n t h e m o s t r e c e n t i n f o r m a ti o n t h a t y o u h a v e . A t le a s t for those assets maybe that were purchased at least seven years ago. Yo u k n o w – b u t b e c a u s e o f o t h e r f a c t o r s a t S A A b e c a u s e w h e n i t c o m e s t o r e c o r d k e e p in g t h e y – t h e y h a v e g o t v e r y, v e r y p o o r c o n tr o ls t h e r e s o t h e y c o u l d n o t p r o v e t h o s e to u s . S o I t h in k C h a i r p e r s o n t h a t t h o s e – t h a t i s b a s ic a l ly a s n i p p e t o f t h e is s u e s th a t w e h a v e id e n ti fi e d . 10 C H A I R P E R S O N : N o t h a t i s fi n e . I m a y h a v e a s k e d y o u th a t q u e s ti o n a h e a d o f Mr M b ik i w a r e a c h i n g t h e p o i n t w h e r e h e w a s g o in g t o d e a l w i t h th a t . M r M b i k i w a y o u c a n e i t h e r c o n t in u e a r o u n d t h i s a r e a o r d e a l w i t h i t a t a la t e r ti m e t h a t y o u h a d p l a n n e d t o d e a l w it h it . But I do w a n t to h a v e a v e r y f u ll p ic t u r e o f w h a t t h e y f o u n d w a s th e p o s i ti o n a n d w h e t h e r w h a t th e y f o u n d g a v e a n y i n d i c a ti o n a b o u t h o w w e l l t h e i r p r e d e c e s s o r s h a d d o n e th e j o b . A n d w e h a v e g o t t o lo o k a t th a t b e c a u s e h e h a s a lr e a d y to ld u s a b o u t s o m e o f t h e t h i n g s t h a t t h e y f o u n d . J a I m e a n t h e o p i n i o n th a t t h e y – t h e y g a v e a n d w e k n o w th a t t h e p r e d e c e s s o r s h a d g iv e n S A A a c le a n b i ll o f h e a l th f o r f iv e y e a r s . 20 S o th e q u e s t io n a r i s e s a s t o w h e th e r t h o s e o p in i o n s f o r t h o s e fi v e y e a r s w e r e r e a lly p r o p e r ly a r r iv e d a t. W a s a p r o p e r j o b d o n e y o u k n o w ? A n d I a c c e p t t h a t t h e w i t n e s s is tr y in g t o b e v e r y c a u ti o u s i n n o t u n d u ly c r i ti c is i n g h i s c o ll e a g u e s in t h e p r o fe s s i o n . I u n d e r s t a n d th a t . But o b v i o u s l y h e w i ll a p p r e c i a t e t h a t h e h a s g o t t o g iv e u s h i s e v i d e n c e a s fr a n k l y a s p o s s i b le a n d h o n e s tl y. I f h e – i f h e h a s a v i e w t h a t t h e y d i d Page 6 of 121 21 FEBRUARY 2020 – DAY 217 a f in e j o b h e m u s t s a y s o . I f h e h a s a v i e w t h a t t h e y d id n o t d o a f i n e jo b th a t is w h a t h e – h e n e e d s t o s a y i f h e is a b l e t o s u b s t a n ti a te t h a t . A D V M I C H A E L M B I K I WA : I n d e e d C h a ir. CHAIRPERSON: Okay thank you. A D V M I C H A E L M B I K I WA : C h a ir I d o in t e n d t o g o t o p r e c i s e ly th e r e i n due course. C H A I R P E R S O N : Ye s n o th a t is f in e . Yo u c a n … A D V M I C H A E L M B I K I WA : I w i ll t a k e M r S o k o m b e l a t o … CHAIRPERSON: Ja. 10 A D V M I C H A E L M B I K I WA : Th e d e t a i le d M a n a g e m e n t R e p o r t . C H A I R P E R S O N : T h a t is fi n e . A D V M I C H A E L M B I K I WA : A n d i ts s p e c if ic fi n d i n g s o n t h e o p e n i n g balance. C H A I R P E R S O N : T h a t is fi n e . A D V M I C H A E L M B I K I WA : F o r p r e s e n t p u r p o s e s M r S o k o m b e la c a n I – c a n j u s t c la r i fy w h a t y o u s a y a b o u t t h e o p e n in g b a la n c e ? T h e r e a s o n t h a t t h a t i n p a r ti c u l a r – y o u a r e a b l e t o c o p y t o m a k e a c o m m e n t a b o u t t h e p r e v i o u s a u d i t i s t h a t b e c a u s e i t is th e c lo s i n g b a l a n c e o f t h e p r e v i o u s y e a r ’s a u d i t? 20 M R S O K O M B E L A : A b s o l u t e ly C h a ir. A D V M I C H A E L M B I K I WA : O k a y. CHAIRPERSON: A n d I th i n k fr o m w h a t y o u h a v e s a i d I m u s t a c c e p t t h a t t h a t g i v e s y o u a r a t h e r l i m it e d p ic t u r e o f w h a t m a y h a v e h a p p e n e d . M a y b e y o u m ig h t n e e d t o l o o k a t m u c h m o r e I d o n o t k n o w b u t y o u m i g h t b e a b le t o s a y, n o fr o m a n a u d it o r s p o i n t o f v i e w i f I h a v e g o t t h a t Page 7 of 121 21 FEBRUARY 2020 – DAY 217 t h e n r e a ll y I h a v e g o t q u i te a r e a s o n a b l e p ic t u r e o f h o w t h e j o b w a s done. M R S O K O M B E L A : C h a ir I th i n k i t is w o r th n o ti n g t h a t t h e a u d i t w o r k in t h e – i n th e a u d i t fi le a n o th e r e x p e r i e n c e d a u d i t o r n e e d s to c o m e a n d r e - p e r f o r m t h a t w o r k a n d h e c o m e t o t h e c o n c l u s io n . C H A I R P E R S O N : Ye s , y e s . M R S O K O M B E L A : Ye s . C H A I R P E R S O N : I f th e j o b h a s b e e n d o n e p r o p e r ly is t h a t w h a t y o u a r e s u g g e s t in g ? 10 M R S O K O M B E L A : Ye s . C H A I R P E R S O N : O k a y. M R S O K O M B E L A : Ye s C h a ir. C H A I R P E R S O N : O k a y. O n c e t h e r e i s a d i ff e r e n c e o f o p i n i o n it m e a n s t h a t th e r e i s a p r o b le m ? M R S O K O M B E L A : O n c e th e r e is a d i ff e r e n c e o f o p i n io n b e c a u s e a l l o f u s w e s u b s c r i b e t o th e s a m e … CHAIRPERSON: Standards. M R S O K O M B E L A : A u d i ti n g s ta n d a r d s . CHAIRPERSON: Ja. 20 M R S O K O M B E L A : T h e m e t h o d o l o g ie s m a y d i ff e r. CHAIRPERSON: Ja. MR SOKOMBELA: Here and there. CHAIRPERSON: Hm. MR SOKOMBELA: B u t t h o s e m e th o d o l o g i e s h a v e b e e n p r e p a r e d in a c c o r d a n c e w i t h th e a u d i t in g s t a n d a r d s . Page 8 of 121 21 FEBRUARY 2020 – DAY 217 CHAIRPERSON: Hm. S o o n e s h o u l d w o r r y if t h e r e is a d i ff e r e n t o p i n i o n la t e r o n ? M R S O K O M B E L A : A b s o l u t e ly C h a ir. CHAIRPERSON: Okay thank you. A D V M I C H A E L M B I K I WA : M r S o k o m b e l a b e f o r e w e m o v e o n y o u r a u d i t o p i n i o n in v o lv e d r e s ta t e m e n t s a s w e l l d i d i t n o t ? M R S O K O M B E L A : A b s o l u t e ly C h a ir. A D V M I C H A E L M B I K I WA : C a n y o u te ll u s w h a t a r e s t a t e m e n t is ? MR SOKOMBELA: 10 C h a ir a r e s t a t e m e n t c a n – c a n b e a s a r e s u lt o f m a y b e a c h a n g e i n a c c o u n t in g p o lic y. When maybe the company m a y b e h a s d e c i d e d t o c h a n g e h o w i t ’s g o i n g t o a c c o u n t f o r i ts tr a n s a c ti o n s o r a c c o u n t b a l a n c e s . A s i m p le e x a m p le o f th a t i s w h e n a c o m p a n y h a s b e e n a c c o u n ti n g fo r a s s e ts o r le t u s s a y l a n d a n d b u il d in g s a t c o s t b u t th e n i t d e c i d e s C h a i r to a c c o u n t f o r it a t r e v a l u e d a m o u n t t h e n – t h e n w h a t t h e n h a p p e n s is t h a t i n t h e y e a r th e n t h a t i t m a k e s th a t d e c is i o n t h e n i t n e e d s t h e n t o a p p ly t h a t a c c o u n ti n g p o lic y a s i f it h a s b e e n a n a p p l ic a ti o n f o r t h e p r e v i o u s y e a r s . I t h i n k th e s t a n d a r d s a r e s a y i n g t h a t y o u n e e d to a p p ly i t r e tr o s p e c ti v e ly. S o – s o t h a t i s o n e i n s ta n c e . 20 A n o t h e r i n s t a n c e C h a ir p e r s o n w h e r e th e n t h e r e s t a te m e n ts a r e d o n e i s w h e n t h e n th e r e w e r e e r r o r s i n th e fi n a n c i a l s t a te m e n ts fo r t h e p r i o r y e a r s . S o t h e n t h e r e is a n a c c o u n ti n g s t a n d a r d s t h e r e – s t a n d a r d t h e n t h a t p r o v i d e g u id a n c e in t e r m s o f h o w t h e n t h o s e e r r o r s n e e d s t o b e c o r r e c te d i n t h e f i n a n c ia l s ta t e m e n ts . S o t h e n th e r e s t a te m e n ts i n t h e fi n a n c i a l s t a t e m e n t s th e n C h a ir p e r s o n m a y b e a s a r e s u l t o f t h o s e t w o – th o s e tw o . J a . Page 9 of 121 21 FEBRUARY 2020 – DAY 217 A D V M I C H A E L M B I K I WA : A n d f o ll o w i n g o n fr o m t h e C h a i r ’s q u e s ti o n s . W e r e t h e r e s ta t e m e n t s i n t h is i n s t a n c e a b l e to s h e d a n y l ig h t o n t h e a u d it w o r k d o n e p r e v i o u s l y ? MR SOKOMBELA: C h a ir t h e r e s t a t e m e n t s t h a t w e r e – th a t w e r e e ffe c te d in th e f i n a n c ia l s t a t e m e n t s o f S o u t h A fr ic a n A i r w a y s f o r 2 0 1 7 – 2 0 1 6 /2 0 1 7 f in a n c ia l y e a r w e r e a s a r e s u l t o f c o r r e c ti n g t h e e r r o r s f o r t h e p r i o r y e a r fi n a n c i a l s t a te m e n t s . CHAIRPERSON: Okay thank you. M R S O K O M B E L A : Ye s . 10 A D V M I C H A E L M B I K I WA : T h a n k y o u . M r S o k o m b e l a I w o u l d li k e y o u t o t a k e u s t h r o u g h t h e k e y a r e a s o f c o n c e r n t h a t y o u i d e n ti f ie d d u r i n g t h e c o u r s e o f t h e a u d i t? M R S O K O M B E L A : T h a n k y o u v e r y m u c h C h a ir. C h a ir y e s te r d a y I t h i n k I m e n ti o n e d th a t t h e a u d i t o f S o u t h A f r i c a n A ir w a y s w a s d o n e b y t h e A u d i t o r G e n e r a l f o r t h e f ir s t ti m e i n 2 0 1 6 / 1 7 f in a n c ia l y e a r. A n d I t h in k o n e o f t h e th in g s t h a t I s a id is t h a t in t e r m s o f la w t h e P u b lic F i n a n c e M a n a g e m e n t A c t t h e B o a r d o f S A A w a s r e q u ir e d to g iv e u s fi n a n c i a l s t a te m e n ts b y 3 1 M a y th a t y e a r. H o w e v e r d u e t o l i q u i d i ty c h a ll e n g e s t h a t th e y f a c e d b e c a u s e t h e y c o u l d n o t p r o v e th e g o in g c o n c e r n 20 a s s u m p t io n t h e y e n d e d u p g iv in g u s t h e f i n a n c ia l s ta t e m e n ts b y 3 1 O c t o b e r t h a t y e a r. A n d w e g a v e – w e th e n s i g n e d a n a u d it o p i n i o n o n the 8 December 2017. S o I h a v e a lr e a d y ta lk e d a b o u t t h e r e g r e s s i o n t h a t t h e a u d i t – t h e a u d i t o p i n i o n o f S A A r e g r e s s e d . C h a ir p e r s o n I h a v e s u m m a r i s e d t h e k e y a r e a s o f c o n c e r n i n th e a u d i t o f S A A i n t h e M a n a g e m e n t R e p o r t i n t h e E x e c u tiv e S u m m a r y w h i c h fo r ms p a r t o f t h is Page 10 of 121 21 FEBRUARY 2020 – DAY 217 a ffi d a v i t a n d i t is o n A n n e x u r e P S 2 5 . A n d … C H A I R P E R S O N : W h a t p a g e is t h a t M r M b i k i w a ? A D V M I C H A E L M B I K I WA : S o r r y C h a ir. I am going to go there in a moment. MR SOKOMBELA: Ja. A D V M I C H A E L M B I K I WA : I t i s a t p a g e – it i s i n D D 2 0 B a t p a g e 5 7 2 . M R S O K O M B E L A : C h a ir. C H A I R P E R S O N : L e t m e g e t t o it b e f o r e y o u c o n ti n u e . O h y o u – w e – I d o n o t n e e d t o l o o k a t i t fo r n o w. 10 M R S O K O M B E L A : Ye s . C H A I R P E R S O N : O k a y a lr ig h t c o n t i n u e w i t h i t – c o n ti n u e . M R S O K O M B E L A : T h a n k y o u C h a ir. CHAIRPERSON: Hm. M R S O K O M B E L A : C h a ir I d o w a n t t o s t a t e t h a t t h i s – th e M a n a g e m e n t R e p o r t w a s c o m m u n i c a t e d t o th e B o a r d o f D ir e c t o r s o f S A A o n th e 1 D e c e m b e r 2 0 1 7 a n d – a n d th e m o s t i m p o r t a n t t h i n g to h ig h l i g h t in t e r m s o f t h e k e y a r e a s o f c o n c e r n s th a t w e h a d i s t h a t a t S A A – S o u t h A f r i c a n A ir w a y s f a c e d – t h e r e w a s a lo t o f i n s t a b i li ty th a t w a s h a p p e n i n g a t SAA. 20 I n t h e E x e c u tiv e C o m m i t te e o f S A A m o r e th a n 4 0 % o f t h e p o s i ti o n s w e r e f ill e d in a n a c t i n g c a p a c i ty. A n d C h a ir p e r s o n th a t c r e a te d a l o t o f c h a l le n g e s e s p e c i a lly to t h e c o n t r o l e n v i r o n m e n t o f t h e b u s i n e s s i ts e lf i n t e r m s o f h o w t h e b u s i n e s s i s s u p p o s e d t o b e – t o l o o k lik e . W h e n w e – w h e n – d u r i n g th a t f in a n c ia l y e a r th e B o a r d a ls o w a s n e w. T h e y w e r e a p p o i n te d s ix m o n t h s b e f o r e t h e e n d o f t h e fi n a n c i a l y e a r. A n d a ls o o n e o f t h e c h a ll e n g e s a ls o w it h th a t B o a r d is t h e fa c t Page 11 of 121 21 FEBRUARY 2020 – DAY 217 t h a t t h e y d i d n o t h a v e a n a v ia t io n s p e c ia li s t o r s o m e o n e t h a t – t h a t h a s g o t a n e x p e r ie n c e i n a v i a ti o n . A n d a ls o t h e n t h a t i s o n e o f t h e is s u e s a ls o t h a t w e h a v e i d e n t if i e d t o s a y, S A A is a n a ir l i n e a n d i f t h e n t h e y d o n o t h a v e a n a v i a ti o n s p e c i a l is t th e n i t is – t h a t m ig h t b e – th a t m ig h t p o s e a c h a ll e n g e t o S A A . A n d a ls o … C H A I R P E R S O N : T h a t is n o w a t B o a r d l e v e l ? M R S O K O M B E L A : A b s o l u t e ly C h a ir. C H A I R P E R S O N : Ye s o k a y. M R S O K O M B E L A : A t B o a r d le v e l . 10 CHAIRPERSON: Hm. M R S O K O M B E L A : A t B o a r d l e v e l. T h a t w a s o n e o f t h e c h a l le n g e s t h a t w e h a d . M a y b e i f I c a n g o b a c k t o th e E x e c u tiv e C o m m i t t e e j u s t a t t h e high level there. I t h i n k o n e o f t h e k e y p o s i ti o n s f o r a n e x a m p l e t h a t w e r e v a c a n t th e r e w a s t h e p o s i ti o n o f a C h ie f E x e c u t iv e O ffic e r w h i c h is a v e r y i m p o r t a n t p o s i t io n . Th e p o s i ti o n o f a C h i e f Fi n a n c i a l O ff ic e r w a s v a c a n t. A l s o w a s fi ll e d in a n a c t in g c a p a c i ty. Th e p o s it i o n o f a C h ie f C o m m e r c i a l O ff ic e r w a s a l s o – w a s a l s o v a c a n t . And the Chief C o m m e r c i a l O ffi c e r i n a n a ir l in e is a v e r y, v e r y i m p o r t a n t o ff ic ia l b e c a u s e h e is r e s p o n s i b l e f o r r u n n in g b a s ic a l ly t h e a ir l in e e s p e c i a l ly 20 t h e p r o f i ta b ili t y o f t h e r o u t e s a m o n g o t h e r s . T h e C h i e f S tr a t e g y O ff ic e r a ls o t h e r e w a s n o C h i e f S t r a te g y O ff ic e r a t t h e t i m e . T h e o t h e r p o s i t io n t h a t i n a s m u c h a s i t w a s n o t a t t h e le v e l o f E X C O a l s o th a t w a s – I think it was not vacant per se but I think the incumbent was on s u s p e n s i o n w a s a p o s i ti o n o f a C h i e f P r o c u r e m e n t O ff ic e r w h i c h a ls o c o n tr i b u t e d t h e n t o t h e w e a k c o n t r o l e n v ir o n m e n t e s p e c i a l ly i n th e a r e a Page 12 of 121 21 FEBRUARY 2020 – DAY 217 o f S u p p ly C h a i n M a n a g e m e n t . A n o t h e r c h a ll e n g e t h a t o r c o n c e r n t h a t w e h a d a t S A A w a s t h e m a t te r o f o ff ic ia ls th a t l a c k e d a p p r o p r i a t e c o m p e te n c i e s e s p e c i a l ly i n t h e a r e a s o f p r e p a r a t io n o f f i n a n c ia l s t a te m e n ts , u n d e r s t a n d in g you know the i n t e r n a ti o n a l fi n a n c i a l r e p o r t in g s ta n d a r d s , u n d e r s t a n d in g t h e l a w s a n d r e g u la t io n s g o v e r n i n g S u p p ly C h a i n M a n a g e m e n t , C o m p a n y ’s A c t a m o n g o t h e r s . A n d a ls o o ffic i a ls t h a t w e r e r e s p o n s ib l e f o r t h e – t h e A n n u a l P e r f o r m a n c e R e p o r t or the p e r fo r m a n c e i n fo r m a t i o n as well th e y d id not have an u n d e r s t a n d in g o f h o w to c o m p l y w i th t h e N a t io n a l Tr e a s u r y fr a m e w o r k 10 f o r p r o g r a m p e r f o r m a n c e in f o r m a t io n w h i c h is a fr a m e w o r k t h e n t h a t g u i d e s e n ti t ie s i n te r ms o f h o w t h e y n e e d t o p r e p a r e a n d r e p o r t o n p e r f o r m a n c e i n f o r m a ti o n . S o t h a t h a d a n e g a tiv e i m p a c t b e c a u s e w e e n d e d u p h a v in g a l o t o f fi n d i n g s C h a ir i n th o s e a r e a s . C h a ir th e C o m p l ia n c e c h a ll e n g e with L e g i s l a ti o n at SAA was a serious s p e c i f ic a l ly o n t h e – o n th e is s u e s o f ir r e g u la r e x p e n d i t u r e , fr u i t le s s a n d w a s t e fu l e x p e n d it u r e , t h e C o m p a n y ’s A c t a n d a ls o o n e o f th e a r e a s – is s u e s t h a t w e h a v e id e n ti fi e d t h e r e is c o m p l i a n c e – is C o n s e q u e n c e Management. Because in as much as there was all – there were all of t h e s e t r a n s g r e s s i o n s th a t w e c o u l d s e e o n t h e g r o u n d b u t w e c o u l d n o t 20 s e e c o n s e q u e n c e m a n a g e m e n t t h a t i s b e i n g e ff e c t e d to t h o s e t h a t tr a n s g r e s s e d t h e la w. I n t h e y e a r u n d e r r e v i e w th a t w e d i d a t t h e t i m e 2 0 1 7 in th e A n n u a l R e p o r t t h e y d is c lo s e d ir r e g u l a r e x p e n d i tu r e o f a p p r o x i m a te ly R 1 2 5 m i lli o n w h ic h w a s a s ig n if ic a n t i n c r e a s e f r o m I t h i n k j u s t o v e r R 5 m il li o n t h a t t h e y d i s c l o s e d i n 2 0 1 6 fi n a n c i a l y e a r. However… Page 13 of 121 21 FEBRUARY 2020 – DAY 217 C H A I R P E R S O N : W a s t h a t s o m e t h i n g l ik e 5 0 0 % i n c r e a s e ? M R S O K O M B E L A : I d id n o t c o u n t C h a ir t h e p e r c e n ta g e . A D V M I C H A E L M B I K I WA : But sorry that – that is reported by SAA it s e l f? MR SOKOMBELA: A b s o l u t e ly. A b s o lu t e l y C h a ir. H o w e v e r th e R 1 2 5 m il li o n a ls o th a t w a s d is c lo s e d a s ir r e g u la r e x p e n d i tu r e w a s n o t c o m p le t e a n d w e e n d e d u p q u a l i fy in g th e a u d it r e p o r t o f S A A b e c a u s e o f t h o s e c h a ll e n g e s . C h a ir p e r s o n . 10 S o I th i n k i t is v e r y i m p o r t a n t t o m e n t io n t h a t A n o t h e r c o n c e r n t h a t w e h a v e w a s t h e – w a s t h e le g a l d iv is io n a s w e ll a s th e o ffic e o f t h e C o m p a n y S e c r e ta r y i n te r m s o f t h e c a p a c i t a ti o n o f t h o s e o ff ic e s . T h e y w e r e s e v e r e ly u n d e r c a p a c i t a t e d . I n th e le g a l d i v i s i o n C h a ir t h e – th e r e w a s n o c a p a c i ty t o e n s u r e t h a t a ll – fo r a ll t h e t e n d e r s th a t a r e a w a r d e d t h e r e i s a c o n tr a c t t h a t is b e i n g s ig n e d . S o u t h A f r ic a n A ir w a y s w a s o p e r a t in g o n t h e le t t e r s o f a w a r d s . F o r a n e x a m p l e w h e n t h e t e n d e r is fi n a l is e d t h e n th e r e w il l b e th a t le t t e r t h e n t h a t is s e n t t o t h e w i n n i n g b i d d e r. C H A I R P E R S O N : Yo u h a v e b e e n – y o u h a v e w o n ? M R S O K O M B E L A : Yo u h a v e w o n . CHAIRPERSON: Hm. 20 MR SOKOMBELA: But subsequent… C H A I R P E R S O N : T h e r e w a s n o c o n t r a c t s i g n e d a f t e r th a t ? M R S O K O M B E L A : S u b s e q u e n t t o t h a t t h e r e w a s n o c o n tr a c t s ig n e d . CHAIRPERSON: And that is not how it is done. M R S O K O M B E L A : T h a t is n o t h o w i t is d o n e C h a ir p e r s o n . CHAIRPERSON: Hm. Page 14 of 121 21 FEBRUARY 2020 – DAY 217 M R S O K O M B E L A : Ye s . S o t h a t a ls o in o u r v ie w w a s a b i g r i s k f o r S A A b e c a u s e i f y o u d o n o t h a v e c o n tr a c ts t h a t a r e s i g n e d w it h y o u r s u p p li e r s h o w a r e y o u g o i n g to c o n tr o l t h e m ? Yo u k n o w i t – t h e y m a y d e li v e r g o o d s to y o u o r t h e y m a y – t h a t o f p o o r q u a li t y o r t h e y m a y n o t e v e n d e l iv e r t h e m a t a l l b e c a u s e y o u d o n o t h a v e a c o n t r a c t . B u t t h e y w e r e p a id . Yo u k n o w a n d t h e y w e r e p a i d b a s e d o n t h is l e tt e r o f a w a r d . S o f o r u s th a t w e s a id t h is is e x p o s i n g S A A t o s ig n if ic a n t – t o s ig n if ic a n t r is k t o d e liv e r. CHAIRPERSON: Can I just ask before you proceed? Do not forget the 10 next point you wanted to make. M R S O K O M B E L A : A b s o l u t e ly C h a ir. CHAIRPERSON: W e r e y o u a b le t o g e t a p ic t u r e o f h o w l o n g t h a t h a d b e e n g o i n g o n – f o r h o w lo n g th a t h a d b e e n g o i n g o n t h a t t h e y w o u ld ju s t i s s u e th e l e t t e r o f a w a r d i n g th e t e n d e r w it h o u t h a v i n g a c o n t r a c t concluded? M R S O K O M B E L A : C h a ir I th i n k t h a t h a s b e e n g o i n g o n f o r q u i te s o m e ti m e . B e c a u s e … C H A I R P E R S O N : A n d f o r q u it e s o m e ti m e w o u ld b e f o r s o m e y e a r s ? MR SOKOMBELA: 20 Fo r s o m e y e a r s C h a i r. Ev e n t h o u g h w e d i d n o t count. C H A I R P E R S O N : Ye s . M R S O K O M B E L A : In t e r m s o f h o w m a n y y e a r s . C H A I R P E R S O N : Ye s . MR SOKOMBELA: Because of the magnitude. CHAIRPERSON: yes. Page 15 of 121 21 FEBRUARY 2020 – DAY 217 MR SOKOMBELA: O f t h e s e c h a l le n g e s t h a t th e y h a d th e r e b e c a u s e S A A h a s g o t a v e r y b ig c o n tr a c t r e g is te r. C H A I R P E R S O N : Ye s . MR SOKOMBELA: Th a t t h e y h a d a n d m a j o r it y o f t h o s e w e c o u ld n o t fi n d . C H A I R P E R S O N : Ye s . MR SOKOMBELA: The signed contracts. C H A I R P E R S O N : Yo u m u s t te ll m e if t h e p ic t u r e I a m h a v in g is n o t t h e p ic t u r e t h a t y o u g o t. Yo u s a y y o u d i d n o t c o u n t h o w m a n y y e a r s a n d I 10 t h i n k y o u s a i d b e c a u s e o f t h e m a g n i tu d e a n d s o o n . A m I r i g h t to g e t t h e i m p r e s s io n th a t y o u t h o u g h t w h e r e d o w e s t a r t i f w e w a n t t o c o u n t ? M R S O K O M B E L A : C h a ir – C h a ir y o u a r e r i g h t b e c a u s e t h e c r e d ib il i ty o f t h e – o f t h e c o n tr a c t r e g is t e r i ts e lf . CHAIRPERSON: Hm. M R S O K O M B E L A : Wa s q u e s ti o n a b le . C H A I R P E R S O N : Ye s . Ye s . M R S O K O M B E L A : Ye s . CHAIRPERSON: Ye s . W o u ld I b e r i g h t i n – i n t h i n k i n g th a t if y o u p ic k e d t h i s u p a s a c o n c e r n th e n y o u r p r e d e c e s s o r s o u g h t t o h a v e a ls o 20 p ic k e d it u p i f i t h a d b e e n g o i n g o n f o r s o m e y e a r s ? M R S O K O M B E L A : C h a ir i f th e y f o u n d i t th e s ta t e th a t i t w a s . C H A I R P E R S O N : Ye s . M R S O K O M B E L A : Ye s th e y o u g h t t o h a v e p ic k e d i t u p . C H A I R P E R S O N : Ye s . M R S O K O M B E L A : H o w e v e r I w a s n o t t h e r e a t th e ti m e . Page 16 of 121 21 FEBRUARY 2020 – DAY 217 C H A I R P E R S O N : Ye s . M R S O K O M B E L A : S o I d o n o t k n o w in t e r m s o f w h a t … C H A I R P E R S O N : Ye s . M R S O K O M B E L A : T h e c ir c u m s t a n c e s w e r e . C H A I R P E R S O N : Ye s . M R S O K O M B E L A : H o w e v e r w h e n w e w e r e th e r e a n d w e l o o k e d a t th e s t a te o f a ff a i r s . C H A I R P E R S O N : Ye s . M R S O K O M B E L A : I t w a s q u i te d i r e . 10 CHAIRPERSON: Hm. Okay thank you. I i n t e r r u p te d y o u w h i l e y o u w e r e c o n ti n u i n g . M R S O K O M B E L A : T h a t is o k a y C h a ir. A D V M I C H A E L M B I K I WA : C h a ir m a y I a s k o n e fo ll o w u p q u e s t io n ? C H A I R P E R S O N : Ye s o k a y. A D V M I C H A E L M B I K I WA : A r i s i n g fr o m t h a t b e f o r e y o u p r o c e e d . C a n y o u g iv e u s a n i n d ic a ti o n o f w h a t w o u l d h a v e f o r m e d p a r t o f y o u r a u d i t y e a r th a t w o u l d a ls o fo r m p a r t o f p r io r o n e s s u b j e c t o f c o u r s e to s a m p li n g a n d th e l ik e ? A c o n tr a c t e n t e r e d i n to i n 2 0 1 2 / 2 0 1 3 t h a t w a s d u e to r u n u n ti l 2 0 1 9 w o u l d t h a t f o r m p a r t o f y o u r – o f y o u r a u d i t y e a r ? 20 M R S O K O M B E L A : A b s o l u t e ly C h a ir. A D V M I C H A E L M B I K I WA : A n d a s – s o r r y p l e a s e c o n ti n u e . MR SOKOMBELA: J a C h a ir a s l o n g a s t h a t c o n tr a c t is s ti ll e ff e c tiv e b e c a u s e t h e k e y is s u e i s t h a t t h a t c o n tr a c t t h e r e w il l n o t b e e x p e n d i t u r e t h a t w il l fl o w t h r o u g h t h e i n c o m e s t a te m e n t o r if m a y b e i t is a c o n tr a c t t o d e l iv e r a s s e ts t h e r e w i ll b e a s s e t s t h a t w i ll b e n e e d t o b e r e c o g n is e d Page 17 of 121 21 FEBRUARY 2020 – DAY 217 in t h e b a l a n c e s h e e t . S o w e o u g h t t o e n s u r e th e n t h a t w e te s t t h o s e r e g a r d le s s o f w h e n th e y w e r e e n te r e d i n t o . CHAIRPERSON: W e ll l e t u s g o b a c k t o m y e a r li e r q u e s ti o n a b o u t w h e t h e r o r n o t P r i c e w a te r h o u s e / N k o n k i s h o u l d h a v e p ic k e d u p w h a t y o u p ic k e d u p a b o u t c o n tr a c t s . Yo u - y o u s a i d w e ll i t d e p e n d s h o w t h e s i tu a ti o n w a s w h e n th e y a r r iv e d a n d y o u w e r e n o t th e r e . S o y o u - y o u d o n o t k n o w, b u t if i t w a s t h e s a m e a s w h a t y o u f o u n d . T h e y s h o u ld have picked it up. T h a t is m y u n d e r s t a n d in g o f y o u r e v i d e n c e a n d y o u h a v e 10 m a d e t h e p o in t t h a t S A A i s b i g a n d th e y h a v e g o t a l o t o f c o n tr a c ts - b i g c o n tr a c ts a n d s o o n . S o m y q u e s t io n is c o u l d a n y a u d i t o r a u d i t S A A i n t h e y e a r s t h a t p r e c e d e d y o u r c o m in g i n . L e t u s s a y t h e p a s t fi v e y e a r s fr o m 2 0 11 . C o u l d a n y a u d i t o r w h o d id a p r o p e r j o b n o t h a v e l o o k e d a t what contracts and tender SAA had awarded? C o u ld a n y b o d y d o i n g a u d i ti n g o f a n y e n ti t y o r a n e n ti ty s u c h as SAA not look at that? M R S O K O M B E L A : C h a ir - C h a ir, th e y w i ll h a v e t o l o o k a t i t . C H A I R P E R S O N : T h e y w o u l d h a v e to lo o k a t i t? M R S O K O M B E L A : A b s o l u t e ly. 20 CHAIRPERSON: A n d i f t h e y lo o k e d a t i s t h e r e a n y r e a s o n w h y th e y w o u ld n o t h a v e s e e n t h a t t h e s t a t e o f t h e c o n tr a c t r e g is t e r le a v e s m u c h t o b e d e s i r e d . Is t h e r e a n y b a s i s y o u c a n th in k o f w h y t h e y w o u l d n o t have picked up that there were no contracts? MR SOKOMBELA: I cannot think of any … C H A I R P E R S O N : B a s is ? Page 18 of 121 21 FEBRUARY 2020 – DAY 217 M R S O K O M B E L A : B a s is C h a ir. C H A I R P E R S O N : Ye s . M R S O K O M B E L A : H o w e v e r I m u s t s p e c i f y t h a t I d o n o t k n o w w h a t th e approach was. Yo u k n o w. H o w e v e r it i s i m p o r t a n t t h a t th e a u d i t o r s lo o k s a t c o n tr a c t m a n a g e m e n t . C H A I R P E R S O N : Ye s . W e ll t h a t i s - th a t i s w h a t I a m … MR SOKOMBELA: Hm. CHAIRPERSON: Tr y i n g t o e s t a b l is h , b e c a u s e y o u s e e I a m n o t a n a u d it o r. 10 MR SOKOMBELA: Hm. C H A I R P E R S O N : I a m n o t a n a u d i t o r. Yo u a r e a n a u d i to r. Th e y - th e y a r e a u d it o r s . S o I a m tr y i n g t o s e e w h a t c o u l d b e e x p e c t e d f r o m a n a u d it o r w h o d o e s h is o r h e r j o b r e a s o n a b l y w e ll a n d s o w h e n y o u p a i n t t h e p ic t u r e t h a t y o u p a i n t t o m e a b o u t t h e s t a te o f a ffa ir s a t S A A i n 2 0 d u r i n g t h e 2 0 1 6 /2 0 1 7 fi n a n c i a l y e a r. T h a t t h e r e w e r e m a n y c a s e s - a s I u n d e r s t a n d i t - w h e r e j u s t a l e t t e r a w a r d i n g th e t e n d e r h a d b e e n i s s u e d , b u t t h e r e w e r e n o c o n tr a c ts . I w a n t t o h a v e a n u n d e r s ta n d i n g w h a t a r e t h e c h a n c e s t h a t a n y a u d it o r d o in g h is o r h e r j o b p r o p e r l y c o u l d m is s th a t i n th e p r e v i o u s 20 years. Yo u a s a n a u d it o r y o u m i g h t b e a b l e t o s a y, n o . It w o u l d b e e a s y to m is s i t o r y o u m ig h t s a y, I a m s u r p r i s e d th e y m is s e d i t . I f - if t h a t i s t h e c a s e . Yo u k n o w. I w o u l d e x p e c t a n y a u d i to r w o r th h i s s a l t d o i n g h is jo b o r h e r j o b p r o p e r ly a n d r e a s o n a b ly t o p ic k th is u p o v e r th e y e a r s e s p e c ia ll y if th e y h a v e b e e n a u d i t i n g a n e n ti ty fo r fiv e y e a r s in succession. Page 19 of 121 21 FEBRUARY 2020 – DAY 217 MR SOKOMBELA: Hm. CHAIRPERSON: H o w c o u ld t h e y n o t p i c k it u p a t l e a s t o n o n e o f th e fi v e y e a r s ? MR SOKOMBELA: Hm. C H A I R P E R S O N : D o y o u w a n t t o s a y a n y t h in g a b o u t - a b o u t th is ? M R S O K O M B E L A : I th i n k - I th in k C h a ir t h e r e a r e - th e i r c h a n c e s a r e t h e y s h o u l d h a v e p i c k e d it u p . C H A I R P E R S O N : Ye s . MR SOKOMBELA: If … 10 C H A I R P E R S O N : Ye s . M R S O K O M B E L A : T h e s i t u a t i o n w a s th e s a m e s it u a ti o n a s w e s e e . C H A I R P E R S O N : Ye s . M R S O K O M B E L A : Yo u k n o w i n 2 0 1 6 / 2 0 1 7 . C H A I R P E R S O N : Ye s . M R S O K O M B E L A : Ye s . C H A I R P E R S O N : Ye s . T h a n k y o u . M R S O K O M B E L A : T h a n k y o u C h a ir. A D V M I C H A E L M B I K I WA : Th a n k y o u C h a i r. P l e a s e c o n t in u e … MR SOKOMBELA: Thank you. 20 A D V M I C H A E L M B I K I WA : W h e r e y o u w e r e . C H A I R P E R S O N : Ye s . MR SOKOMBELA: T h a n k y o u C h a ir. C h a ir, I t h in k o n e o f t h e o t h e r t h i n g s th a t I w a n t e d t o m e n ti o n . I h a v e - I h a v e m e n t i o n e d th e u n d e r c a p a c i t a ti o n o f t h e l e g a l d iv is i o n a s w e ll a s t h e C o m p a n y S e c r e t a r y ’s o ffic e . I t h in k o n e - o n e o f t h e c o n c e r n s t h a t w e h a d t h e r e a t S A A i s Page 20 of 121 21 FEBRUARY 2020 – DAY 217 t h a t t h e - t h e C o m p a n y S e c r e t a r y ’s o ff ic e i s v e r y i m p o r ta n t e s p e c i a l ly in t e r m s o f t h e m f u l f il li n g t h e ir r e s p o n s ib il i ti e s in t e r m s o f th e C o m p a n ie s A c t a n d a d v is i n g t h e B o a r d o f D ir e c to r s . T h e r e - t h e r e is - t h e r e is m a n y tr a n s g r e s s io n s t h a t w e s a w a t S A A o u t o f th e B o a r d R e s o lu t io n s t h a t w e r e m a d e a n d w e c o u l d n o t s e e w h e r e t h e C o m p a n y S e c r e ta r y h a s a d v i s e d t h e B o a r d . I f I m a y m a k e a n example. F o r e x a m p l e t h e r e is a n e x a m p l e w h e r e w e f o u n d o u t th a t S A A h a s p r o v id e d fi n a n c i a l a s s i s t a n c e t o i t s s u b s i d i a r i e s . T h e A ir C h e fs , t h e S o u th A fr ic a n A ir w a y s Te c h n ic a l . T h e r e is a n o t h e r s m a ll s u b s i d i a r y t h a t t h e y h a d th a t w a s 10 c a l l e d S o u t h A f r i c a n A ir w a y s Tr a v e l C e n tr e . Th e y - t h e y p r o v id e d fi n a n c i a l a s s is t a n c e to t h a t - t o t h o s e s u b s i d ia r i e s c o n tr a r y t o t h e r e q u ir e m e n t s o f S e c ti o n 4 5 o f th e C o m p a n i e s Ac t , b e c a u s e S e c ti o n 4 5 o f t h e C o m p a n i e s A c t r e q u i r e s t h e n a c o m p a n y to - t o - t o p r o v e t h a t a ft e r t h e - t h e f in a n c i a l a s s i s t a n c e h a s b e e n p r o v i d e d . T h e c o m p a n y w il l n e e d th e r e q u i r e m e n t s o f s o lv e n c y a n d li q u i d a t in g c h a ll e n g e s . Yo u k n o w - a s - y o u k n o w. S o I th in k t h a t w a s t h a t w a s a c h a l l e n g e d , b e c a u s e a t - a t t h a t t i m e th a t S A A w a s p r o v id in g t h e fi n a n c i a l a s s is t a n c e a l r e a d y S A A w a s in fi n a n c i a l d i s t r e s s . Th e ir 20 t h e ir li a b i li t ie s w e r e e x c e e d i n g t h e ir a s s e ts . Meaning that SAA was in s o lv e n t . T h e y h a d l i q u id i ty c h a ll e n g e s a n d t h e n t h a t t h e n r e s u l t e d i n t h e m - I t h i n k in t h e C o m p a n i e s a n d In t e l le c t u a l P r o p e r ty C o m m i s s i o n is s u i n g a n o n - c o m p l ia n c e n o ti c e to - t o S A A . S p e c i fi c a ll y f o r t h e fi n a n c i a l a s s is t a n c e t h a t w a s p r o v i d e d t o A ir C h e fs . Page 21 of 121 I t h i n k t h a t is - 21 FEBRUARY 2020 – DAY 217 t h a t is th e o n e . S o t h a t i s o n e e x a m p l e C h a ir p e r s o n . A n o th e r e x a m p l e is - i s - I t h in k t h e r e w a s a l s o a - a B o a r d R e s o l u t i o n t h a t w a s m a d e f o r t h e s e t a s i d e o f - o f t h e 3 0 p e r c e n t I th in k f o r th e - fo r t h e S M M E s w h ic h I t h i n k t h e D T I, t h e N a t i o n a l Tr e a s u r y h a v e - h a v e w a r n e d t h e B o a r d th a t th is is - t h e d e c is i o n th a t t h e B o a r d w a s m a k in g w a s unlawful. H o w e v e r th e B o a r d c o n ti n u e d to - to i m p l e m e n t t h a t d e c is i o n a n d w e c o u l d n o t s e e h o w t h e C o m p a n y S e c r e t a r y a ls o c o u l d n o t a d v is e t h e B o a r d o n t h a t . S o th o s e w e r e t h e e x a m p le s C h a ir p e r s o n to n a m e a 10 f e w t h a t w e h a d a n d th a t m a d e u s th e n a s - a s th e a u d i t te a m t o - to b e w o r r i e d t h e n in t e r m s o f t h e n w h a t i s t h e v a l u e t h e n t h a t t h e C o m p a n y S e c r e t a r y ’s o ffi c e is p r o v i d i n g t o S A A . C h a ir p e r s o n , th e - t h e is s u e o f r e c o r d k e e p i n g a t S A A w a s w a s a s i g n i f ic a n t c o n c e r n t o u s . W e w e r e - w h e n w e w e r e r e q u e s t in g in f o r m a ti o n fo r a u d i t p u r p o s e s . A t t i m e s i t w i ll - s o m e t i m e s i t w i ll t a k e t h r e e m o n th s f o r u s to g e t in f o r m a t io n a n d t h a t w a s t h e d ir e s i tu a ti o n t h a t th e - t h e s t a te o f a ff a i r s w a s a n d t h i s h a s r e s u l t e d in s i g n i fic a n t li m i ta t io n s - li m i t a ti o n s o f s c o p e o n o u r s i d e . Yo u k n o w d u e t o t h a t is s u e . 20 Es p e c i a ll y o n t h e a r e a s o f S u p p ly C h a i n M a n a g e m e n t a n d a ls o in a s s e ts - i n t h e a s s e ts o f - o f S A A . W h e n w e w e r e e v a l u a ti n g t h e s t a t u s o f i n t e r n a l c o n tr o l s - o f k e y c o n tr o ls a t S A A . T h e y i n d ic a te d t h a t a n in t e r v e n ti o n w a s r e q u ir e d i n t h e a r e a s o f le a d e r s h i p . In th e a r e a s o f fi n a n c i a l a n d p e r f o r m a n c e m a n a g e m e n t a s w e l l a s g o v e r n a n c e a n d t h e c o n tr i b u t i n g f a c t o r s t o t h a t C h a ir i n c l u d e d th e - t h e l a c k o f p r o p e r ly d o c u m e n te d p o lic ie s a n d Page 22 of 121 21 FEBRUARY 2020 – DAY 217 p r o c e d u r e s a t S A A , b e c a u s e w h a t w e s e e - w h a t w e fo u n d o u t is th a t S A A d o e s n o t h a v e - y o u k n o w - a d e q u a t e p o li c i e s a n d p r o c e d u r e s . T h e r e i s n o t e v e n a c e n tr a l r e p o s i t o r y w h e r e y o u c a n g o a n d s a y w h e n I a m l o o k in g f o r a p o li c y f o r s o m e th in g I c a n g o a n d fi n d i t a s a n e m p l o y e e o f S A A . S o m e o f t h e p o li c i e s w e r e o u t d a t e d . T h e y w e r e o u t d a t e d . Yo u k n o w. T h e y h a v e b e e n - t h e l a s t t i m e t h a t t h e y w e r e t h a t th e y w e r e u p d a t e d m a y b e w e r e a b o u t f iv e y e a r s a g o / 1 0 y e a r s a g o a n d th a t r e s u l t e d in a l o t o f - lo t o f c h a ll e n g e s a ls o o n u s . E s p e c i a l ly in t h e a u d it p r o c e s s , b e c a u s e w h a t w e r e a l is e d 10 w a s th a t th e r e is n o o n e t h a t w a s a c c o u n t a b l e f o r a n y t h i n g , b e c a u s e a t le a s t y o u n e e d t o g o t o t h e p o lic y t o s e e w h a t a r e t h e r o l e s a n d r e s p o n s i b i li ti e s o f s p e c i fic i n d iv id u a l s o r e m p lo y e e s i n th e b u s i n e s s . So those were then the - the challenges then that we had and m a n a g e m e n t a ls o w e r e r e s p o n d i n g v e r y s lo w ly t o o u r - t o o u r a u d i t fi n d i n g s i n te r m s o f a d d r e s s in g o u r a u d i t f i n d i n g s . I d o n o t k n o w h o w m a n y e n g a g e m e n ts w e h a d w i th S A A . Yo u k n o w. S o t h a t w a s - th a t w a s th e r e . T h a t w a s - t h a t w a s a c h a ll e n g e C h a ir. A n o th e r a r e a o f c o n c e r n . I t h in k I h a v e a l r e a d y h ig h l i g h t e d . I a m ju s t g o i n g t o b e q u ic k o n t h i s o n e . Is … 20 CHAIRPERSON: Before you go to that one. Let us go back to the one about record keeping. M R S O K O M B E L A : Ye s C h a ir. C H A I R P E R S O N : I - I w o u ld h a v e th o u g h t f o r a n a u d i t o r to d o h is o r h e r jo b p r o p e r l y in a u d it i n g a n e n t i ty. P r o p e r r e c o r d k e e p i n g o n t h e p a r t o f t h e e n ti t y i s c r u c i a l . That is one, because without proper record Page 23 of 121 21 FEBRUARY 2020 – DAY 217 k e e p i n g i t o u g h t to b e q u i t e d i ffic u lt fo r a n a u d i to r to d o h is o r h e r jo b p r o p e r ly. Th a t i s o n e . Tw o , y o u s a y t h a t a s p a r t o f t a lk i n g a b o u t t h e r e c o r d k e e p i n g , b u t m a y b e i t g o e s b e y o n d t h a t . Yo u s a y i t w a s d i ff ic u l t to fi n d p o l ic ie s at SAA. O b v i o u s ly w h e n y o u a r e a n a u d it o r a n d y o u a r e a u d i ti n g a n e n t i ty c e r ta i n ly s u c h a s a n S O E . Yo u - y o u a r e b o u n d to h a v e t o f i n d o u t h a v e y o u g o t a p o l ic y o n t h is . H a v e y o u g o t a p o l ic y o n t h a t ? H a v e y o u g o t a p o li c y o n t h a t ? If you have I want to see t h e m . N o w c e r t a in ly w h e n i t c o m e s t o p o l ic i e s - i f w h e n y o u c a m e i n 10 in 2 0 1 6 - d u r in g 2 0 1 6 f o r t h e 2 0 1 6 /2 0 1 7 fi n a n c i a l y e a r th e r e w a s t h a t p r o b le m t h a t S A - y o u w e r e l o o k i n g f o r c e r ta i n - f o r p o lic i e s a n d S A A c o u l d n o t g iv e y o u s o m e o f t h e p o l ic ie s o r m a y b e th e y c o u ld n o t g iv e y o u a n y. I a m n o t s u r e . O b v io u s ly t h e o n e s w h o h a d a u d i t e d in th e y e a r b e f o r e m u s t h a v e lo o k e d f o r t h o s e a s w e ll . M a y b e n o t e x a c t ly t h e s a m e , b u t th e y m u s t h a v e l o o k e d fo r s o m e p o l ic i e s a n d t h e q u e s t io n a r i s e s o n w h a t y o u s a w d u r i n g t h e - w h e n y o u w e r e d o i n g a u d i t in g 2 0 1 6 / 2 0 1 7 - t h e 2 0 1 6 /2 0 1 7 f in a n c i a l y e a r. W e r e y o u a b l e t o c o n c lu d e t h a t e i th e r y o u r p r e d e c e s s o r s d i d 20 n o t a s k fo r t h e s e p o li c i e s , b e c a u s e i f t h e y h a d a s k e d f o r t h e m a n d h a d n o t b e e n g iv e n t h e m . Th a t w o u ld h a v e a ff e c t e d t h e ir o p i n i o n o r w h a t w a s y o u r v ie w o f w h a t is li k e ly t o h a v e h a p p e n e d d u r i n g t h e p r e v i o u s y e a r. Is - is it p o s s ib l e t h a t t h e y - t h e y c o u l d - I m e a n o b v i o u s l y i f th e y a s k e d t h e y w e r e n o t g i v e n , b e c a u s e th e y w e r e n o t t h e r e . T h e r e f o r e s h o u l d t h a t n o t h a v e a ff e c te d t h e ir o p in i o n ? I f th e y Page 24 of 121 21 FEBRUARY 2020 – DAY 217 w e r e n o t g iv e n s h o u l d t h e y n o t h a v e n o t e d t h a t s o m e w h e r e a s a concern? So I wonder whether you are able to comment on those a s p e c ts . MR SOKOMBELA: C h a ir, I th i n k - I j u s t w a n t t o c l a r i f y t h a t . Th e r e w e r e s o m e p o l ic i e s . CHAIRPERSON: Hm. MR SOKOMBELA: H o w e v e r w h a t w e h a v e i d e n t i fi e d i n th o s e p o l ic i e s is t h a t t h e y w e r e la s t u p d a t e d y e a r s a g o . CHAIRPERSON: Hm. 10 MR SOKOMBELA: Yo u k n o w a n d y o u fi n d t h a t m a y b e , b e c a u s e t h e business as it goes things change in terms of how things are supposed t o b e d o n e . Yo u f i n d t h a t t h e y a r e o u t d a t e d o r t h e y a r e n o t - o r th e y a r e n o l o n g e r r e l e v a n t a n d in s o m e c a s e s f o r a n e x a m p l e y o u fi n d th a t t h e r e a r e n o p o l ic ie s a t a l l. J a . I t h i n k C h a ir, I t h in k in t e r m s o f t h e q u e s ti o n t h a t y o u a r e a s k in g o b v i o u s ly in te r ms o f g e t t in g p o lic i e s a n d p r o c e d u r e s is p a r t o f t h e a u d i t p r o c e s s i ts e lf . H o w e v e r I d o n o t k n o w i n t e r m s o f h o w t h e y a c t u a ll y g a th e r e d t h a t i n fo r m a t i o n , b e c a u s e i t w a s n o t p a r t o f t h e s c o p e o f l o o k i n g a t t h e o p e n i n g b a l a n c e s fo r t h e p r e d e c e s s o r a u d i to r. 20 S o I - I d o n o t h a v e a n o p i n i o n o n th a t in t e r m s o f h o w t h e y m i g h t h a v e d e a l t w i th a s i m i l a r s i t u a t i o n . CHAIRPERSON: B u t y o u a r e a b l e t o s a y a u d i t in g a n y p a r ti c u l a r fi n a n c i a l y e a r in r e g a r d t o a n e n ti ty li k e S A A w o u ld r e q u ir e a n a u d i to r t o a s k f o r v a r i o u s p o l ic i e s t o s e e i f t h e y a r e in p l a c e a n d t o s e e w h e t h e r w h a t t h e y p r o v i d e a n d w h e t h e r t h a t is f in e ? Page 25 of 121 21 FEBRUARY 2020 – DAY 217 M R S O K O M B E L A : A b s o l u t e ly C h a ir. C H A I R P E R S O N : Ye s . O k a y. M R S O K O M B E L A : A b s o l u t e ly. A D V M I C H A E L M B I K I WA : Mr S o k o m b e la , b e f o r e y o u c o n t in u e . O n t h e is s u e o f r e c o r d k e e p in g . Yo u m e n ti o n in y o u r a ffi d a v i t a li m i t a t i o n o f s c o p e . C a n y o u te ll u s w h a t th a t is ? M R S O K O M B E L A : C h a ir, a - a l i m i ta t io n o f s c o p e is w h e n m a n a g e m e n t d i d n o t p r o v i d e u s w i t h d o c u m e n ta t io n . T h e n w e a r e li m i t e d . We c a n n o t - w e c a n n o t - y o u c a n n o t d o a n y t h i n g . Yo u k n o w. W e w il l t h e n 10 ju s t s a y y o u li m i t e d u s . Yo u k n o w. S o - a n d t h a t is n o t a g o o d t h i n g fo r a n a u d i t o r t o g e t li m i t e d - l i m i ta t io n o f s c o p e , b e c a u s e o u r o b j e c ti v e is t o g e t d o c u m e n ts . S c r u t in is e t h e m s o t h a t y o u c a n h a v e a n o p i n i o n o n them. CHAIRPERSON: W h a t - w h a t is th e e x p l a n a t io n y o u g o t f r o m m a n a g e m e n t a b o u t t h e ir i n a b il i ty to g iv e y o u d o c u m e n ts ? W a s it t h a t t h e y d o n o t k n o w w h e r e t h e d o c u m e n t w e r e , b u t th e d o c u m e n ts d i d e x i s t o r w a s i t th e d o c u m e n ts a r e n o t th e r e ? M R S O K O M B E L A : C h a ir - C h a ir … C H A I R P E R S O N : O r i t v a r ie d ? 20 M R S O K O M B E L A : J a . C h a ir, I t h i n k o n e o f t h e c h a l le n g e s th a t w e s a w a t S A A w a s t h e r e - t h e r e w a s n o d i s c i p li n e o f r e c o r d m a n a g e m e n t . F o r a n e x a m p le w e h a v i n g a R e c o r d s M a n a g e r. Yo u k n o w. S o m e b o d y t h a t w i ll k n o w th e n th a t h e is g o i n g t o r e g u la t e in t h e e n ti ty i n t e r m s o f h o w d o c u m e n ts n e e d s t o b e r e c o r d e d . H o w t h e y n e e d to b e f il e d . F o r h o w l o n g t h e y n e e d t o b e r e t a i n e d . A m o n g th o s e t h i n g s . Page 26 of 121 21 FEBRUARY 2020 – DAY 217 S o i t w a s - e a c h a n d e v e r y b u s i n e s s u n i t w o u ld d o w h a t t h e y lik e . Yo u k n o w a n d a t ti m e s fo r a n e x a m p l e , b e c a u s e p e o p l e c o m e a n d g o i n a n o r g a n i s a t io n . S o y o u f in d o u t t h a t m a y b e t h e c u r r e n t p e o p l e t h a t y o u a r e d e a li n g w i th t h e y d o n o t k n o w w h e r e t h o s e d o c u m e n ts a r e . CHAIRPERSON: Hm. MR SOKOMBELA: Yo u k n o w. Yo u m a y fi n d th a t m a y b e t h e y a r e a v a i la b le s o m e w h e r e , b u t t h e y d o n o t k n o w w h e r e th e y a r e . A D V M I C H A E L M B I K I WA : T h a n k y o u . M r S o k o m b e l a , p l e a s e c o n ti n u e w h e r e y o u w e r e i n y o u r d e s c r i p ti o n o f t h e a r e a s o f c o n c e r n . 10 M R S O K O M B E L A : Th a n k y o u v e r y m u c h C h a ir. C h a ir, o n e - o n e o f th e a r e a s o f c o n c e r n th a t w e h a d w a s th e q u a li ty o f t h e - th e a n n u a l p e r f o r m a n c e r e p o r t th a t S A A u s e s to r e p o r t o n i ts - o n th e a c h i e v e m e n t o f th e s tr a t e g ic o b je c t iv e s . W e c o u l d n o t - i t w a s v e r y p o o r. W e c o u l d n o t - w e - w e i d e n t if i e d s ig n if ic a n t fi n d i n g s o n t h e u s e f u l n e s s o r m e a s u r a b il i ty o f t h e ir K e y P e r f o r m a n c e I n d ic a to r s a n d a ls o w e c o u ld n o t d e te r m in e i f t h e y a r e r e l ia b l e o r n o t a n d t h i s is v e r y i m p o r t a n t fo r a n e n ti ty l ik e S A A t h a t h a s g o t f o r e x a m p l e lo n g t e r m t u r n a r o u n d s tr a t e g ie s , b e c a u s e y o u w o u ld w a n t to s e e w h e t h e r t h e y a r e a c h i e v i n g t h e ir s tr a t e g ic o b j e c ti v e s o r n o t a n d I h a v e a lr e a d y m e n t i o n e d th a t th is 20 w a s d u e to a ls o th e c h a l le n g e s l ik e k e y o ffi c i a l s th a t w e r e r e s p o n s i b l e f o r t h is th a t l a c k e d a p p r o p r i a te c o m p e t e n c i e s . T h e r e w a s n o f u l lt i m e H e a d o f S tr a t e g y a t th e b u s i n e s s . J a . A m o n g o t h e r s . O n e o t h e r c o n c e r n t h a t w a s q u i t e s ig n if ic a n t t o u s w a s t h e - t h e i n e ff e c tiv e n e s s o f I n f o r m a t io n Te c h n o l o g y E n v ir o n m e n t a n d I n f r a s t r u c t u r e a t S A A a n d w e - w e a r e s a y in g th a t b e c a u s e S A A d i d n o t Page 27 of 121 21 FEBRUARY 2020 – DAY 217 h a v e a c o h e r e n t I n f o r m a t i o n Te c h n o lo g y G o v e r n a n c e Fr a m e w o r k t h a t w o u ld allow for e ff e c t iv e a li g n m e n t of processes, p r o je c ts and s tr u c t u r e s to s u p p o r t i ts b u s i n e s s . O n e o f th e t h i n g s t h a t w e - t h a t w e s a w t h e r e C h a i r is t h a t t h e - th e I n f o r m a ti o n Te c h n o l o g y D e p a r t m e n t is s u p p o s e d t o w o r k a s a n e n a b l e r t o - o r t o b u s in e s s - t o e n a b l e b u s i n e s s t o o p e r a t e p r o p e r ly, b u t w h a t w e s a w i s t h a t t h e r e w a s n o e ff e c tiv e c o m m u n ic a ti o n b e tw e e n t h e t w o . Yo u k n o w th e I T D iv is io n w i ll d o i ts p r o j e c t t h i n k in g t h a t b u s in e s s is g o i n g to - is g o in g to - t o a d a p t t o t h e m o r u t il is e t h e m . 10 O n e o f th e th i n g s f o r e x a m p l e t h a t I s a w - w h a t w e s a w a t S A A w a s t h e i s s u e o f r e c o r d s . S A A i s u s in g a l o t o f p a p e r - p a p e r s , b u t t h e y h a v e g o t o n e o f t h e b e s t E R P S o l u ti o n s b y t h e n a m e o f S A P, b u t p e o p l e w e r e w o r k i n g o u t s i d e w i t h p a p e r s . Yo u k n o w, b e c a u s e I g u e s s m a y b e th e r e w a s n o c h a n g e m a n a g e m e n t to s a y l e t u s k n o w t h a t w e h a v e g o t S A P. L e t u s e n s u r e th e n t h a t w e d o a ll t h e t r a n s a c ti o n s o n t h e s y s te m i ts e l f . S o t h o s e w e r e t h e c h a l le n g e s t h a t w e h a d a n d a ls o t h e t h e r e s p o n s i b i li ty f o r t h e - t h e I C T G o v e r n a n c e Fr a m e w o r k w a s - w a s t h a t o f t h e A u d i t a n d R is k C o m m i t t e e a n d i t w a s - i t w a s m a n d a t e d t o 20 i m p l e m e n t th e - t h e I C T G o v e r n a n c e F r a m e w o r k . O n e o f t h e c h a l le n g e s t h a t w e w a s i n t h e A u d i t a n d R is k C o m m i t t e e a t S A A w a s t h a t th e y d i d n o t h a v e a te c h n ic a l r e p r e s e n t a t iv e th a t - t h a t is - th a t u n d e r s ta n d s I T. Yo u k n o w. S o t h a t a ls o m a k e s t h e n o v e r s i g h t i n e ff e c ti v e , b e c a u s e y o u - y o u o u g h t t o h a v e s o m e b o d y t h e n t h a t u n d e r s t a n d s in t e r m s o f th e I T i s s u e s . W h a t a r e th e - w h a t a r e th e i s s u e s t h e r e i n t h e Page 28 of 121 21 FEBRUARY 2020 – DAY 217 - i n th e I T? T h e R is k M a n a g e m e n t p r o c e s s e s a t S A A t h e y l a c k e d m a t u r i t y C h a ir a n d - a n d a l s o t h e d e le g a ti o n o f a u t h o r i t y a t S A A d i d n o t o p e r a t e o p ti m a ll y. R e s u l ti n g in i n v a l i d d e c i s i o n s a t t i m e s a n d a ls o o n e o f t h e t h i n g s t h a t w e h a v e s e e n is t h a t it - i t - t h e t u r n a r o u n d ti m e fo r a d e c is i o n t o b e m a d e . I t w a s l o n g . I t w a s lo n g . I t h i n k i t i s b e c a u s e o f h o w t h e b u s i n e s s it s e l f w a s c o n v ic te d . Yo u k n o w, b e c a u s e t h e r e i s a lo t p e o p le th a t n e e d s t o a p p r o v e s o m e t h i n g . Yo u k n o w. S o th a t t o o k ti m e . I r e m e m b e r o n e o f t h e c o n tr a c ts fo r a n e x a m p le . I th i n k - I th i n k th e c o n tr a c ts w e r e o n t h e j e t f u e l . I th i n k th e y 10 w e r e - th e e x t e n s io n o f c o n t r a c t w a s e x t e n d - w a s - w a s a p p r o v e d . Th e extension was approved. I th in k a b o u t t h r e e m o n t h s a f t e r t h e d a t e - t h e e x p i r y d a t e o f t h e c o n tr a c t . S o a g a i n t h a t t e l ls y o u t h e n in t e r m s o f h o w l o n g t h e d e c i s i o n s a t S A A t o o k . Th e - th e i n a d e q u a t e s e g r e g a t io n o f d u ti e s a ls o w a s i d e n ti f ie d e s p e c i a l ly i n t h e a r e a s o f m a i n te n a n c e r e s e r v e s a n d p r o v is i o n f o r le a s e l ia b il it i e s . W h a t w e h a v e d e t e c t e d t h e r e i s m a te r i a l d i ff e r e n c e s b e t w e e n t h e a n n u a l fi n a n c i a l s t a te m e n ts a n d th e c a lc u l a ti o n s b o t h f o r t h e m a in t e n a n c e r e s e r v e s a s w e ll a s - a s a p r o v i s i o n f o r l e a s e li a b i li ti e s 20 w h ic h a l s o l e d t o m a t e r ia l m is s ta t e m e n ts a n d a ls o c h a n g e s m a d e t o th e c a l c u l a ti o n s t h a t w e r e m a d e o n t h e s u b m i t t e d f in a n c i a l s ta t e m e n ts . J a . S o th o s e w e r e t h e - t h o s e w e r e t h e k e y is s u e s I th i n k a t a h i g h l e v e l C h a ir p e r s o n th a t - t h a t w e h a v e id e n ti fi e d a s t h e a r e a s o f concern. C H A I R P E R S O N : Yo u m a y o r m a y n o t b e a b l e to te ll m e t h is . L o o k i n g Page 29 of 121 21 FEBRUARY 2020 – DAY 217 a t w h e r e S A A w a s fi n a n c i a l ly i n t h e 2 0 1 6 / 2 0 1 7 fi n a n c i a l y e a r i n c lu d in g is s u e s o f li q u i d i ty a n d in s o lv e n c y a n d l o o k in g a t t h e c l e a n a u d i ts t h a t y o u r p r e d e c e s s o r s h a d g iv e n fo r t h e p r e v i o u s fiv e o r s o y e a r s . Is t h i s is th e fi n a n c i a l s ta t e i n w h ic h S A A w a s i n t h e 2 0 1 6 / 2 0 1 7 fi n a n c i a l y e a r r e c o n c i l a b le w it h t h e c l e a n a u d i ts t h a t h a d b e e n g iv e n f o r f iv e successive years? M R S O K O M B E L A : C h a ir, I t h i n k w h e n y o u a r e s a y in g r e c o n c il a b l e w i t h p r e v i o u s y e a r s . M a y b e y o u m a y n e e d to c l a r i f y t h a t q u e s ti o n . CHAIRPERSON: 10 Ye s . L e t m e p u t i t t h i s w a y is i t fr o m a n a u d it o r ’s p o i n t o f v i e w i f y o u c o m e t o a n e n ti ty i n a p a r t ic u l a r fi n a n c i a l y e a r a n d fi n d i t t o b e i n t h e p o s i ti o n i n w h i c h S A A - in w h i c h y o u f o u n d S A A t o b e in t h e 2 0 1 6 / 2 0 1 7 fi n a n c i a l y e a r. Ar e y o u a b l e to s a y c l e a n a u d i ts f o r t h e p a s t f iv e y e a r s f o r t h i s e n t it y a r e c o n s is t e n t w i t h th is f in a n c ia l s i tu a ti o n i n w h ic h I a m fi n d i n g it t h e y e a r a f t e r t h e p r e d e c e s s o r s h a v e g o n e o r i s t h e p o s i t io n t h a t y o u s a y t h e r e i s n o w a y i f S A A is t h is - i s in t h is fi n a n c i a l p o s i ti o n th is y e a r th a t t h e c l e a n a u d i t o f la s t y e a r a n d th e p r e v i o u s f iv e y e a r s c o u l d b e j u s ti f ie d o r a r e y o u o n ly a b l e to s a y l o o k i t is p o s s i b l e t h a t a l l th o s e y e a r s t h o s e c l e a n a u d it s fa ir l y r e p r e s e n te d t h e p o s i ti o n o f S A A ? 20 S o m e t h i n g h a p p e n e d m a y b e d u r i n g th is fi n a n c i a l y e a r t h a t ju s t p u t i t in t h e p o s i ti o n th a t it is i n . I d o n o t k n o w if t h a t h e lp s y o u i n a n y w a y t o u n d e r s ta n d w h a t I a m lo o k i n g f o r. M R S O K O M B E L A : I t - i t d o e s - i t d o e s C h a ir. C H A I R P E R S O N : Ye s . MR SOKOMBELA: It does. Page 30 of 121 21 FEBRUARY 2020 – DAY 217 CHAIRPERSON: Hm. MR SOKOMBELA: I th i n k C h a i r w h a t - w h a t I s a i d I th in k s p e c i fi c a ll y y e s t e r d a y. O n e o f t h e t h i n g s t h a t I s a i d w a s t o s a y w h e th e r I a m g o i n g t o b e a b l e t o p r o v id e a n o p i n i o n … CHAIRPERSON: Ja. M R S O K O M B E L A : O n - o n w h e t h e r t h e n t h e - t h e c l e a n a u d it o p in io n t h a t w a s is s u e d b y P w C a n d N k o n k i … CHAIRPERSON: Hm. M R S O K O M B E L A : Wa s a v a li d … 10 CHAIRPERSON: Hm. MR SOKOMBELA: Opinion … CHAIRPERSON: Hm. MR SOKOMBELA: Because I think one important aspect is that these t h e s e w e r e c r e d i b le fi r ms a n d th e s e fi r ms th e - t h e I n d e p e n d e n t R e g u l a t o r y B o a r d f o r A u d i to r s d i d n o t fi n d a n y c h a ll e n g e s a s f a r a s th e q u a li ty is c o n c e r n e d . T h a t w a s th r o u g h o u r c o n c u r r e n c e s w h e n w e w e r e c o n c u r r in g t h a t a s th e A u d i to r - G e n e r a l . H o w e v e r w e - w e id e n ti fi e d - w e d i d id e n t i fy e r r o r s i n t h e p r e v i o u s y e a r s ’ f in a n c ia l s t a t e m e n ts t h a t w e r e c o r r e c te d a s p a r t o f t h e 20 r e s t a te m e n t o f c o r r e s p o n d i n g fi g u r e s , b u t C h a ir p e r s o n w h a t I d o n o t k n o w is w h e t h e r t h e n h o w d i d t h e p r e v i o u s - w h e t h e r t h e p r e v i o u s a u d it o r s w e r e a b l e t o i d e n ti fy t h o s e o r n o t - t h o s e e r r o r s o r n o t. S o I t h i n k th a t i s t h e - t h a t is t h e c h a l le n g e t h a t w e h a v e a n d … C H A I R P E R S O N : T h a t is th e c h a ll e n g e ? M R S O K O M B E L A : J a . T h a t is t h e c h a l le n g e a n d w h a t I - w h a t I d o n o t Page 31 of 121 21 FEBRUARY 2020 – DAY 217 w a n t to d o a ls o is t o - is t o s p e c u la t e . CHAIRPERSON: Ja. No, no, no. I - I … M R S O K O M B E L A : Yo u k n o w. Is to s p e c u l a te , j a . CHAIRPERSON: I accept - I accept. MR SOKOMBELA: Hm. CHAIRPERSON: Yo u - y o u w il l s e e th a t w i t h th e s e q u e s t i o n s I a m tr y i n g t o g e t … MR SOKOMBELA: Hm. CHAIRPERSON: 10 A s c lo s e a p ic tu r e o f S A A n o t j u s t i n 2 0 1 6 - i n th e 2 0 1 6 /2 0 1 7 fi n a n c i a l y e a r, b u t i n t h e y e a r s b e f o r e . A s c l o s e a p i c t u r e a s you as an auditor … M R S O K O M B E L A : A b s o l u t e ly. C H A I R P E R S O N : W e r e - w e r e a b le t o g e t . M R S O K O M B E L A : In d e e d . C H A I R P E R S O N : Yo u s e e . A D V M I C H A E L M B I K I WA : M R S O K O M B E L A : In d e e d . C H A I R P E R S O N : S o t h a t - th a t i s w h y I a m t r y i n g to l o o k - l o o k a t th a t , b e c a u s e - a n d w e - w e a ll k n o w t h a t t h e s i t u a t io n - fi n a n c i a l s i t u a t i o n o f 20 S A A h a s b e e n v e r y b a d f o r q u i te s o m e ti m e . Yo u k n o w. M R S O K O M B E L A : In d e e d . C H A I R P E R S O N : S o - s o , b u t i n o r d e r t o b e a b le t o p a s s a n o p i n i o n o n t h e is s u e s I a m r a is in g . MR SOKOMBELA: Hm. CHAIRPERSON: What would an auditor need to do? Would they need Page 32 of 121 21 FEBRUARY 2020 – DAY 217 t o d o m u c h m o r e th a n t h e l i m i te d l o o k t h a t t h e s t a n d a r d s - a s y o u to ld m e - a l l o w y o u w h e n y o u c o m e i n t o - t o lo o k a t o r - o r w h a t - w h a t is i t t h a t w o u l d b e n e e d e d f o r y o u o r a n y a u d i t o r t o t e ll m e - t o g iv e m e a n s w e r s t o th e s e q u e s t io n s . MR SOKOMBELA: that as - as C h a ir, I t h i n k a ls o - I th in k i t is i m p o r t a n t t o n o te a p r o f e s s io n a l a c c o u n ta n t I have got e t h ic a l r e s p o n s i b i li ti e s . E s p e c i a l ly p a s s i n g j u d g m e n t o n - o n s o m e t h in g th a t I do not know what … C H A I R P E R S O N : Ye s . 10 M R S O K O M B E L A : T h e c ir c u m s t a n c e s w e r e . C H A I R P E R S O N : Ye s . Ye s . M R S O K O M B E L A : H o w e v e r I th in k i t i s i m p o r t a n t m a y b e to m e n ti o n to y o u C h a i r th a t i f t h e s i t u a ti o n a s S A A b e f o r e w e t o o k b a c k th e a u d i t w a s t h e s a m e a s t h e s i t u a t io n th a t w e fo u n d S A A t o b e a t th e n i t w o u l d h a v e e x p e c te d t h e n th a t t h e p r e v i o u s a u d i to r s h a v e i d e n t i fi e d t h o s e fi n d i n g s . H a v e r e p o r te d t h o s e f in d i n g s a n d m a y b e p e r h a p s t h e a u d i t opinion should not have been clean. C H A I R P E R S O N : Ye s . Ye s . M R S O K O M B E L A : I t h in k t h a t is t h e c l o s e s t a n s w e r I c a n g iv e y o u . 20 CHAIRPERSON: T h a t y o u c a n g i v e , y e s , y e s . N o , n o th a t is fi n e , a n d w h a t w o u l d t h e C o m m is s i o n n e e d t o d o t o e s t a b l is h w h e t h e r t h e p o s i ti o n t h a t y o u f o u n d a t S A A w h e n y o u c a m e in w a s t h e s a m e o r w a s d i ff e r e n t w h e n t h e y c a m e i n , w h a t w o u l d w e n e e d to d o i f w e w a n t t o d o t h a t , b e c a u s e w e a r e c o m m i t t e d to b e i n g f a ir t o e v e r y b o d y. MR SOKOMBELA: A b s o l u te ly. Page 33 of 121 21 FEBRUARY 2020 – DAY 217 CHAIRPERSON: B u t w e n e e d t o u n d e r s ta n d a n d t o d o a p r o p e r j o b . MR SOKOMBELA: T h a n k y o u C h a ir. C h a i r t h e r e g u l a to r f o r th e a u d it o r s , w h ic h is t h e In d e p e n d e n t R e g u l a t o r B o a r d f o r A u d i t o r s is t h e o n e t h a t h a s g o t a m a n d a te to r e v i e w t h o s e f u n d s , j a , t h o s e fu n d s a n d t h e y a r e th e o n e s t h a t c a n b e a b l e th e n t o p r o v i d e a n o p i n io n w h e t h e r t h e n th o s e o p in i o n s w e r e f a ir o p in io n s o r n o t. CHAIRPERSON: O k a y, o k a y, n o t h a n k y o u . A D V M I C H A E L M B I K I WA : T h a n k y o u C h a ir. C a n I , fo ll o w i n g f r o m t h a t j u s t a s k o n e q u e s ti o n o f c la r i ty, b e c a u s e I u n d e r s ta n d y o u r 10 e v i d e n c e fr o m e a r l ie r to b e t h a t a t le a s t in t w o r e s p e c ts y o u r a u d i t o p i n i o n d o e s m a k e a j u d g m e n t o f th e p r io r y e a r ’s a u d i t w o r k . T h e fir s t is in r e s p e c t o f t h e o p e n i n g b a la n c e , t h e c l o s i n g b a l a n c e , w h ic h is c a r r i e d o v e r fr o m t h e p r e v i o u s a u d i t y e a r t o y o u r o w n is th a t a c o r r e c t assessment? MR SOKOMBELA: N o t h a t is n o t a c o r r e c t a s s e s s m e n t . Th e c o r r e c t a s s e s s m e n t is t h a t w a s o u r s e lv e s w e d id n o t s a ti s f y, w e w e r e n o t s a ti s f i e d w i t h t h e – w i th w h a t w e s a w i n t h e a u d i t fi le o f t h e p r e v i o u s a u d it o r s . H o w e v e r w e d i d n o t p a s s j u d g m e n t , i n s t e a d w h a t w e d id w e p e r f o r m e d a d d i t io n a l p r o c e d u r e s a t S A A a n d i n s o m e c a s e s w e 20 id e n t i fi e d s ig n i f ic a n t f in d in g s t h a t r e s u l t e d i n t h e p r i o r fi g u r e s b e i n g corrected. S o I th i n k i t is i m p o r t a n t t o u n d e r s t a n d t h a t t o s a y t h e r e a s o n w h y – I t h in k i t w a s a t th e m e r c y o f th e p r e v i o u s a u d i t o r s f o r t h e m to a l lo w u s t o g o t o t h e ir a u d i t fi le , i f t h e y l i k e d t h e y m i g h t h a v e s a id n o w e d o n ’ t w a n t t o g iv e y o u a c c e s s , s o – a n d w e a r e v e r y c l e a r th e n t o Page 34 of 121 21 FEBRUARY 2020 – DAY 217 s a y w e j u s t w a n t t o g e t t h is a c c e s s s o th a t w e c a n s e e w h a t is th a t w e c a n r e ly, w h a t is i t t h a t p e r h a p s i f w e d o n ’ t r e ly t h e n w e n e e d to g o b a c k to S A A a n d p e r f o r m a d d i t io n a l p r o c e d u r e s . CHAIRPERSON: Ye s . A D V M I C H A E L M B I K I WA : S o r r y M r S o k o m b e l a i t m a y h a v e b e e n th e f a c t th a t I u s e d t h e w o r k j u d g m e n t w h i c h w a s t h e i n a p p r o p r i a te o n e to use. W h a t I m e a n t o a s k w a s t h a t i n y o u r f in d i n g s a s t o t h e o p e n i n g b a l a n c e y o u w e r e y o u r s e l f m a k i n g a f in d i n g a s t o t h e c l o s in g b a l a n c e o f t h e p r i o r y e a r ’s a u d i t o r s , b a s e d o n t h e c ir c u m s ta n c e s th a t p r e v a il e d a t 10 t h e ti m e f o r t h e m ? MR SOKOMBELA: C h a ir I h a v e m a d e th e fi n d i n g s o n t h e c l o s in g b a l a n c e b a s e d o n th e a d d i ti o n a l p r o c e d u r e s a n d t h e e v i d e n c e th a t I g o t a t S A A , a n d th e e v i d e n c e t h a t I g o t a t S A A w e r e a t t h e t i m e t h a t t h e previous auditors were there. A D V M I C H A E L M B I K I WA : MR SOKOMBELA: Ye s . Because we had to go back memory lane and for t h e m t o g i v e u s e v id e n c e a n d s o m e e v i d e n c e t h e y c o u l d p r o v e c e r t a in things, but unfortunately in some instances there was non-compliance w i t h t h e a c c o u n ti n g s t a n d a r d s . 20 CHAIRPERSON: Ye s , y e s , s o i n r e g a r d t o t h a t y o u k n e w w h a t p o s i t io n t h e y h a d fo u n d S A A a n d y o u k n e w i t w a s t h e s a m e a s th e p o s i t io n y o u found it and then you were able to say we need to correct something? MR SOKOMBELA: CHAIRPERSON: A b s o l u te ly, a b s o lu t e l y. Thank you. A D V M I C H A E L M B I K I WA : And th e Page 35 of 121 second respect was the 21 FEBRUARY 2020 – DAY 217 r e s t a te m e n ts th a t y o u s p o k e a b o u t e a r l ie r w h e r e y o u r e s t a t e d th e fi n a n c i a l s t a t e m e n t s fr o m p r i o r y e a r s , is t h a t c o r r e c t? MR SOKOMB ELA: T h e m a n a g e m e n t h a d t o r e s t a te t h e fi n a n c i a l s t a te m e n ts , o t h e r w i s e th e a u d i t o p in i o n c o u l d h a v e b e e n w o r s e if t h e y d i d n ’ t r e s ta t e th o s e p r i o r s t a te m e n ts . CHAIRPERSON: W e l l if w h e n y o u c a m e th e r e w a s n o r e s t a t e m e n t , r e s t a te m e n t w a s d o n e a t y o u r in s ta n c e i s t h a t r ig h t ? MR SOKOMBELA: C h a ir I c a n ’ t r e m e m b e r y o u k n o w w h e th e r t h e r e w e r e a n y r e s t a t e m e n t o f c o r r e s p o n d i n g f i g u r e s in t h e 2 0 1 6 / 1 7 fi n a n c i a l , 10 t h e r e m a y b e o n e o r t w o r e s t a t e m e n t o f c o r r e s p o n d in g fi g u r e s . CHAIRPERSON: MR SOKOMBELA: Ye s . J a , s o I c a n ’ t n e c e s s a r ily r e m e m b e r i f th e r e w e r e n ’ t a n y, b u t w h a t I w a n t a ls o t o s p e c i fy i s t h a t th e r e s ta t e m e n t o f p r i o r y e a r s is a n a c c e p t a b l e – is a c c e p ta b l e i n t h e p r o fe s s i o n . CHAIRPERSON: MR SOKOMB ELA: I n te r ms o f s ta n d a r d s . In t e r m s o f s t a n d a r d s , t h e r e is e v e n a c c o u n ti n g s t a n d a r d s t h a t s a y s i f y o u f i n d t h a t t h e r e a r e e r r o r s i n th e p r i o r y e a r s t h is is h o w y o u n e e d t o d e a l w i t h th e m , t h i s is h o w y o u n e e d t o d i s c lo s e them. 20 CHAIRPERSON: MR SOKOMBELA: CHAIRPERSON: Ye s , y e s , y e s . Ye s C h a ir. W h a t m a d e r e s t a t e m e n t t o b e n e c e s s a r y, w a s i t n o t a s i tu a ti o n t h a t lo g ic a l ly m u s t h a v e e x i s te d w h e n y o u r p r e d e c e s s o r s w e r e d o i n g t h e ir a u d i t . MR SOKOMBELA: W h a t m a d e t h e r e s t a t e m e n t C h a ir is t h a t y o u k n o w Page 36 of 121 21 FEBRUARY 2020 – DAY 217 b e c a u s e p e o p l e t h a t a r e p r e p a r i n g f in a n c i a l s t a te m e n ts s o m e t i m e s th e y m a k e m is t a k e s o r t h e y m a k e e r r o r s in t h e s e n s e , i n th a t s e n s e , s o y o u m a y fi n d t h a t s o m e o f t h e – o r m a y b e th e r e m a y b e d i ffe r e n t in t e r p r e t a ti o n s o r th e y m ig h t h a v e i n t e r p r e te d t h e s t a n d a r d w r o n g , y o u k n o w. L e t m e m a k e a n e x a m p le o f w h e r e f o r e x a m p l e t h e – w e fi n d t h a t h o w th e y i n t e r p r e t e d t h e s t a n d a r d w a s w r o n g w a s S A A h a d a s u b o r d in a t e d lo a n w i th N e d b a n k o f a b o u t R 1 . 3 b i ll io n , a n d t h a t h o w t h e n t h a t s u b o r d i n a te d l o a n w a s tr e a t e d in th e f i n a n c ia l s ta t e m e n ts , i t w a s 10 tr e a t e d a s a n e q u it y i n s tr u m e n t , a s o p p o s e d t o b e t r e a t e d a s a d e a d in s t r u m e n t , a n d w h e n w e a s p a r t o f t h e o p e n i n g b a l a n c e s w h e n w e w e ’r e r e v ie w i n g t h e d e c is i o n to c l a s s i fy t h is l o a n a s e q u i ty a n d e v e n t h e i n te r e s t th a t w a s p a i d t o N e d b a n k a t t h e ti m e w a s c la s s if i e d a s d iv i d e n d s , a s d iv id e n d s a s o p p o s e d to b e c l a s s i fi e d a s i n te r e s t p a i d y o u k n o w i n t h e f in a n c ia l s t a te m e n ts , w e r e a l is e d t h a t th a t w a s n o t i n a c c o r d a n c e w i t h th e in t e r n a t io n a l f in a n c ia l r e p o r ti n g s t a n d a r d s a n d m a n a g e m e n t th e n h a d to r e c l a s s if y th a t l o a n f r o m b e in g a n e q u i ty in s t r u m e n t to b e i n g a d e a d i n s tr u m e n t . CHAIRPERSON: 20 Okay so hence your comment that your predecessors m a y h a v e b e e n f a c e d w i t h th e s a m e s it u a t io n b u t t h e ir i n te r p r e t a ti o n o f t h e s t a n d a r d s m a y h a v e b e e n d i ff e r e n t fr o m y o u r o w n in t e r p r e t a ti o n . MR SOKOMBELA: CHAIRPERSON: MR SOKOMB ELA: In t h a t s p e c if ic s c e n a r io . I n r e g a r d to t h a t s p e c i fi c s c e n a r io . I n th a t s p e c i f ic s c e n a r io t h a t’s w h a t I d e t e r m i n e d , h o w e v e r in o t h e r s c e n a r i o s I d o n o t k n o w w h a t m i g h t h a v e c a u s e d t h e m Page 37 of 121 21 FEBRUARY 2020 – DAY 217 n o t to , b u t i n th a t s p e c i fi c o n e b e c a u s e w e l o o k e d a t th a t o n e , t h e r e is a l o t o f c o n s u l ta t i o n s t h a t w e h a d t o d o . CHAIRPERSON: MR SOKOMBELA: Ye s . O n o u r s i d e a s w e l l t o a r r iv e a t a d e c i s i o n to s a y r e c la s s i f y th e R 1 . 3 b i ll io n n o t t o b e p a r t o f y o u r e q u i ty, i t is n o t y o u r e q u it y, i t is a d e a d i n s tr u m e n t, m e a n i n g t h a t i t s h o u ld f o r m p a r t o f th e lo a n s . CHAIRPERSON: Ye s , y e s , y e s , o k a y a lr ig h t , b u t y o u s a y o t h e r s y o u c o u l d n ’ t te ll w h a t l e d t h e m t o d e c is io n , c o n c lu s i o n t h e y r e a c h e d ? 10 MR SOKOMBELA: CHAIRPERSON: A b s o l u te ly C h a ir. O k a y, t h a n k y o u . A D V M I C H A E L M B I K I WA : Thank you. M r S o k o m b e la I w o u l d n o w lik e t o ta k e y o u to th e f in a l m a n a g e m e n t r e p o r t t h a t y o u r e fe r r e d t o , y o u w ill fi n d t h a t i n D D 2 0 B a t p a g e 5 7 2 . A r e y o u t h e r e ? MR SOKOMBELA: Ye s C h a ir. A D V M I C H A E L M B I K I WA : C a n y o u s t a r t b y te ll in g u s w h a t t h is d o c u m e n t i s a n d w h a t i ts p u r p o s e is ? MR SOKOMBELA: C h a ir t h is is th e fi n a l m a n a g e m e n t r e p o r t o f S o u t h A fr ic a n A ir w a y s , . . . [i n d is t in c t] fo r t h e 3 1 s t o f M a r c h 2 0 1 7 f in a n c i a l y e a r 20 a n d t h e p u r p o s e is to c o m m u n ic a t e s i g n i fi c a n t f in d in g s t o m a n a g e m e n t a n d th o s e c h a r g e d w i t h g o v e r n a n c e s o th a t t h e y c a n b e a b l e t h e n to a d d r e s s a n y d e f ic ie n c ie s t h a t a r e i d e n ti fi e d a n d a ls o f o r t h e A u d i t C o m m i t t e e to b e a b l e to h a n d o v e r t o t h e i n te r n a l a u d i t t o m a k e a f o l l o w u p o n s o m e o f th e fi n d i n g s th a t w e a d d r e s s e d . CHAIRPERSON: I f y o u h a v e b e e n a u d i ti n g a n e n t i ty a s a n a u d i t o r Page 38 of 121 21 FEBRUARY 2020 – DAY 217 w o u ld y o u a l w a y s h a v e t o h a v e a m a n a g e m e n t r e p o r t t h a t y o u p u t i n o r is t h e d e c is i o n t o d o a m a n a g e m e n t r e p o r t d ic t a te d b y t h e f a c t t h a t y o u h a v e m a d e c e r t a i n a d v e r s e fi n d i n g s o r c e r ta i n fi n d i n g s th a t y o u fe e l ju s t i fy p u t ti n g t o g e t h e r a r e p o r t t h a t w o u l d b e g i v e n t o m a n a g e m e n t ? MR SOKOMBELA: C h a i r t h e m a n a g e m e n t r e p o r t is a r e q u ir e m e n t t o – t h a t i t n e e d s t o b e p r o v i d e d to m a n a g e m e n t a n d . . . [i n t e r v e n e s ] CHAIRPERSON: I r r e s p e c t iv e o f w h a t fi n d in g s w e h a v e m a d e ? MR SOKOMBELA: I r r e s p e c t iv e o f w h a t fi n d i n g s t h e y h a v e m a d e , I t h i n k o t h e r fir m s th e y c a ll it a m a n a g e m e n t l e t te r. 10 CHAIRPERSON: MR SOKOMBELA: CHAIRPERSON: O k a y, o k a y. Ye s . W h ic h t h e r e f o r e m e a n s t h a t i f w e w a n t to lo o k a t w h a t y o u r p r e d e c e s s o r s m a y h a v e p ic k e d u p o r n o t p ic k e d u p f o r t h e p r e v i o u s fi n a n c i a l y e a r s w e l o o k a t t h e ir m a n a g e m e n t r e p o r t to management. MR SOKOMBELA: CHAIRPERSON: A b s o l u te ly C h a ir. Ye s , o k a y. A D V M I C H A E L M B I K I WA : Th a n k y o u C h a ir. Mr Sokombela if you turn o v e r t o p a g e 5 7 7 , I a m c o n c e r n e d t h a t i t l o o k s li k e y o u a r e l o o k in g a t a 20 d i ff e r e n t p a g e to m e . MR SOKOMBELA: Yo u r e y e s a r e v e r y s h a r p , I m u s t s a y. A D V M I C H A E L M B I K I WA : 5 7 7 w h ic h s a y s “o v e r a ll m e s s a g e ” a t th e top. MR SOKOMBELA: I s e e t h a t C h a ir. A D V M I C H A E L M B I K I WA : T h i s is t h e k i n d o f s u m m a r y o f t h e is s u e s Page 39 of 121 21 FEBRUARY 2020 – DAY 217 t h a t y o u h a v e b a s ic a l ly j u s t t a lk e d u s t h r o u g h , is th a t r i g h t? MR SOKOMBELA: A b s o l u te ly C h a ir. A D V M I C H A E L M B I K I WA : I w o u l d l ik e y o u t o tu r n t o p a g e 6 1 8 o f t h e Management Report please. CHAIRPERSON: W e l l m a y b e le t u s f o r t h e s a k e o f c o m p l e t e n e s s l e t u s p la c e o n r e c o r d t h a t t h e m a n a g e m e n t r e p o r t s ta r t s a t p a g e 5 7 5 a n d goes up to what page? A D V M I C H A E L M B I K I WA : C h a ir i t is a l i t t le b i t c o m p li c a t e d , i t g o e s u p t o 6 4 9 , b u t t h a t is .. . [ in t e r v e n e s ] 10 CHAIRPERSON: I j u s t w a n t w h o e v e r r e a d s th e tr a n s c r i p t t o k n o w . . .[ i n t e r v e n e s ] A D V M I C H A E L M B I K I WA : CHAIRPERSON: I n d e e d , s o le t m e e x p l a i n . Ja. A D V M I C H A E L M B I K I WA : I t g o e s u p t o 6 4 9 , e x c e p t fo r A n n e x u r e s A to C. CHAIRPERSON: Ye s . A D V M I C H A E L M B I K I WA : Annexures A to C are the detailed audit fi n d i n g s . CHAIRPERSON: 20 Ye s . A D V M I C H A E L M B I K I WA : In t o ta l i t r u n s to 7 2 0 p a g e s , t h o s e a r e c o n ta in e d i n Fi le D D 2 0 C . CHAIRPERSON: Ye s . A D V M I C H A E L M B I K I WA : CHAIRPERSON: Fr o m p a g e 9 5 0 . Ye s . A D V M I C H A E L M B I K I WA : A ll t h e w a y th r o u g h t o D D 2 0 D a t p a g e 1 5 9 1 . Page 40 of 121 21 FEBRUARY 2020 – DAY 217 CHAIRPERSON: O k a y s o th e m a n a g e m e n t r e p o r t w i t h it s a n n e x u r e s s t a r ts a t 5 7 5 a n d . . . [i n te r v e n e s ] A D V M I C H A E L M B I K I WA : CHAIRPERSON: 5 7 2 C h a ir. Of, 5 – 572 of DD20B up to what page of what lever a r c h fi le ? A D V M I C H A E L M B I K I WA : CHAIRPERSON: Up to DD20D at page 1591. O k a y th a t ’s fi n e . A D V M I C H A E L M B I K I WA : Th a n k y o u . C h a ir I s e e w e h a v e r e a c h e d 11 : 1 5 . 10 CHAIRPERSON: Ye s , le t ’s t a k e t h e s h o r t a d j o u r n m e n t , w e w il l r e s u m e at half past eleven. We adjourn. REGISTRAR: A ll r is e . INQUIRY ADJOURNS INQUIRY RESUMES C H A IR PER SO N : O k a y, le t u s c o n tin u e . A D V MIC H A EL MB IK IWA : Th a n k y o u C h a ir. Mr So k o mb e la w e w er e in th e fin a l ma n a g e me n t r e p or t w h ic h w a s a t p a g e 5 7 2 , in File D D( 2 0) ( b ) , c a n I a s k y o u to tu r n to p a g e 6 1 8 o f th a t d o c u me n t? 20 MR SO K O MB ELA : Ye s C h a ir. A D V MIC H A EL MB IK IWA : A t – a t ite m 4 .2 .3 o n th a t p a g e it s a y s p r o c ur e me n t p r oc e ss es , a n d it s a y s th e ta b le b e lo w is a s u mma ry o f fin d in g s id e n tifie d o n p r o c u r e me n t p r o c es se s . C a n y o u ta k e u s th r o u g h w h a t th a t ta b le r e p r e s e n ts ? MR SO K O MB ELA : C h a ir th is ta b le r e p r e se n t th e s u mma r y o f w o r k th a t Page 41 of 121 21 FEBRUARY 2020 – DAY 217 w e h a v e d o n e w h e n w e w e r e a u d itin g th e a u d it o f Su p p ly - C ha in Ma n a g e me n t lik e th e p r oc u r e me n t p r o ce ss , th e s u p p ly, th e p r o cu r e me n t p r o c es se s . C h a ir I d o n o t k n o w if y o u w a n t me to ta k e y o u th r o u g h th e ta b le its e lf. A D V MIC H A EL MB IK IWA : MR SO K O MB ELA : Ple a s e . C h a ir, if y o u lo o k a t th e ta b le th e r e , it is b as ic a lly h a s g o t th r e e c o lu mn s , b as ic a lly. Th e c o lumn th a t h a s g o t c o n tr a c ts a n d th e c o lu mn th a t h a s g o t q u o ta tio n s , a n d th e n th e c o lu mn th a t h a s g o t a to ta l. Th a t c o lu mn – th a t c o lu mn th a t h a s g o t c o n tr a c ts , y o u w ill s e e th a t 10 th e r e is a v a lu e a n d a ls o th e r e is a n u mb e r, in a c tu a l fa c t in a ll c o lu mn s th e r e is a v a lu e a n d a ls o th e r e is a n u mbe r. C h a ir, ye s te r da y I th in k I e x p la in e d th e c on c ep t o f s a mp le , in te r ms o f s a mp le s e le c tio n . C H A IR PER SO N : I a m s o r r y, ju s t to ma k e s u re I u n d e r s ta n d th es e c o lu mn s , in itia lly w h en y o u s a id th e r e w er e th r e e c o lu mn s I w o n de r e d w h a t y o u w er e ta lk in g a b ou t b e c a us e th er e s e e ms to b e ma ny, ma n y c o lu mn s b u t I th in k I d o u n d e r s ta n d n o w. Yo u h a v e g o t c o n tr ac ts a n d th e n n u mb e r a n d v a lu e o n th e r ig h t h a n d s id e an d th e n o n th e le ft h a n d s id e y o u h a ve g o t to ta l, y o u h a v e g o t n u mb e r, y o u h a v e g o t v a lu e . MR SO K O MB ELA : 20 C H A IR PER SO N : MR SO K O MB ELA : Ye s C h a ir. D o – d o th o s e tw o c o lu mns r e p r es e n t th e s a me th in g ? Th o s e – th o s e tw o c o lumn s C h a ir, if y o u – if y o u lo o k a t ju s t th e c o lu mn s u p in th e to p th er e , y o u w ill s e e in th e to p th a t I h av e g o t to ta l, th e r e is to ta l, th e n n e x t to to ta l i t is v e r y b lu r so , y o u ma y n o t s e e it, b u t w h a t th a t w o r d is , it is s a y in g q uo ta tio n s . C H A IR PER SO N : Ye s . I c a n s e e th a t. Page 42 of 121 21 FEBRUARY 2020 – DAY 217 MR SO K O MB ELA : An d th e n n e x t to th a t is c o n tr a c ts so , w h a t w e d id th e n , b e c a u s e th is is th e ta b le th a t s h o w s in te r ms o f th e s e le c tio n th a t w e h a v e d o n e , th e s e le c tio n th a t w e h a v e d o n e w h e n w e w e r e te s tin g , w h e n w e w an te d to te s t te n d e r s a s w e ll a s qu o ta tio n s a t SAA . C H A IR PER SO N : I w ill te ll , I w ill te ll y o u w h a t ma y b e c o n fu s in g me . I w o u ld h a v e e x pe c te d y o u to s ta r t w ith th e c o n tr ac ts c o lu mn a n d th e n n o , n u mb e r, ma y b e va lu e n u mb e r so , I a lmo s t a s k e d yo u w h e th er y o u a r e le ft h a n d e d so – s o a s y o u ex p la in it ma y b e I w ill g e t to u n d e r s ta n d it mo r e . MR SO K O MB ELA : 10 Ab s o lu te ly C h a ir. Be fo r e I e x p la in it le t me g o b a c k to th e c o n ce p t o f s a mp le , th e s a mp le s e le c tio n b e c au s e w h a t th is d e mo n s tr a te is u s a s Au d ito r s a s I e x p la in ed y e s te r d ay th a t s o me time s it is imp r a c tica l fo r u s to te s t ev e ry th in g , s o th e n fo r u s to ga in e v id e n ce w e – w e d o s a mp le a t time s , s o th is ta b le th en s h o ws th e sa mp le s ize , th e s a mp le s iz e s th a t w e h av e s e le c te d fo r bo th te n d e r s , fo r b o th th e te n d e rs a s w e ll a s th e q u o ta tio n s , a n d th e n th e s a mp le s iz e in te r ms o f th e n u mb e rs a s w e ll a s th e v a lu e o f th o s e te n d e r s , fo r a n e x a mp le , if y o u lo o k o n th e le ft h a n d s id e o f th a t ta b le , b e s id e s th a t w e d id n o t la b e l it, it s u p p os e d to b e d e sc r ip tio n . C H A IR PER SO N : 20 MR SO K O MB ELA : C H A IR PER SO N : An d d e s c r ip tio n w ou ld h av e b e e n fo r th a t fir s t c o lu mn ? Fo r th a t fir s t c o lu mn C h a ir. Ye s . O h O k a y, a nd y es so ma y b e th a t is p a r t o f w ha t is c o n fu s in g me , o k ay, a n d – a n d to ta l th e r e is s u p p o se d to b e to ta l o f w h a t? MR SO K O MB ELA : Th e to ta l th e r e is s u p p o se d to b e th e to ta l o f q u o ta tio n s a n d c on tr a c ts . A D V MIC H A EL MB IK IWA : So , q u o ta tio n s a n d c o n tr ac ts is a b r e ak d ow n Page 43 of 121 21 FEBRUARY 2020 – DAY 217 o f w h a t is c o n ta in e d in th e to ta l c o lu mn s . MR SO K O MB ELA : Ab s o lu te ly. So – s o – s o if I a m s a y in g , fo r e x a mp le if I ma k e a n e x a mp le C h a ir, y o u s a y th e r e , I s a id a w a r d s e le c te d fo r te s tin g , th e to ta l is 1 4 0 a n d th e v a lu e is 7 .6 b illio n R a n ds . C H A IR PER SO N : Ye s , Ye s , Ye s , Ye s . MR SO K O MB ELA : Bu t if y o u g o to q u o ta tio n s th e n u mb er is 4 4 a n d th e v a lu e is 11 .7 millio n , a n d if y o u g o to c o n tr a c ts it is 9 6 a n d th e n u mb e r is 7 .5 b illio n R a n d s . C H A IR PER SO N : 10 Ye s . MR SO K O MB ELA : So , th e 1 4 0 is fo r 4 4 p lu s 9 6 , th e n it w ill g iv e y o u 140. C H A IR PER SO N : O h , it g o e s b a ck to w h a t I w a s ta lk in g a b o u t, I w o u ld h a v e e xp e c te d th e to ta l to b e [in te r v e n e s ]. A D V MIC H A EL MB IK IWA : C H A IR PER SO N : O n th e fu r th e s t r ig h t- h a n d c o lu mn . Th a t is r ig h t, ma y b e I s h o u ld a s k , a r e y ou le ft- h a n d e d ? MR SO K O MB ELA : N o I a m n o t le ft h a n d e d , ma y b e my b ra in is le ft handed. C H A IR PER SO N : O k a y s o - s o – s o n ow th e q u o ta tio n s , a r e th o s e q u o ta tio n s th a t r e la te to th e c o n tr a c ts d ea lt w ith in th e e x tr e me r ig h t 20 c o lu mn o r d o th e q u o ta tio n s r e la te to d iffe r e n t tr a n s a c tio n s? MR SO K O MB ELA : Q u o ta tio n s C h a ir, w h a t – w h a t SAA h a s in its Su p p ly - C h a in - Man a g e me n t- Po licy h a s g o t th r e s h o ld w h e r e fo r e x a mp le , g o o d s a n d s e r v ic es th a t a r e b e lo w 5 0 0 0 0 0 t h e y d o n o t g o to a n o p e n c o mp e titiv e te n d e r. C H A IR PER SO N : Ye s , y e s . Page 44 of 121 21 FEBRUARY 2020 – DAY 217 MR SO K O MB ELA : Th e n th e y w ill ju s t ma k e th e r e q u e s t a min imu m o f th r e e q u o ta tio n s . So , w e te s t th o s e a s a s ep a r a te p o p u la tio n , y es . C H A IR PER SO N : O k a y, o k a y, s o in o th e r w o r ds y o u h a v e tw o c o lu mns here. MR SO K O MB ELA : C H A IR PER SO N : Ye s C h a ir. Th e o n e c o lu mn d e a ls w ith c o n tr a c ts , th e o th e r o n e d e a ls w ith s itu a tio n s w he r e th e r e w er e q u o ta tio n s b u t n o c o n tr a c ts . MR SO K O MB ELA : C H A IR PER SO N : 10 MR SO K O MB ELA : Ab s o lu tle ly. O r n o t n e c e s sa r ily ? N o t n e c e s s a r ily, ma y b e - ma y b e th a t w o r d co n tr a c t s h o u ld b e wr itte n c o n tr a c ts les s te n d er. C H A IR PER SO N : MR SO K O MB ELA : C H A IR PER SO N : Oh, yes. Be c a u s e th o s e w ill b e th e b ig tic k e tin g ite ms . So , th e c o n tr a c ts o n e r e la te s to th o s e th a t w e r e s u p p os e d to h a v e g on e o u t to o p e n te n d e r ? MR SO K O MB ELA : C H A IR PER SO N : Ab s o lu te ly C h a ir. An d th e q u o ta tio n s r e fe r s to th o s e tr a n s a c tio n s w h ich w e r e b e low 5 0 0 , is it 5 0 0 0 0 0 ? MR SO K O MB ELA : 20 C H A IR PER SO N : MR SO K O MB ELA : C H A IR PER SO N : I th in k J a , I th in k th e th r e s h o ld w a s 5 0 0 0 00 C h a ir. Ye s , s o th a t is w h a t, th a t is w h a t q u o ta tio n s d e a ls w ith . Ab s o lu te ly. So if I w a n t to lo o k a t a n y th in g r e la tin g to q u o ta tio n s th e n I h a v e to lo o k o n , o n , lo o k s lik e th e fir s t tw o th ir d s o f th e c o lu mn s , a n d th e n th e la s t th ir d d e a ls w ith c o n tr a c ts ? MR SO K O MB ELA : Ab s o lu te ly C h a ir. Page 45 of 121 21 FEBRUARY 2020 – DAY 217 C H A IR PER SO N : MR SO K O MB ELA : O k a y a lr ig h t I th in k I u n d e r s ta n d it n o w. Ye s , C h a ir, th a n k y o u . C h a ir th e n th a t ta b le th e n fo r a n e x a mp le w e s h ow e d th e r e in th a t ta b le t h a t th e n u mb e r o f a w a r d s th a t w e , th a t w e r e s e le c te d for te s tin g a n d w e a ls o s h ow e d th er e th e e x p e nd itu r e th a t h a s b e en in c ur r e d on th e s e le c te d aw a r ds in th e c ur r e n t y e ar. W h ic h is th e c ur r e n t y e a r w a s th e y e ar w h ich is 2 01 6 /2 0 1 7 id e s t. if y o u lo o k a t th e a w a rd s s e lec te d fo r e x a mp le , 7 .6 b illio n R a n d s , s o o u r c a lc u la tio ns o n th a t, o u t o f th a t 7 .6 b illio n R a n d s [in te r v e ne s ]. C H A IR PER SO N : 10 MR SO K O MB ELA : C H A IR PER SO N : Th o s e a r e b illio n s . Ye s b illio n s . Ev e r y th in g w e a re d e a lin g w ith h e r e is b illio n s it s e e ms . MR SO K O MB ELA : N o t n e c e s s a r ily C h a ir, f o r e x a mp le [in te r v en e s ]. A D V MIC H A EL MB IK IWA : Ac tu a lly, n o t th e q u o ta tio n s c o lu mn b ec a us e a s Mr So k o mb e la h as s a id th a t is w h er e th e v a lu e wa s low s o th a t is o n ly 11 .7 millio n . Bu t th e c o n tr a c ts c o lu mn is 7 .5 b illio n , b e c a us e th o s e a r e a s y o u s a id a r e th e b ig - tic ke t ite ms . MR SO K O MB ELA : C H A IR PER SO N : 20 MR SO K O MB ELA : Th a n k y o u C h a ir. O k a y, a ll r ig h t, y e s . So C h a ir w h a t I w a s s a y in g is th a t w h e r e , w h e r e w e w o u ld s a y e x p en d itu r e in c u rr e d o n s e le c ted a w a r d s in th e c u r r e n t y e a r, b a s e d o n o ur – th e in fo r ma tio n th a t we ga th e r e d wa s th a t o u t o f th a t 7 .6 b illio n R a n d ’s , 3 .4 b illio n R a n d ’s w a s alr e a d y in cu r r ed in th e c u r r e n t y e a r a n d th a t h e lp s u s to id e n tify w h e th e r if th e r e is n o n - c o mp lia n c e o r th e r e a r e tr an s gr e ss io ns o n th e aw a rd in g on th o s e q uo ta tio n s o r te n de rs , Page 46 of 121 21 FEBRUARY 2020 – DAY 217 w h e th e r th e r e ma y b e irr e g u lar e x p en d itu r e o r n o t. C H A IR PER SO N : O h , o k a y s o , th e v a lu e o f th e 1 4 0 q u o ta tio n s th a t w e r e s e le c te d wa s 7 .6 b illio n R a n ds MR SO K O MB ELA : C H A IR PER SO N : MR SO K O MB ELA : C H A IR PER SO N : In to ta l y e s C h a ir In to ta l a ll o f th e m. Ab s o u te ly C h a ir. An d th e n , th e n th e r e w a s 3 .4 b illio n R a n d e x pe n d itu r e w h ic h w as in c u r re d d u r in g th a t p a r tic u la r fin a n c ia l y e a r o r n o t n e c e ss a r ily d u r in g th a t p a r tic u la r ye a r ? 10 MR SO K O MB ELA : C H A IR PER SO N : It is a c c u mu la tiv e It is a c c u mu la tiv e MR SO K O MB ELA : Be c a u s e so me o f th e a w a r ds w er e mig h t h a v e ma d e in th e p r io r y e a rs b u t th e c o n tr a c ts a r e s till e ffe c tiv e . C H A IR PER SO N : MR SO K O MB ELA : Ye s o k a y, o k a y. I u n d e r s ta n d . Ab s o u te ly C h a ir Ye s C h a ir, th e n o n th e n e x t o n e C h a ir is th e – is th e limita tio n s th a t w e r e imp o s e d to us o n th e a wa r ds th a t w e h a d s e le c te d , fo r a n e x a mp le w h e r e w e s e lec te d s p e c ific c o n tr ac ts o r te n d e r s , w h e r e w e w e r e n o t g i v e n , th e r e y o u w ill s e e C h a ir th e limi ta tio n s th a t w e r e imp o s e d o n u s , w e h a d fo u r c o n tr a c ts a t a v a lu e 20 o f 2 7 9 millio n R a n d s . C H A IR PER SO N : MR SO K O MB ELA : Ye s . An d th e n C h a ir, th e n th e n e x t o n e w e h a v e g o t a w a r ds o n w h ich n o n -c o mp lia nc e w as id e n tifie d [in te r v e n e s ]. C H A IR PER SO N : I a m s o r r y, b e for e yo u p ro c e e d d o yo u , d id yo u g e t to k n o w w h a t p e rc e n ta g e o f th e q u o ta tio n s 1 40 w a s ? So , in o th e r w o r ds y ou Page 47 of 121 21 FEBRUARY 2020 – DAY 217 lo o k e d a t 1 4 0 th a t y o u s e le c te d th a t w a s n o t a ll. MR SO K O MB ELA : C H A IR PER SO N : Ab s o lu te ly C h a ir. Bu t d id y o u k n o w w h e th er th a t w a s a b o u t 5 0 p e r c e n t, th a t w a s a b o u t 1 0 p e r c e n t, th a t w a s a b o u t 8 0 p e r c e n t o f th e q u o ta tio n s fo r th e r e le v a n t p e r io d ? MR SO K O MB ELA : C H A IR PER SO N : I d o n o t h a v e th a t s ta tis tic s C h a ir. Yo u d o n o t h a v e ? MR SO K O MB ELA : C H A IR PER SO N : 10 I d o n o t h a v e th o s e s ta tis tic s C h a ir, y e s . Be c a u s e I a m ju s t w o n d er in g if – if th e li mita tio n s th a t r e la te d to fo u r q u o ta tio n s , p r o d u c e d o r th e v a lu e th e r e o f w as 2 7 9 millio n , if y o u k n e w wh a t p e r ce n ta g e 1 4 0 w a s o f th e to ta l q u o ta tio n s , o n e c o u ld h a v e a n ide a o f h o w muc h ma y be w e cou ld b e ta lk in g o f. If it w a s 5 0 p e r c en t w e c o u ld b e ta lk in g a b o u t h a lf , h a lf a b illio n R a n d s . O k a y, a lr ig h t. MR SO K O MB ELA : O k a y, o k a y. Th a nk y o u C h a ir. Ch a ir th e ne x t o n e is a w a r d on w h ich n o n- c o mp lia nc e wa s id e n tifie d b e c a us e a fte r w e s e lec te d th e s e a w a rd s , w e d id te s t w h e th e r th e y c o mp lie d w ith th e le g is la tio n , Su p p ly - Ch a in - Man a g e me n t- Po lic y or n o t, a nd w h a t w e fo un d wa s th a t 1 2 1 o f th o s e a w a r ds to a v a lu e o f 6 .6 b illio n R a n d s d id , w e r e n o t [in te r v e n es ]. 20 C H A IR PER SO N : C o mp lia n t? MR SO K O MB ELA : We r e not Ma n a g e me n t- Po licy and la w s c o mp lia n t and w ith re g u la tio n s . th e An d Su p p ly - C h a inif you lo o k [in te r v e n e s ]. C H A IR PER SO N : We ll ma y b e le t me a s k th is a b o u t th o s e . D o y o u h a v e a n y r ec o lle c tio n or is it s o me th in g th a t y o u w o u ld b e a b le to fin d in y o ur Page 48 of 121 21 FEBRUARY 2020 – DAY 217 r e p o r t, w h e th er th e n a tu r e o f th e n on - co mp lia n c e s r e la te d to se r io us n o nc o mp lia n ce s or w h e th e r it mig h t have been ju s t te c h n ic a l non- c o mp lia n ce s , to g e t a p ic tu r e a s to ma y b e th a t ma y b e mo r e th a n 5 0 p e r c en t o f th e n o n - c o mp lia n c es w e r e s itu a tio n s w h e r e th e r e w a s n o c o mp lia n ce a t a ll? MR SO K O MB ELA : Th e r e is a lo t o f th o s e C h a ir, if I ma y, b e c a u s e in th e – in th e a u d it r e p o r t o f S AA a s – a s in te r m s a s p e r th e a n n u a l r e p o r t, w e h a v e d is c los e d th e n in te r ms o f w h a t th os e n o n- c o mp lian c es w er e a n d C h a ir, th o s e n o n- c o mp lian c es r a n ge fr o m, r a n g e fr o m – fr o m th e is s u e o f 10 SAA n o t g o in g to a n o p e n te n d e r, fo r a n e xa mp le th e c o n fin in g th e – th e p r o c ur e me n t p r oc es s es , a n d th a t, w e fo u n d th a t th a t w a s c o n tr a ry th e n to Se c tio n 5 1 , p a r a gr a p h , su b - pa r a gr a p h- 1 , p ar a g r ap h - A, R o ma n fig u re 3 , o f th e Pu b lic Fin a n c e Ma n a g e me n t Ac t b e c a use th a t w a s n o t c o mp e titiv e o r e q u ita b le a n d – a n d fa ir in te r ms o f h o w th ey – th e y d e a lt w ith th a t. O th e r n o n - co mp lia n ce s th a t w e h a v e id e n tifie s C h a ir is s itu a tio n s w h er e b y a w a r ds w er e ma d e to – to c o n tr ac to r s w h e r e th e Ta x C le ar a nc e C e r tific a te s fr o m, th a t w e r e c o n fir me d b y th e So u th A fr ic a n R e v e n ue Se r v ic es w e re c o n fir me d , a n d o th e rs we r e s itu a tio n s w he r e by th e p r e fe r e n tia l p o in t s ys te ms th a t w e – th a t w e w e r e n o t a w a r d e d in te r ms o f 20 th e Pr o c u r e men t Po lic y, Fr a me w o rk Ac t, I t h in k th a t th e y c a ll it th e tr u e PPFA. So me o f th e a w a r d s w er e – w e r e aw a r d ed b a se d o n th e c a lc u la tio ns o f p o in ts , th a t w e r e n o t in te r ms o f th e ir o r ig in a l b id d o c u me n ts , in te r ms o f h o w th e y w e r e g o in g to c a lc u la te th e ir p o in ts to a w a r d th e – th e te n d e r e rs . An d s o me o f t h e a w a r ds fo r e x a mp le w e r e a w a r de d w h er e , fo r th e s u p p lie r s th a t d id n o t s c o r e th e h ig h es t p o in ts , Page 49 of 121 21 FEBRUARY 2020 – DAY 217 y o u k n ow, fo r th e – fo r th e te n d e r s . An d a ls o , th e r e w e r e s o me a w a r ds th a t w e r e a w a r d e d h o w e ve r th e c r ite r ia th a t w a s a p p lie d to e v a lu a te th o s e te n d e r s d iffe r e d fr o m th e c r ite r ia th a t w a s i n th e o r ig in a l b id d o c u me n ts . So , a mo n g o th e r s th o s e w e r e th e – th o s e w e r e th e ty p e o f n o n c o mp lia n ce s th a t w e – th a t w e id e n tifie d C h a ir. C H A IR PER SO N : MR SO K O MB ELA : Ye s , n o th a n k y o u . C h a ir I w a s s till ta k in g y o u th r ou g h th e – th e ta b le its e lf. C H A IR PER SO N : 10 MR SO K O MB ELA : Ye s . So w h a t I w a s s a y in g is th a t a b o u t 1 2 1 c o n tr a c ts w ith a v a lu e o f 6 .6 b illio n R a n d s , w e fo u n d th a t th e r e w a s n o n - co mp lia n ce , h o w ev e r in th e c u r r e n t y e a r, w e a p p r o x imate ly a b o u t 1 0 3 w e r e w e c o u ld c la ss ify th o s e on e s a s irr e g u lar e xp e n d itur e to th e v a lu e o f 2 .6 b illio n R a n ds . C h a ir, s o th a t is – th a t is th e n th e ta b le C h a ir, I d o n o t k n o w C h a ir if y o u w a n t me to g o th r o u g h e a c h a n d e v e r y o th er n u mb e r ? C H A IR PER SO N : Mr Mb ik iw a ? A D V MIC H A EL MB IK IWA : I d o n o t th in k th a t is n e c e s s a ry C h a ir b ec a u se th e – th e to ta l is a c o mb in a tio n o f b o th th e q u o ta tio n s a n d th e c o n tr a c ts . I ju s t d o w a n t to a s k , w h a t th e d iffe r e n c e is b e tw e e n n o n - c o mp lia nc e a n d 20 ir r e g u lar e x p en d itu r e ? MR SO K O MB ELA : Th e d i ffe r e n c e b e tw e en , in a c tu a l fa c t th e r e is n o d iffe r e n c e b e tw e e n th e tw o , b u t if th e r e is n o n - c o mp lia n c e th a t ma y r es u lt in ir r e g u la r ex p e nd itu r e . Bu t y o u ma y fin d o u t th a t th e r e a s o n w h y ma yb e n o t th e w h o le 6 .6 b illio n R a n ds h a s – ha s b e e n d e c lar e d as a ir r e gu la r e x p e nd itu r e is th e fa c t th a t th e e x p e n d itu r e h a s n o t y e t b e e n inc u rr e d Page 50 of 121 21 FEBRUARY 2020 – DAY 217 [in te r v e n e s ]. A D V MIC H A EL MB IK IWA : MR SO K O MB ELA : In th a t fin a n c ia l y e a r ? In th a t fin a n c ia l y e a r y es . A D V MIC H A EL MB IK IWA : Th a n k y o u . So – s o a s y o u h a v e ju s t d e s cr ib e d as p a r t o f 1 4 0 c o n tr ac ts , th a t fo r me d p a r t o f y o u r Sa mp le , 1 2 1 , s o r ry n o t c o n tr a c ts , b o th q u o ta tio n s a n d c o n tr ac ts th a t fo r me d p a r t o f y o u r s a mp le . 1 2 1 w e r e n o n - c o mp lia n t, a n d 1 0 3 r e s u lte d in ir r e g u la r e x p e nd itu r e , is th a t c o r r e c t? MR SO K O MB ELA : 10 Ye s C h a ir. A D V MIC H A EL MB IK IWA : Th a t is 8 6 p e r c e n t o f te n d e r s in , o f c o n tr a c ts a n d q u o ta tio n s in th a t y e a r w h ich w a s n on - co mp lia n t w ith th e SC M Po lic y. MR SO K O MB ELA : C h a ir if y o u e x tr a p o la te , y o u k n o w b e c a u s e I a m a s s u ming th e n th a t is a n e x tr a p o la tio n to th e s a mp le [in te r v e n es ]. A D V MIC H A EL MB IK IWA : MR SO K O MB ELA : C H A IR PER SO N : Ab s o lu te ly C h a ir. Ye s , y e s , J a , J a , o f th e s a mp le ? A D V MIC H A EL MB IK IWA : C H A IR PER SO N : So r r y 8 6 p e r c e n t w ith in y o u r s a mp le ? O f th e s a mp le , i n d e e d . An d it c o u ld b e w o r s e , it c o u ld b e b e tte r d e pe n d in g o n – o n w h a t y ou fin d in te r ms o f th o s e th a t we r e n o t s e lec te d a s p a r t o f th e 20 s a mp lin g . MR SO K O MB ELA : C H A IR PER SO N : Ab s o lu te ly C h a ir. Ja. A D V MIC H A EL MB IK IWA : r e p r es e n ta tiv e ? Ar e you a b le to say w h e th e r it is W h e th e r a s a mp le o f 7 .6 b illio n R a n d in v a lu e is r e p r es e n ta tiv e ? Page 51 of 121 21 FEBRUARY 2020 – DAY 217 MR SO K O MB ELA : C h a ir I th in k – I th in k it is r e p r e s en ta tiv e b e c a us e I th in k th e s ta te o f n o n -c o mp lia nc e w ith Su pp ly C h a in Ma n a g e men t Po lic y le g is la tio n a t SAA is , th e n o n - c o mp lia n c e is v e ry lo w th e r e , y o u k no w, I th in k in mo s t in s ta n c e s [in te r v en e s ]. C H A IR PER SO N : MR SO K O MB ELA : C H A IR PER SO N : We ll – w e ll b e fo r e y o u s a id v e r y lo w Ve r y h ig h I a m s o r r y C ha ir. Ma y b e it is tw o n e g a tiv e s . We ll I w a s w o n d e r in g w h e th e r y ou w e r e g o in g to s a y it is h o r r ib le . MR SO K O MB ELA : 10 C H A IR PER SO N : MR SO K O MB ELA : C H A IR PER SO N : Ye s , C h a ir. It is h o r r ib le . It is h o r r ib le , C h a ir. Ye s , o k a y, th a n k y o u . We ll, e x c u s e me , I g o b a c k to my e a r lie r p ro b in g . If in th e 2 0 1 6 /2 0 1 7 fin a n cia l y e a r y ou fo u n d th a t o u t o f 1 4 0 a s a mp le o f 1 4 0 q u o ta tio n s , tr a ns ac tio n s b as e d o n q uo ta tio n s , 1 2 1 w e r e n o t c o mp lia n t w ith th e la w s . H o w wo u ld it b e p o s s ib le th a t y o u r p r e d ec e ss o rs co u ld n o t h a ve p ick e d u p ev en 1 0 o u t o f th e 1 2 1 ? Be c a us e I ta k e it if th e y h a d p ic ke d u p th e 1 0 o u t of th e 1 2 1 th a t y o u fo u n d o r a s imila r p e rc e n ta g e e v en if th e y d id n o t g o to th e s a le I w o u ld ima g ine th a t th e y w o u ld n o t h a v e g iv e n a c le a n a u d it a n d y o u mu s t ju s t te ll me i f I a m 20 mis u n d e rs ta n d in g th in g s b ec a us e I a m n o t a n Au d ito r. Bu t th a t is th e k in d o f q u e s tio n s th a t c o me s to my min d . I f y o u ta k e 1 4 0 tr a n s a c tio ns a n d y o u te s t th e m in te r ms o f c o mp lia n c e a n d y o u fin d s u c h a h ig h n u mb e r 1 2 1 n o t c o mp lia n t a n d I a m r ig h t in th in k in g th a t a c le a n a u d it me a n s th a t y o u r p r e d ec e ss o rs d id n o t fin d a n y n o n - c o mp lia nc e , h o w is th a t p o s s ib le ? An d a g a in y o u mu s t ju s t te ll me if y o u s a y C h a ir y o u a r e n o t a n Au d ito r I c a n Page 52 of 121 21 FEBRUARY 2020 – DAY 217 s e e , s o th a t is w h y y o u d o n o t u n d er s ta n d this . MR SO K O MB ELA : J a J a C h a ir, I th in k th is is a n a r e a th a t I th in k a s p a r t o f u s r e q u es tin g a c ce ss to th e Pr e d e c e sso r s Au d ito rs file s , w h e r e w e a g r e e d w ith th e p r e v io u s Au d ito r s b e c a us e th e r e w a s n o t mu c h w o r k th a t w a s d o n e th e r e a nd w e a g r e ed w ith th e m t h a t o n o u r s id e w e w e r e g o in g to b a s ic a lly s ta r t fr o m s c ra tc h , y o u kn ow, b e c a us e w e w a n te d to s e e in te r ms o f h o w mu c h w o rk th e y h a v e d o ne o n Su p p ly C h a in Ma n a ge me n t b u t b a s e d on th e fe e d b ac k th a t I h a v e re c e iv ed fr o m my te a m a n d a ls o th e e n g a g e me n ts a ls o th a t w e h a d w ith th e Pr ed e c es s or Au d ito r s . J a . Th e r e 10 w a s n o t mu c h w or k th a t w a s d o n e in th a t s pa c e . C H A IR PER SO N : Yo u s a y th a t y o u d is c u ss e d th e is s u e w ith th e m, a n d th e y a g r e e d th a t th e y h a d n o t d o n e mu c h wor k in r e g a rd to th a t? MR SO K O MB ELA : C H A IR PER SO N : Ab s o lu te ly C h a ir. Ye s . Wo u ld th a t, w h a t w o u ld n o t d o ing w or k on th is k in d o f th in g d o if o n e w e r e to lo o k a t h ow th e Au d it w a s d o n e . I me a n , w o u ld y ou , w o u ld o n e be a b le to s a y w e d id a g o o d jo b , th e y d id a g o o d jo b if th e y d id n o t d o th is o r is th e p o s itio n th a t w e ll r e a lly if y o u d id n o t d o th is y o u c a n n o t b e s a id to h a v e d o n e a g o o d jo b o r is th e p o s itio n th a t lo o k it is n o t a g o o d r e fle c tio n o n th e m, b u t th a t is h o w fa r o n e c a n ta k e 20 it. O r is th e p o s itio n th a t to s a y w e ll th e s e th in g s d o h a p p e n , y o u k n o w e v e n to th e b e s t Au d ito r s . So I a m, i t is ju s t th a t fo r me to fin d th a t 1 2 1 o f 1 4 0 tr a n s a c tio ns th a t y o u h a v e lo o k e d a t w e r e n o n - c o mp lian t. Th a t is a v e r y h ig h n u mb er, th a t is w h y I w a s th in k in g y o u w er e g o in g to s ay it is h o r r ib le a nd y o u d id s ay, y o u d e sc r ibe it lik e th a t a n d i f th e r e w a s s o me th in g s o h o rr ib le e ve n in th e p r e v io us y e a r ’s , h o w c o u ld it n o t h a v e Page 53 of 121 21 FEBRUARY 2020 – DAY 217 b e e n p ick e d up a n d or w as it a q u e s tio n o f ma y b e a pr o fe ss io n a l ju d g e me n t n o t ma d e to d o - to d o th is k in d o f w o r k a n d th a t is w h y. I f y o u s a y lo o k I c a n n o t e x p la in it fe e l fr e e to s a y s o . If y o u s a y lo o k I d o u n d e rs ta n d I ju s t w a n t to s e e h o w I mu s t lo o k a t th is k in d o f th in g . MR SO K O MB ELA : C h a ir, I th in k w h a t I c an s a y o n my s id e is th a t w e – w e tr ie d to - w e tr y b y a ll me a n s to e n s u r e th a t w e g iv e g u id a n c e to th e , e s p ec ia lly th e Au d ito r s a n d p r iv a te p r ac tic e s [in te r v e n e s ]. C H A IR PER SO N : MR SO K O MB ELA : 10 Ye s , y e s . In te r ms o f te s tin g how to te s t Su p p ly C h a in Ma n a g e me n t, b e c a us e if y o u r e me mb e r C h air y e s te r d ay, o n e o f th e th in g s th a t w e ta lk e d a b o u t is th e d iffe r e n c e b etw e e n h o w a r e Pu b lic Se c to r Au d ito r s o r G o v e r n men t Au d ito r s d o th e a u d it w o r k a s a n d – a n d Pr iv a te Se c to r Au d ito r s [in te r v e ne s ]. C H A IR PER SO N : MR SO K O MB ELA : Ye s An d w h a t I s a id th e r e is th a t u s w h e n it c o mes to c o mp lia n ce w e a r e b ig o n c o mp lia n c e a n d o n e imp o r ta n t is s u e th e n to me n tio n C h a ir is th a t b e c a u s e w e k n o w th e n th a t w h e n it c o me s to c o mp lia n ce w o rk th e r e is a lo t o f g u id a nc e th a t w e p r o v id e w h e n th e a u d ito r s in p r iv a te p r a c tic e a re d o in g th e a u d its o f Sta te O w n e d En titie s . 20 We e v e n g iv e th e m th e w or k ing p a p er s th a t w e u s e th a t h as g o t th e s a me p r o c ed u r es th a t w e e x ec u te to e n su r e th e m th a t th e y a r e a b le to p ic k u p th e is s u e s a n d we e v e n , b e ca u s e wh a t w e a ls o d o , b e c a us e in th e a u d it o f Su p p ly - Ch a in - Man a g e me n t th e a u d it o ff ic e i s q u ite a d v a n c ed , b e c a u se w e a r e a b le a lso to e v e n d o th e b ac kg r o un d ch e c ks u s ing th ir d p a r ty da ta . So th a t is a s e r v ic e a ls o th a t w e o ffe r to t h e m, fo r a n e x a mp le th e y w ill Page 54 of 121 21 FEBRUARY 2020 – DAY 217 g e t th e d a ta fr o m th e Sta te O w n e d En ti ty, t h e y g iv e it to u s th e n w e w ill r u n C o mp u te r As s is te d Au d it Te c h n iq u es , w e c a ll th e m C AT S. We w ill r u n C ATS fo r th e m. An d th o s e C ATS w ill c o me o ff w ith c o n flic t o f in te r e s t, w e w ill c o me u p w ith d u p lic a te p a y me n ts w e w ill c o me u p w ith a lo t o f th in g s s o th a t th e y c a n b e a b le to b e e mp o w e r ed to – to e x e c u te th e a u d it o f Su p p ly - Ch a in - Man a g e me n t s uc ce ss fu lly an d a ls o th e r e is a lo t o f te c h n ic a l g u id an c e , th e me mo r a n d u ms th a t th e a u d it o ffic e p r o d u c es o n a r e g u la r b as is , th a t a ls o g e ts g iv e n to th e Pr iv a te Se c to r fir ms a n d it is a v a ila b le o n th e w e b s ite o f th e Au d ito r G e n e r a l. 10 At t ime s a s w e ll w e w o u ld h av e fo r a n ex a mp le a w or ks h o p , w e w o u ld w o rk s ho p th e m, w e c a llin g it a s , w e u s ed to c a ll it a Se c tio n 4 - 3 Wo r ks h op w h er e a ll th e Au d ito r s o f Sta te O w n e d En tit ie s th a t fr o m th e Pr iv a te Se c to r fir ms w ill c o me s o th a t w e c a n w o r k s h op w ith th e m , s p e c ific a lly o n th e a u d it o f Su p p ly - Ch a in - Man a g e me n t as w e ll as a aud it o f p e r fo r ma n c e in fo r ma tio n b e c a us e th o s e a r e th e a r e a s th a t w e u n d e r sta n d th a t ma y b e th e y ma y n o t h a v e th e te c h n ica l e x p er tis e . C H A IR PER SO N : An d s o – s o y o u r p re d e ce s s or s Pr ic e Wa te r ho u se a n d N k o nk i, th e y k n e w o f th e a v a ila b ility o f th a t a s s is ta n c e , th e y w o u ld h a ve k n o wn a b o u t its a v a ila b ility. 20 MR SO K O MB ELA : I a m s o r r y C h a ir ; th ey k n e w a n d ev e n s o me o f th e in fo r ma tio n fo r a n e x a mp le I w o u ld me e t w i th th e m a n d I w o u ld g iv e it to th e m. C H A IR PER SO N : MR SO K O MB ELA : C H A IR PER SO N : G iv e it to th e m. Ab s o lu te ly. So if th e r e is a n y p a r t o f th e jo b th e y d id n o t d o or d id Page 55 of 121 21 FEBRUARY 2020 – DAY 217 n o t d o p r o p e r ly it c a n n o t b e b e c a us e th e r e w a s n o as s is ta nc e a va ila b le if th e y n e e d e d it. MR SO K O MB ELA : Ab s o lu te ly C h a ir, a b s o lu te ly. C H A IR PER SO N: Bu t a ls o , y ou me n tio n e d ea r lie r o n th a t Pr ice w a te rh o us e is a b ig a u d itin g fir m a n d y o u ta lk e d a b o u t its r e p u ta tio n a n d s o o n . If o n e h a s r e g ar d to its s iz e a n d its r e p u ta tio n a n d y o u mig h t e v e n k n o w a lo t a b o u t th e s k ills th e y h av e , th e e x p er tis e th e y h av e . Th e n o n e is e n title d to lo o k a t th e w o r k d on e a g a ins t th e k in d o f e xp e r tis e an d th a t o n e e x p ec ts fr o m a fir m lik e th a t. 10 So , if o n e h a s r e g a r d to th a t it ma y b e th a t it is d iffic u lt to u n d e r s ta n d w h y th is w a s n o t d o n e . Wo u ld th a t b e a fa ir c o mme n t a s fa r a s y o u a r e c o n ce r n ed ? MR SO K O MB ELA : J a ... ( in te r v e n e s ) C H A IR PER SO N: To s a y th e le a s t. MR SO K O MB ELA : C h a ir to s a y th e lea s t I th in k it is d iffic u lt to u n d e rs ta n d th a t. C H A IR PER SO N: Ye s . MR SO K O MB ELA : I th in k a ls o o n e o th e r i mp o r ta n t a s p e c t is th a t ma y b e p e o p le w o u ld s ay e s p ec ia lly th e fir ms w o u ld s a y ma y th is is th e s p e c ia lity 20 o f th e AG . U s ma y b e w e a r e g o o d in a u d itin g fin a n c ia l s ta te me n ts . Ma y b e th a t is w h e r e ma y b e o ur - mo s t o f o u r e n e r gy is g o in g to b e a n d I a m s p e c u la tin g h er e C h a ir. I a m n o t- I a m j u s t ... ( in te r v e n es ) C H A IR PER SO N: J a . MR SO K O MB ELA : I a m ju s t s p e c u la tin g in t e r ms o f, ja . C H A IR PER SO N: Bu t o f c o u rs e , th e a n sw e r to th a t is y o u sh o u ld no t ta k e Page 56 of 121 21 FEBRUARY 2020 – DAY 217 w o r k th a t y o u d o n o t h a v e th e c a p a c ity to d o . An d y o u s h o u ld n o t d o ta k e w o rk th a t y o u d o n o t h a v e s k ills or e x pe r tis e n e c es sa ry to d o . MR SO K O MB ELA : Ab s o lu te ly C ha ir. C H A IR PER SO N: So th a t is th e o n e p a r t. T h e s e c o nd p a r t, p r o b a b ly th a t k in d o f e x p la n a tio n c a n n o t a v a il a fir m lik e Pr ic e w a te r h o us e . Ev e n I d o n o t k n o w w h e th er w h e n it is a jo in t a p p o in tme n t a s it w a s fo r th o s e y e a r s it is p o s s ib le fo r th e o n e th e p a r tn e r to s a y, w e ll n o , th a t o n e w a s d o n e b y so and so. By th e o n e w e w e r e jo in t a p p o in te d w ith s o I a m n o t r e s p on s ib le . I d o n o t k n o w w h e th e r th a t is p o s s ib le . 10 Bu t e v e n th e n , I d o n o t k n o w w h e th e r N k o nk i- it w o u ld a v a il N k o n k i to s it to e x p la in th is b y w a y o f la c k o f a n y e x pe r ie n c e o r e xp e r tis e or c a p ac ity. I d o n o t k n o w, a r e y o u a b le to s a y a ny th in g a b o u t th is ? MR SO K O MB ELA : I th in k C h a ir lik e y o u s a id I th in k th is - I s a id y e s te r d ay th e Pr ic e w a te rh o us e C oo p e rs is a g lo b a l firm th a t h a s g o t p r o fe s s ion a ls . At th e t ime w h e n N k o n k i w a s s till a v a ila b le o r w a s s till in th e s p a c e a s w e ll w as a me d iu m s iz ed fir m. An d th e n a ls o th e n th e pe o p le th e n th a t w e r e in tr us te d w ith th e a u d its w e r e s e as o n ed p r o fe s s ion a ls . An d th e r e w e r e p e o p le th e n th a t w h e r e I a m s ittin g , I w o u ld n o t h a v e d o u b te d - I w o u ld n o t d o u b t th a t th e y k n ew w h a t th e r ig h t th in g w a s in 20 te r ms o f w h a t th e y w e r e e x pe c te d – w h a t th e y w e r e ex p ec te d to d o . C H A IR PER SO N: We ll th a t is a ll v e r y imp o r ta n t fo r th is C o mmis s io n ’s in q u ir y b ec a u se w h e re s o me th in g w a s n o t d o n e p r o p er ly o n e o f th e th in g s o n e w o u ld lo o k a t is w h e th e r th a t w a s a r e s u lt o f in c o mp e te n c e o r a r e s u lt o f n e g lig e n c e , a r e s u lt o f la ck o f a p p ro p r ia te e x p e r tise o r w h e th e r it is s o me th in g mu c h mo r e th a n th a t. Page 57 of 121 21 FEBRUARY 2020 – DAY 217 W h e th e r p e o p le we r e a wa r e o f w h a t th e y w e r e s up p o se d to d o . Th e y k n e w th e tr u e p o s itio n b u t fo r c e r ta in r e a s o n s d id n o t w a n t to d o th e r ig h t th in g . Yo u u n d e r s ta n d ? MR SO K O MB ELA : Ab s o lu te ly C ha ir. C H A IR PER SO N: Ye s . O k a y, th a n k y o u . A D V MIC H A EL MB IK IWA: Th a n k y o u . Mr So k o mb e la I w o u ld lik e to ta k e y o u to a n a s p ec t o f th e d e ta ile d a u d it fin d in g s . MR SO K O MB ELA : Ye s . A D V MIC H A EL MB IK IWA : Atta c h e d to th e ma n a g e me n t r e p or t. 10 MR SO K O MB ELA : Ab s o lu te ly. A D V MIC H A EL MB IK IWA : C a n I a s k y o u to g o to file D D 2 0 C ? C H A IR PER SO N: Sh o u ld I c lo se th e o n e w ith th e r e p o r t o r w ill w e co me b a c k to it? A D V MIC H A EL MB IK IWA: We w ill c o me ba c k to it a t s o me p o in t C h a ir b u t n o t fo r th e time b e in g . C H A IR PER SO N: N o t n o w. A D V MIC H A EL MB IK IWA : Yo u c a n c lo s e it f o r n o w. C H A IR PER SO N: O k a y. A D V MIC H A EL MB IK IWA : An d c a n I a s k y ou to g o to p a g e 11 0 4 . 20 MR SO K O MB ELA : 11 0 4 ? A D V MIC H A EL MB IK IWA : Ye s . Th is is title d , L a c k o f Effe c tiv e a n d Ap p r o p r ia te Ste p s to Pr ev e n t Ir r e gu la r a n d Fr u itle ss a n d Was te fu l Ex p e n d itu r e . An d th e r e a r e tw o ta b le s , A ... ( in te r v e n es ) C H A IR PER SO N: Be fo r e y o u p r o c e e d is th is p a r t- is th is a n o th e r r e p o r t o r is it p a r t o f th e r e p o r t w e w e r e lo o k ing a t? Page 58 of 121 21 FEBRUARY 2020 – DAY 217 A D V MIC H A EL MB IK IWA : C ha ir it is a n An n e x ur e to th e r e p o r t w e we r e lo o k in g a t. C H A IR PER SO N: J a . A D V MIC H A EL MB IK IWA : An d it w a s in c lu de d in th e p a g e n u mb e r s th a t I g a v e y ou . C H A IR PER SO N: Ja. Ok a y, I th in k w e mus t ju s t id e n tify it p r o p er ly fo r th e tr a n s c r ip ts . A D V MIC H A EL MB IK IWA : In d e e d . C H A IR PER SO N: J a . 10 A D V MIC H A EL MB IK IWA: C ha ir th is is th e D e ta ile d Au d it Fin d in g s a tta c h e d to th e Ma n a g e me n t R e p o r t. C H A IR PER SO N: W h e r e d o es th is p a r tic u lar An n e x u r e s tar t fr o m? A D V MIC H A EL MB IK IWA : Th e An n e x u re s ... ( in te r v e n e s) C H A IR PER SO N: Th is p a g e is I ta k e it p a r t o f a n An n e x u r e th a t s ta r ts fr o m s o me w h er e e a r lier. A D V MIC H A EL MB IK IWA : It s ta r ts a t p a g e 9 5 0 C h a ir. C H A IR PER SO N: O k a y, I th in k fo r th e r e c o r d if y o u ju s t s ta te th a t ... ( in te r v en e s) A D V MIC H A EL MB IK IWA : In d e e d . 20 C H A IR PER SO N: So th a t w h o e v e r re a ds th e tr a n s c r ip t k no w s . A D V MIC H A EL MB IK IWA : Ye s , it is - it b e g in s a t 9 5 0 a n d w e a r e a t p a g e 11 0 4 . C H A IR PER SO N: O k a y. D o e s th e p a r tic u la r An n e x u re h a v e a p a r tic u la r title o r a n y th in g lik e th a t? A D V MIC H A EL MB IK IWA : In d e e d C h a ir. Th e title is .. . ( in te r v e n e s) Page 59 of 121 21 FEBRUARY 2020 – DAY 217 C H A IR PER SO N: L e t u s s p e c ify a ll o f th a t. A D V MIC H A EL MB IK IWA : Ye s . Th e title is An n e x u re A, Ma tte r s A ffe c tin g th e Au d ito r R e p o r t Fin a n c ia l Sta te me n t R e la te d Fin d in g s . C H A IR PER SO N: O k a y a n d yo u s a id it s ta r ts fr o m 9 0 0 a n d ? A D V MIC H A EL MB IK IWA : 9 5 0 . C H A IR PER SO N: An d it g o e s u p to ? A D V MIC H A EL MB IK IWA : Th e - C h a ir I n e e d to c h e c k w h er e ... ( in te r v en e s) C H A IR PER SO N: U p to w h e r e it g o e s . 10 A D V MIC H A EL MB IK IWA : A, B a n d C s p e c ific a lly b e g in . C H A IR PER SO N: O h . A D V MIC H A EL MB IK IWA : I k n o w w h e r e C - I k n o w w h e r e th e th r e e An n e x u re s e n d . C H A IR PER SO N: Ye s . O k a y, n o th a t is fin e . A D V MIC H A EL MB IK IWA : O h n o s o r ry, I d o h a v e it. C H A IR PER SO N: U h - h u h . A D V MIC H A EL MB IK IWA : It e n d s a t 11 7 1 . An n e x u re B b e g in s a t 11 7 2 . C H A IR PER SO N: Ye s o k a y, n o th a t is fin e . So , w ith e v e r y p a g e th a t w e g o in g to it is imp o r ta n t th a t w e k n o w if i t is p a r t o f a la r g e r d o c u me n t. 20 A D V MIC H A EL MB IK IWA : C e r ta in ly. C H A IR PER SO N: W h a t th a t d o c u me n t is , w h e r e it s ta r ts fr o m a n d u p to w h e r e it g o e s . A D V MIC H A EL MB IK IWA : C e r ta in ly Ch a ir. C H A IR PER SO N: O k a y a lr ig h t. A D V MIC H A EL MB IK IWA : Mr So k o mbe la c a n y o u ex p la in to u s wh a t Page 60 of 121 21 FEBRUARY 2020 – DAY 217 th e s e tw o ta b le s r e p re s en t? C H A IR PER SO N: We a r e n o w b a ck a t p a g e 11 0 4 . A D V MIC H A EL MB IK IWA : So r r y, 11 0 4 C ha ir. C H A IR PER SO N: J a . MR SO K O MB ELA : C h a ir th e s e tw o ta b le s w h a t th e s e tw o ta b le s r e p r es e n t is th a t th e fir s t ta b le r e p r e s e n t wh a t ma n a g e me n t h a s d isc lo s ed in th e fin a n c ia l s ta te me n ts o r th e a n n u a l re p o r t. Yo u w o u ld s e e th e r e , C h a ir ... ( in te r v e n e s) C H A IR PER SO N: Is th a t th e o n e s a y in g Ty pe o f Ex p e n d itu r e ? 10 MR SO K O MB ELA : Th e r e is o n e ta b le th a t h a s g o t tw o , n u mb e r 1 , n u mb e r 2 o n ly. C H A IR PER SO N: Ye s . MR SO K O MB ELA : W h e r e n u mbe r 1 is fr u itle s s a n d wa s te fu l e x p en d itu r e . C H A IR PER SO N: Ye s . MR SO K O MB ELA : C u r re n t y e a r, th e v a lu e is 4 0 .4 millio n . C H A IR PER SO N: Mm- h mm. MR SO K O MB ELA : An d th e n th e o th e r o n e is ir re g u lar e x pe n d itu r e c u r re n t y e a r th e v a lu e is 1 25 .9 millio n . C H A IR PER SO N: Ye s . 20 MR SO K O MB ELA : Ab s o lu te ly c ha ir w ith a to ta l o f 1 6 6 .3 mil lio n . C H A IR PER SO N: Ye s . MR SO K O MB ELA : So , Ch a ir th a t is th e n th e ta b le th a t w e w e r e d e mo n s tr a tin g in te r ms o f w h a t ma n a g e men t h a s id e n tifie d a n d r e p o r te d in th e fin a n c ia l s ta te me n ts th e ms e lv es . H ow e v er, in ta b le B C h a ir w e ar e lis tin g th e n th e n u mb e r o f th e fin d in g s th a t w e h a v e id e n tifie d a s th e Au d it Page 61 of 121 21 FEBRUARY 2020 – DAY 217 O ffic e . C H A IR PER SO N: Ye s . MR SO K O MB ELA : W h er e th e n u s w e ha v e id e n tifie d it th r o u g h th e s e le c tio n th a t w e h a v e d o n e o u r o w n ir r eg u la r e x p en d itu r e a s w e ll a s fr u itle s s a n d w as te fu l e x p e n d itu re . C H A IR PER SO N: Ye s . MR SO K O MB ELA : If y o u lo o k a t th a t ta b le it h a s g o t fr o m th e le ft- h a n d s id e n u mb er, d e s c r ip tio n o f fin d in g s r a is e d . Th e o th e r c o lu mn is ir r e g u la r e x p e nd itu r e , th e o th e r c o lu mn is fru itle s s an d w as te fu l e x p e nd itu r e . Th e 10 la s t c o lu mn is th e c o mmu n ic a tio n n u mb e r th a t c o mmu n ic a tio n n u mb e r is w h e n w e iss u e th e fin d in g s to th e Au d ite e . C H A IR PER SO N: Ye s . MR SO K O MB ELA : We g iv e it a n u mb e r to s a y it is c o mmu n ic a tio n n u mb e r 5 , n u mb e r 1 5 , n u mb e r 9 8 o r n u mbe r 1 0 0 . C H A IR PER SO N: Ye s . MR SO K O MB ELA : So , th is is th e n th e c o lu mn is a tio n o f th e fin d in g s th a t w e h a v e iss u e d to SAA th a t e i th e r h a s r e su lte d in ir r e g u la r e xp e n d itu r e or h a s r es u lte d in fr u itle s s a n d w as te fu l e x p e nd itu r e C h a ir. A D V MIC H A EL MB IK IWA : An d if w e g o o v e r th e p a g e to 11 0 5 , c a n y o u 20 te ll u s w h a t th e to ta ls in r e s p e c t o f e a c h o f th o s e w er e ? MR SO K O MB ELA : C h a ir th e to ta l fo r ir r e g u la r e x p e n d itur e is 4 .5 b illio n r a n d w or th o f ir r e g u la r e xp e n d itu r e . C H A IR PER SO N: Ye s , ma y b e y o u - ju s t fo r r e c o r d p u rp o s es y o u c o u ld g iv e th e e x a c t a mo u n t. MR SO K O MB ELA : C h a ir th e to ta l a mo u n t fo r ir r e g u la r ex p e n d itur e is 4 Page 62 of 121 21 FEBRUARY 2020 – DAY 217 5 2 1 9 5 6 0 5 3 .4 6 C H A IR PER SO N: Ye s . MR SO K O MB ELA : I h o p e I r e a d p r o p e r ly. A D V MIC H A EL MB IK IWA : Sp o t o n . MR SO K O MB ELA : I w a s s p o t o n . O k a y. C H A IR PER SO N: We ll if a n a u d ito r ca nn o t r e a d it p r o pe r ly th e n ... ( in te r v en e s) MR SO K O MB ELA : J a . C H A IR PER SO N: 10 N o b o dy c a n . Ye s o k ay. Th e n fr u itle s s a n d w as te fu l e x p e nd itu r e . MR SO K O MB ELA : Th e v a lu e o f fr u itle ss a n d w as te fu l e x p e nd itu r e to ta l v a lu e C h a ir is 3 6 8 4 6 2 1 .6 1 . C H A IR PER SO N: Ye s . So , if y o u p u t th e tw o to g e th e r th e n y o u a r e a t a b o u t 4 ,8 - is th a t r ig h t? MR SO K O MB ELA : Ab s o lu te ly C ha ir. C H A IR PER SO N: 4 ,8 b illio n r a n d . MR SO K O MB ELA : Ab s o lu te ly C ha ir. C H A IR PER SO N: Pu ttin g ir r e g u la r ex p e nd itu r e a n d fr u itle ss a n d w a s te fu l e x p e nd itu r e to g e th e r. 20 An d th a t th is is n o t n e c e s s a r ily th e tr u e p ic tu r e b e c a us e w h a tev e r yo u w e re d o in g w as b a s ed o n s a mp le s . MR SO K O MB ELA : C h a ir th is is n o t a tr u e r e fle c tio n . C H A IR PER SO N: Ye s . MR SO K O MB ELA : O f- b e c a u s e lik e I s a id y e s te rd a y, w e te s t- w e s e lec t s a mp le s . Ma n a g e me n t th e n is r e q u ir e d t o g o a n d lo o k a t th e w h o le p o p u la tio n a n d co me b a ck to u s a n d s a y, w e h a v e loo k e d a t th e w h o le Page 63 of 121 21 FEBRUARY 2020 – DAY 217 p o p u la tio n , w e h a v e id e n tifie d 4 .5 b illio n , w e h a v e id e n tifie d 1 0 b ill io n fo r a n e x a mp le . Th e n w e w ill p er fo r m o u r ow n a d d itio n a l p r o ce d u re s to te s t th e c r e d ib ility o f th a t n u mb e r th a t ma n a g e me n t c o me s w ith it to u s . An d i f th e n it is o k a y- th a t it is o k a y, th e n w e w ill a g r e e . Th e n th e y w ill d is c los e in th e fin a n c ia l s ta te me n ts if w e a g r e e . Th e n it ma y n o t r e s u lt in a q u a lific a tio n . Bu t in th is in s ta n c e Ma na g e me n t co u ld n o t- th e y d id tr y to go a n d r e v is e th r o u g h th e w h o le p o p u la tio n b u t u n fo r tu n a te ly, th e y w e r e fa c e d w ith th e s a me c h a lle ng e s th a t w e a r e fa c e d w ith . An d th e y c o n s id er e d h e nc e if 10 y o u lo o k a t th e fin a n c ia l s ta te me n ts th e v a lu e th a t is d is c lo s e d th e r e in th a t fir s t ta b le C h a ir o f 1 2 5 millio n fo r ir r e g u la r ex p e n d itu re a n d o f 4 0 millio n fo r fr u itle s s a n d wa s te fu l e x pe n d itur e , it is b e c a us e Ma n a ge me n t s a id w e a r e g o in g to b e q u a lifie d a ny wa y. So w h y bo th e r to u p d a te th e ... ( in te r v en e s) C H A IR PER SO N: Bu t th a t is - th a t mu s t b e ir r e s po n s ib le is it n o t? Be c a u s e as Ma n a g e me n t y o u mu s t w a n t to k n o w th e tr u e - th e fu ll e x te n d o f th e p r o b le m. Te ll me i f I a m b e in g to o h a r s h . I me a n if a u d ito r s c o me a n d s a y y o u h a v e a s e r iou s p r o b le m b u t w e c a n n o t te ll y o u th e tr u e p o s itio n b e c au s e w e wo r k o n s a mp le . 20 Bu t if y o u lo o k a t w h a t w e h a v e fo u n d e v e n b as e d o n s a mp les , it is te r r ib le . Yo u mu s t- y o u w o u ld h a v e to g o a n d s a y, I r e a lly w a n t to fin d o u t th e fu ll d e p th o f th e p r o b le m. Be c a u s e w h a t ma y ne e d to b e d o n e mu s t b e d on e mu s t b e d e c id e d u p o n o n tr u e fa c ts . An d I d o n o t th in k it s h o u ld b e th e r ig h t a p p r o a ch to s a y, o h w e w ill g e t a q u a lifie d o p in io n a n y w a y s o it is fin e . A m I b e in g h a r s h o n th e m? Page 64 of 121 21 FEBRUARY 2020 – DAY 217 MR SO K O MB ELA : Yo u a r e n o t b e in g h a r s h C h a ir h o w ev e r it is w h e th e r it w a s p r ac tic a l fo r th e m to g o b e c a u s e th e m a g n itu d e o f th e p r o b le ms w a s b ig . Ea r lie r o n I r e fle c te d in te r ms o f th e c h a lle n g es th a t w e fac e d w ith th e c o n tr a c t ma n ag e me n t sy s te m. In te r ms o f th e n th e c o n tr ac t ma n a g e me n t a t SAA is a b ig p r o b le m, i t is a me s s , I c a n s a fe ly s a y it is a me s s b a s ic a lly. Be c a u s e th a t a s s e t – th e c o n tr a c t r e g is te r its e lf w e r e n o t s a tis fie d w h e th e r it is c o mp le te o r n o t C h a ir. So , fo r th e m I r e me mb e r th e y s ta r te d I th in k to g o to - g o to th e w h o le p o p u la tio n I th in k s o me w h e r e in Se p te mb e r if I a m n o t mis ta k e n o f 2 0 1 7 . 10 We s ig n e d th e a u d it r e p o r t b y D e c e mb e r b u t a fte r a b o u t tw o w e e k s o f th e m- b e c a u se I r e me mb e r th e y e v e n d e v e lo p e d th e c h e c k lis t in te r ms o f h o w th e y a r e g o in g to g o a b o u t. An d th a t c h e c k lis t I th in k th e H e a d o f In te r n a l Au d it a t S AA w a s r e q u es te d by th e Au d it C o mmitte e to a s s is t Ma n a g e me n t to d o th is e x e r c is e . H o w ev er, a fte r I th in k a b o u t tw o w e e k s o f p e r fo r min g th a t e x e r c is e fo r a n e x a mp le Ma na g e me n t th e r e w e re c er ta in , fo r e x a mp le th e r e w e r e c e r ta in c o n tr ac ts th a t th e y c o u ld n o t fin d . Th e r e w a s c e r ta in d o cu me n ta tio n e v e n in th e te n d e r d o c u men ts th a t th e y c o u ld n o t fin d a n a c c o un t fo r. An d th e y c o n s ide r e d a n d sa id th e y n e ed mo r e time fo r th e m. N o t o n ly a mo n th o r 20 tw o o r th r e e b u t th e y w o u ld n e e d to a c tu a ll y h a v e a d e d ic a te d te a m th a t w o u ld lo ok in to th a t a n d c o me up w ith a cr e d ib le a mou n t. So , y o u c an s e e th e n th a t i t w a s - th e p r o b le m th e r e w a s s y s te ma tic a s o p p os e to s a y ma y b e it is a mis ta k e o f s o me o ne . It w a s a s y s te ma tic iss u e th a t c o u ld n o t ju s t b e c o r r ec te d w ith in a fe w w e e k s or s o . C H A IR PER SO N: Ye s , th a t ma y b e s o b u t ce r ta in ly h ow a re y o u g o in g to Page 65 of 121 21 FEBRUARY 2020 – DAY 217 c o r re c t a p r o b le m if y o u d o n o t k n o w ho w fa r it g o e s ? Th a t is my c o n ce r n . So th a t is p a r t o f my c o n c e r n . Bu t I g o b a c k to my q u e s tio n . It is d iffic u lt fo r me to th in k th a t SAA s u d d e n ly o u t o f th e b lu e in th e 2 0 1 6 /2 0 1 7 fin a n c ia l y e a r fo u n d its e lf in th i s me s s th a t y o u h a ve to ld me a b o u t a n d th a t th e o th e r y e a rs w h e n th e y w e r e b e in g g iv e n c le a n a ud its b y Pr ic e wa te r h o us e a n d Nk o nk i, th e r e w a s no me s s . W h a t d o y o u s a y to th a t? I a m fin d in g it d iff ic u lt to th in k th a t th e y w e r e in th is me s s in w h ic h y o u- in w h a t y o u d es crib e d a s a me ss in 2 0 1 6 /2 0 1 7 fin a n c ia l y e a r jus t o u t o f th e b lu e in th is fin a n c ia l y e ar. 10 Bu t th e o th e r y e a rs e v er y th in g wa s fin e . Th e r e w a s n o th in g a n y b od y co u ld p ick u p a n d s a y th e r e is a p ro b le m h e r e . MR SO K O MB ELA : Ch a ir I mig h t s a y ou r au d it w o r k a t SAA in c lu d in g th e a u d it w o r k th a t w e h a d d o n e in s u p p ly c h a in ma n a g e me n t a n d th e a u d ito r fin a n c ia l s ta te me n ts a n d th e a u d it o p i n io n th a t w e e x p r e ss e d is a p p r o pr ia te . An d a ls o , it is d i ffic u lt fo r me to a n s w e r I th in k . .. ( in te r v en e s) C H A IR PER SO N: J a , I k n o w. MR SO K O MB ELA : Yo u r q u es tio n in te r ms o f w h y th is th in g b ec a u se I th in k fo r u s th a t is w h a t w e fo u n d w h e n w e g e t th e r e . 20 C H A IR PER SO N: Ye s . MR SO K O MB ELA : We fo u n d th a t th in g s - it w a s a me ss b a s ica lly. C H A IR PER SO N: Ye s . MR SO K O MB ELA : It w a s a me s s , ja . C H A IR PER SO N: Bu t I- y o u mu s t b e a b le to s a y to me lo o k in g a t th e me s s th a t w e fo u n d lo g ic a lly th a t me s s mus t h a v e b e e n th e r e a t le a s t o r Page 66 of 121 21 FEBRUARY 2020 – DAY 217 h a lf o f i t th e p r e v io u s fin a n c ia l y e ar. MR SO K O MB ELA : Ab s o lu te ly C ha ir. C H A IR PER SO N: Th a t y o u c a n s a y. MR SO K O MB ELA : Th a t I c a n s a y C ha ir. C H A IR PER SO N: Ye s . MR SO K O MB ELA : Be c a u s e th a t me s s wa s s y s te ma tic b as ic a lly. C H A IR PER SO N: Ye s . MR SO K O MB ELA : Be ca u se y o u c a n no t h a v e a s ys te ma tic is su e th is y e a r- s ur e ly it mig h t h av e b ee n th e wa y th a t th in g s h av e b ee n d o ne a t 10 SAA fo r q u ite s o me time . C H A IR PER SO N: Ye s . MR SO K O MB ELA : So th a t is- b ec a u se e ve n fo r th e m b e ca u se if it w a s th e p r o b le m th a t w a s o n ly s ta r te d th a t y e a r, th e y w e r e g o in g to b e a b le to c o r re c t it imme d ia te ly. C H A IR PER SO N: Ye s . MR SO K O MB ELA : Bu t if it is a n a c c u mu la tio n o f p r o b le ms fr o m th e p r ior y e a rs th e n it ma y b e v e r y v e ry d iffic u lt fo r th e m to th in k th a t th e y a r e g o in g to a d d r e ss it imme d ia te ly. C H A IR PER SO N: 20 Ye s . Bu t le t me s e e i f y o u a r e a b le to g o o n e s te p fu r th e r. We ta lk e d a b o u t th e p r ev io u s fin a nc ia l y e ar. Ar e y o u n o t a b le to s a y e ve n th e y e a r b e fo r e th a t, th is me s s m u s t s till h a v e b e e n th e r e o r a t le a s t h a lf o f i t o r s o me th in g lik e th a t? MR SO K O MB ELA : An d C h a ir th is is my o p in io n . C H A IR PER SO N: Ye s . MR SO K O MB ELA : It is my o p in ion in te r ms o f b e c a us e w h e n I lo o ke d a t Page 67 of 121 21 FEBRUARY 2020 – DAY 217 th e c h a lle n g e s th a t th o s e g u y s h a d th e r e , th e y w e r e n o t c h a lle n g e s o f th a t y e a r. Th e y w e r e c h a llen g e s th a t a r e c omin g fr o m p r io r y e a rs . C H A IR PER SO N: Ye s . MR SO K O MB ELA : An d y o u c a n s e e e v e n th e c u ltu r e , w h e n y o u lo o k a t th e c u ltu r e th is is h o w th in g s a r e d on e h e r e . So .. . ( in te r v e n e s) C H A IR PER SO N: An d it w a s th e w r o n g w a y o f d o in g th in g s . MR SO K O MB ELA : Ab s o lu te ly it w a s th e w ro n g w a y o f d o in g th in g s . C H A IR PER SO N: Ye s . Is i t n o t tr u e th a t a c le a n a u d it fo r th e 2 0 1 5 /2 0 1 6 fin a n c ia l y e a r w h e n in y o u r o p in io n th is me s s mu s t h a v e b e e n th e r e ? I t is 10 n o t a tr u e r e fle c tio n o r c o u ld n o t h a v e b e e n a tr u e r e fle c tio n o f th e p o s itio n a t SAA? MR SO K O MB ELA : C h a ir I th in k lik e I s a id I th in k th e mo s t imp o r ta n t th in g fo r u s to b e a b le to g e t a c r e d ib le o p inio n o n th a t . .. ( in te r v e n e s ) C H A IR PER SO N: Is to g o to th e b o a r d . MR SO K O MB ELA : Ma y b e is to g o to th e I n d e p e n de n t R e g u la to ry Bo a r d fo r Au d ito r s ... ( in te r v e n e s ) C H A IR PER SO N: Ye s o k a y. MR SO K O MB ELA : To fin d o u t w h e th e r th e n b e c a us e mys e lf w h e re I a m s ittin g , I a m v e r y ca r e fu l o f sa y in g ma y be p e r h ap s th is is wh a t th e y 20 s h o u ld h av e d o n e . Be c a u s e th e b o ar d ma y c o me a n d s a y in a c tu a l fa c t, w e h a v e lo ok e d a t th e ir w o r k a nd th a t c le a n a u d it o p in io n w a s a p p r o pr ia te . C H A IR PER SO N: Bu t o f c o u r s e , y o u ou gh t to b e a b le to s a y, in my ju d g me n t in my o p in io n , in my p r o fe s s io n al o p in io n w h a t my c o lle a g u e s fr o m th a t fir m fo u n d w h e n th e y s a id SAA d e s e rv e d a c le an o p in io n w as Page 68 of 121 21 FEBRUARY 2020 – DAY 217 n o t ju s tifie d . W h e th e r th e b o a r d a g r e es w ith y o u o r n o t th a t is th a t. Yo u a r e g iv in g y o ur o p in io n . If th e y c o me a n d s a y, n o th a t w a s e x c e lle n t. Th a t is th e ir o w n o p in io n . An d y o u c a n d is ag r e e w ith th e m. J u s t b e ca u se th e y a r e th e b o ar d d o es n o t me a n th a t y o u h a v e to h a ve th e s a me o p in io n a s th e m. H a v in g s a id th a t it ju s t s e e ms to me th a t h o w e v er y o u p u t i t a n d o f c o u r s e Pr ic e w a te rh o u se w ill c o me a t s o me s ta g e a n d p u t i ts s id e o f s to r y. Bu t a s I s it h e r e i t ju s t s e e ms to me th a t u n le s s o n e fin d s a n e x p la n a tio n - o n e is g iv e n a n e x p la n a tio n th a t ma k e s s e n s e , it ju s t s e e ms th is me s s y o u a r e 10 ta lk in g a b o u t w h ic h y o u h av e fo u n d in th e 2 0 1 6 /2 0 1 7 fin a n c ia l ye a r w h ic h y o u h a v e s a id a n d I th in k y o u mu s t b e r ig h t it mu s t h a v e b e e n th e r e in th e p r e v iou s fin a n c ia l y e ar in r e s p e c t o f w h ic h a c le a n a u d it w a s g iv e n . It ju s t s e e ms th a t it is in c o mp a tib le w ith p e o p le w h o h a d d o n e a p r o p er jo b in a u d itin g . N o w I a m n o t a n a u d ito r b u t I a m lis te n in g to w h a t y o u a r e te ll in g me . Yo u a r e a n a ud ito r. It is ju s t d iffic u lt to u n d e rs ta n d th a t in a n e n tity w h e r e fo r fiv e c o n s e c u tive y e a r s a n a u d itin g fir m g iv e s a c le a n a u d it th a t is c o ns is te n t w ith o r r a th er th e me s s is c on s is te n t w ith w h a t o n e w o u ld e x p ec t in a n e n tity th a t g e ts a c le a n a u d it. Yo u u n d e r s ta n d wh a t I me a n ? 20 MR SO K O MB ELA : I d o u n d e r s ta n d C h a ir. C H A IR PER SO N: Ye s . MR SO K O MB ELA : An d w h a t I c a n s a y is th a t o n my s id e th e c o n c e r n th a t I h a d w a s w h a t- w h e th e r th e p r e d e c es s or a u d ito r s c o ns id e re d th a t th e r e is n o t e n o u gh w or k th a t w e ha v e do n e o n s u p p ly c h a in man a g e men t a n d y o u d o n o t e v e n h av e to lo o k a t th a t. G o a n d d o y o u r o w n w o rk . Page 69 of 121 21 FEBRUARY 2020 – DAY 217 C H A IR PER SO N: Ye s . MR SO K O MB ELA : So , fo r me th a t is a c o n c e r n . Ma y b e p er h a ps if th e y s till g o in g to c o me a n d ma y b e te ll y o u in te r ms o f .. . ( in te r v e n e s ) C H A IR PER SO N: W h y th e y d id n o t d o th a t p a r t. MR SO K O MB ELA : H o w - w h y th e y d id n o t d o th a t p a r t o r ma y b e te ll w h e th e r h ow th e y s a tis fie d th e ms e lve s in to th a t. C H A IR PER SO N: Ye s . MR SO K O MB ELA : Bu t in te r ms o f th e e n g a g e me n ts th a t my se lf I h a d w ith th e m, th a t is b a s ic a lly th e n w h a t th e y to ld me . 10 C H A IR PER SO N: Ye s . Th e y c o n s id er e d th a t. MR SO K O MB ELA : Ab s o lu te ly. C H A IR PER SO N: Ye s . Bu t w o u ld it- m a y b e I h a v e a s k ed y o u th e q u e s tio n . Fo r y o u it is a s an a u d ito r it is d iffic u lt to u n d e r s ta n d w h y th ey d id n o t d o it. MR SO K O MB ELA : It is d i ffic u lt to u n d e r s ta n d . C H A IR PER SO N: O k a y. A D V MIC H A EL MB IK IWA : We w ill o f c o u r se h e a r fr o m PW C la te r to d a y. Mr So k o mb e la I w o u ld lik e y o u ju s t to g o to p a g e 11 0 5 . It s h o u ld b e ju s t o v e r th e p a g e fr o m w h er e y o u ar e if y o u a r e n o t o n it . 20 MR SO K O MB ELA : 11 0 5 . A D V MIC H A EL MB IK IWA : 11 0 5 . MR SO K O MB ELA : I a m th e r e . A D V MIC H A EL MB IK IWA: An d ju s t r e a d th e la s t th r e e - th o se th r e e p a r a gr a p hs u n d e r th e ta b le b e c a u s e th a t a s I r e a d it d o e s in v o lv e s o me r e fle c tio n o n th e p r io r y e ar s a u d it. Page 70 of 121 21 FEBRUARY 2020 – DAY 217 MR SO K O MB ELA : Th e r e is n o n -c o mp lia nc e w ith PFMA a s ir r e g u lar a n d fr u itle ss a n d w a s te fu l e x pe n d itu r e w a s no t p r e ve n te d . Th e ta b le a b o v e w ith a lis t o f fin d in g s re la te to ir r e g u lar, fr u itle s s an d w a s te fu l e x pe n d itu r e is n o t a c o mp le te lis t a n d s o me o f th e fin d in g s r a is e d h av e n o t b e e n as se ss e d fo r a ud ito r ’s c o n c lus io n . D u e to ma n a g e me n t c o mme n ts b e in g o u ts ta nd in g th a t ma y r e s u lt in a - o k a y I th in k w e ma d e ... ( in te r v e n e s ) C H A IR PER SO N: In a c h a n g e o f o u r a s s es sme n t. MR SO K O MB ELA : It w a s s u p p o se d to b e i n a c h a n g e o f o u r a s s e ss me n t 10 th e r e . C H A IR PER SO N: J a . MR SO K O MB ELA : Th a n k y o u C ha ir. Fu r th e r mo r e , th e a mo u n t o f o p e n in g b a lan c e r e la tin g to ir re g u lar a n d fr u itle s s a n d w a s te fu l e x p e nd itu r e is in c o mp le te d u e to a w a r d s ma d e in th e p r io r y e a r s th a t w e r e id e n tifie d in th e c u r r e n t y e a r a s ir r e gu la r o r r e la te s to fr u itle s s a n d w as te fu l e x p e n d itu r e. Ma n a g e me n t mu s t q u a n tify th e e x p e n d itu r e a n d a d ju s t th e o p e n in g b a la n c e fo r ir r e g u la r a n d fr u itle s s a n d w a ste fu l e x p e n d itu r e a s th is ma y a ffe c t th e a u d it r e p o r t if le f t u n a d ju s te d . 20 A D V MIC H A EL MB IK IWA : C a n y o u jus t e x p la in th a t la s t p a r a g r a p h to u s ? MR SO K O MB ELA : Th e las t p a r a gr a p h C h a ir w h a t w e ar e sa y in g be c au s e w h e n w e a r e s e lec tin g th e te n d e r s , th e r e w e r e te n d e r s th a t w e r e e n te r e d in to in th e p r io r ye a rs th a t w a s s till a c tiv e in th e y e a r th a t w e a r e au d itin g 2017. So , w h e n w e tes te d th e n th o se te nd e r s , w e fin d th a t th e y w e re n o n - co mp lia n ce s th a t r e s u lte d in ir r e g u la r e x p e nd itu r e . Page 71 of 121 So , in te r ms o f 21 FEBRUARY 2020 – DAY 217 th e ir r e g u la r ex p e n d itur e g u id e fr o m Tr e as ur y th e r e is a c er ta in w a y th e n th a t e x p e n d itu r e n e e ds to b e d is c los e d . Me a n in g th a t w e w e re s ay in g th e n th a t r e s ta te th e 5 millio n th a t y o u d is c los e d fo r th e p r io r y e ar w h er e th is w ith th e a d d itio n a l ir r e g u la r e x p e nd itu r e th a t y o u o ug h t to h a v e d isc lose d in th e p r io r y e a rs . So th a t w a s o ur in s tr uc tio n to Ma n a g e me n t a t th e time b e c a u s e w ha t w e w e r e c a u tio n in g th e m if th e y d o n o t d o th a t th e n th a t is g o in g to r e s u lt th e n in u s mo d ify in g o r q u a lify in g th e a u d it r e p or t. A D V MIC H A EL MB IK IWA : 10 W h a t d id y o u s a y th e a mo u n t o f ir r e g u la r e x p e nd itu r e w a s in th e p r io r ye a r ? MR SO K O MB ELA : Wa s a bo u t 5 millio n o r 5 .4 millio n o r s o - I d o n o t h a v e th e e x a c t fig u r e b u t ... ( in te r v e n e s) A D V MIC H A EL MB IK IWA : Th a t is e x a c tly r ig h t. MR SO K O MB ELA : J a . A D V MIC H A EL MB IK IWA : It w a s 5 .4 millio n . MR SO K O MB ELA : J a . A D V MIC H A EL MB IK IWA: So , 5 .4 millio n in th e 2 0 1 5 /2 0 1 6 y e a r y o ur s a mp le th a t y o u h av e ta k e n us th r o u g h y o u h av e s h ow n us ir r e g u la r e x p e nd itu r e th e r e o f 4 .5 b illio n . Is th a t r ig h t? 20 MR SO K O MB ELA : Ab s o lu te ly C ha ir. CHAIRPERSON: N o w t h e R 5 m il li o n o r s o ir r e g u l a r e x p e n d i t u r e t h e p r e v i o u s f in a n c ia l y e a r is t h a t a s p e r t h e d e t e r m i n a t io n o f y o u r p r e d e c e s s o r s o r is t h a t a s p e r t h e d e t e r m i n a t io n o f m a n a g e m e n t ? MR SOKOMBELA: I c a n n o t r e m e m b e r t h a t C h a ir w h e t h e r i t w a s id e n t i fi e d b y t h e p r e v i o u s a u d i t o r s o r b y m a n a g e m e n t . B u t m a n a g e m e n t Page 72 of 121 21 FEBRUARY 2020 – DAY 217 d o id e n ti fy ir r e g u la r e x p e n d it u r e a s w e ll . C H A I R P E R S O N : Ye s . M R S O K O M B E L A : A n d d is c lo s e it . C H A I R P E R S O N : Ye s , y e s . MR SOKOMBELA: However I cannot – I cannot remember this one w h e t h e r i t w a s b e c a u s e o f t h e p r e v i o u s a u d i to r s o r i t w a s b e c a u s e o f management. C H A I R P E R S O N : B e c a u s e i t w o u ld b e – o k a y. I s i t p o s s i b l e t o h a v e a c le a n a u d i t i f t h e r e a r e s e r i o u s – m a y b e I s h o u ld n o t s a y s e r i o u s – i f 10 t h e r e i s ir r e g u l a r e x p e n d i t u r e ? MR SOKOMBELA: It depends. C H A I R P E R S O N : It d e p e n d s ? MR SOKOMBELA: It depends ja because… C H A I R P E R S O N : O n t h e a m o u n t? MR SOKOMB ELA: It depends for example on the amount because we h a v e g o t a w a y o f e v a lu a ti n g . B e c a u s e ir r e g u l a r e x p e n d i tu r e i n i ts n a t u r e i s q u a l it a ti v e ly m a t e r ia l . H o w e v e r t h e n t h e r e a r e c e r ta i n f a c t o r s t h a t w e l o o k i n to t o a r r i v e a t a c o n c l u s io n to s a y i t i s m a te r i a l t h a t i t m a y – t h e n o n - c o m p li a n c e c a n b e e s c a l a t e d t o t h e a u d i t r e p o r t o r n o t . 20 A n d o n e o f th o s e f a c t o r s i s f o r e x a m p le is t h e r e a tr e n d . F o r e x a m p le t h e y m a y i n c u r ir r e g u l a r e x p e n d i tu r e o f R 5 m i ll io n – R 5 . 4 m il li o n t h is year but you see that you know – you know they made a mistake here a n d th e r e y o u k n o w s o m a y b e … C H A I R P E R S O N : N o th in g s i g n i fic a n t. M R S O K O M B E L A : J a m a y b e th is y e a r o k a y l e t u s – l e t u s s e e m a y b e i t Page 73 of 121 21 FEBRUARY 2020 – DAY 217 w a s ju s t a s p u r o f a m o m e n t b u t t h e n i f n e x t y e a r a g a i n t h e y i n c u r t h e R 5 . 4 m il li o n a g a in y o u a r e g o in g to s a y n o w t h e r e i s a tr e n d n o w. Yo u k n o w m e a n in g t h a t y o u a r e n o t – y o u r c o n t r o l s a r e n o t e ffe c t iv e e n o u g h t o p r e v e n t th is ir r e g u l a r e x p e n d i tu r e . N o r m a l ly t h e n w e w i ll th e n e s c a l a t e t h e n t h a t n o n - c o m p li a n c e t o th e A u d i to r s R e p o r t t o s a y, t h e A c c o u n ti n g A u t h o r i ty o r t h e B o a r d d i d n o t t a k e e ff e c ti v e s t e p s to p r e v e n t ir r e g u l a r e x p e n d i t u r e o r fr u it l e s s a n d w a s t e f u l e x p e n d i tu r e . B u t w e – w e d o n o t ju s t s a y t h e m o m e n t w e i n c u r i t o r i m m e d ia t e l y i t g o e s t o t h e A u d it o r s R e p o r t w e l o o k a t t h e q u a li t a t iv e c o n s i d e r a t i o n s a s w e l l . 10 W h a t a r e th e q u a l i ta t iv e c o n s i d e r a t io n s t o a r r iv e a t th a t ? C H A I R P E R S O N : A n d w h a t a b o u t fr u it l e s s a n d w a s te f u l e x p e n d i t u r e ? MR SOKOMBELA: Same principle. CHAIRPERSON: C a n y o u h a v e fr u i t le s s a n d w a s t e f u l e x p e n d i t u r e a n d s t il l h a v e a c l e a n a u d i t ? M R S O K O M B E L A : I t is t h e s a m e p r in c i p l e C h a ir. C H A I R P E R S O N : Ye s . MR SOKOMBELA: B e c a u s e a ls o w e d o l o o k a t th e n a tu r e o f t h a t fr u i tl e s s a n d w a s te f u l e x p e n d i t u r e a s w e ll . F o r e x a m p le y o u m a y fi n d t h a t t h e y h a v e g o t fr u i t le s s a n d w a s te f u l e x p e n d i t u r e b e c a u s e d u e to 20 la t e p a y m e n ts o f s u p p li e r s th e n t h e y w il l i n c u r i n t e r e s t th e r e . A n d t h e n y o u m a y f i n d t h a t m a y b e th e s i tu a ti o n d o e s n o t a ll o w t h e m t o p a y t h e s e c r e d i t o r s o n ti m e . E v e n t h o u g h i t is s ti ll fr u i tl e s s a n d w a s te f u l e x p e n d i t u r e w e m a y a s s e s s it a n d m a y b e a r r iv e a t a c o n c l u s i o n to s a y m a y b e i t i s n o t b e c a u s e th e y a r e ir r e s p o n s ib le o r a n y t h in g . M a y b e i t is b e c a u s e m a y b e t h e y d o n o t h a v e m o n e y. B u t y o u m a y fi n d th a t th e r e i s Page 74 of 121 21 FEBRUARY 2020 – DAY 217 a n o t h e r fr u i t le s s a n d w a s te f u l e x p e n d i t u r e w h e r e b y i t is j u s t – p e o p l e a r e j u s t w a s t in g m o n e y. T h e n t h a t o n e w e c a n e s c a l a t e to t h e A u d i t o r s Report. C H A I R P E R S O N : Ye s I w a s a b o u t t o a s k y o u b e c a u s e y o u r e m e m b e r w e h a d a d i s c u s s i o n a b o u t t h e d i ff e r e n c e b e t w e e n fr u it l e s s a n d w a s t e f u l e x p e n d i t u r e a n d ir r e g u l a r e x p e n d i tu r e . M R S O K O M B E L A : A b s o l u t e ly C h a ir. C H A I R P E R S O N : B e c a u s e y o u w i ll r e m e m b e r t h e e x a m p l e th a t I m a d e t o y o u w h a t r e m a i n s in m y m i n d i s th a t i f i t i s – if i t is fr u i tl e s s a n d 10 w a s te f u l e x p e n d i t u r e i t m e a n s t h a t y o u w e r e w a s t in g m o n e y. M R S O K O M B E L A : A b s o l u t e ly. CHAIRPERSON: Yo u d i d n o t p a y t h is m o n e y f o r a n y v a l u e t h a t t h e e n t i ty g o t fo r t h a t m o n e y. M R S O K O M B E L A : A b s o l u t e ly c h a ir. CHAIRPERSON: S o n o w i f t h a t is c o r r e c t it i s d i ffi c u l t f o r m e t o u n d e r s t a n d w h y y o u c o u l d h a v e a c l e a n a u d it i f t h e r e is w a s t e fu l a n d fr u i tl e s s a n d w a s te f u l e x p e n d it u r e . U n l e s s y o u s a y t o m e i f i t i s a v e r y s m a ll a m o u n t i t m i g h t n o t a ffe c t t h e o p i n i o n b u t i f – i f y o u m ig h t – i f y o u h a v e a s ig n if ic a n t a m o u n t a n d w e k n o w y o u k n o w th a t w o u ld b e r e la t iv e 20 t o e a c h e n ti ty. I f y o u h a v e a s i g n i f ic a n t a m o u n t o f fr u it l e s s a n d w a s te f u l e x p e n d i t u r e I d o n o t s e e h o w y o u c o u l d s t il l h a v e a c l e a n a u d i t t h a t i s h o w I a m lo o k i n g a t i t . W h a t c a n y o u s a y to t h a t ? MR SOKOMB ELA: N o I a g r e e w it h t h a t – w i t h y o u r i n te r p r e t a t i o n C h a ir. Ye s . I a g r e e w i t h th a t . I m u s t s a y I th in k S A A w h e n it c o m e s to fr u i tl e s s a n d w a s t e f u l e x p e n d i t u r e o n e o f t h e t h in g s t h a t tr i p s t h e m a lo t Page 75 of 121 21 FEBRUARY 2020 – DAY 217 is t h e – is th e i m m i g r a t io n p e n a l ti e s . F o r a n e x a m p l e t h e ju r is d i c ti o n s t h a t th e y fl y in t o i f f o r e x a m p l e th e y fl y a p a s s e n g e r t o – l e t u s s a y t o B r a z i l b u t t h e p a s s e n g e r d o e s n o t h a v e a v is a t o g o t o B r a z il t h e n B r a z i l w i ll s a y y o u g o in g t o t a k e t h is p a s s e n g e r b a c k t o w h e r e y o u to o k w i t h y o u r o w n c o s t . Yo u k n o w s o th o s e a r e th e ty p e s o f fr u i tl e s s a n d w a s te f u l e x p e n d i tu r e a n d w e w e r e v e r y c l e a r th e n t o S A A t o s a y t h e y n e e d to p u t m e c h a n i s ms in p l a c e t o e n s u r e t h e n t h a t t h e y a r e a v o i d i n g t h e s e . B e c a u s e i t c a n a c c u m u l a te i n to m ill i o n s a n d m i ll io n s o f R a n d s b e c a u s e t h e y a r e fl y i n g t h e s e p e o p le y o u k n o w t o t h e s e d e s t i n a t io n s 10 a n d t h e y o u g h t to h a v e e n s u r e d t h e n t h a t th e y h a v e g o t v a l id tr a v e l d o c u m e n ts . CHAIRPERSON: W e – w e – y o u s a id t h a t w h a t y o u f o u n d a s f o r e x a m p l e fr u it l e s s a n d w a s te f u l e x p e n d i tu r e d i d n o t n e c e s s a r i ly r e fl e c t t h e tr u e p o s it i o n b e c a u s e it w a s b a s e d o n s a m p le s . M R S O K O M B E L A : Ye s C h a ir. CHAIRPERSON: But nevertheless it seems to me to be a very s ig n if ic a n t a m o u n t b e c a u s e if I a m n o t m i s t a k e n i t w a s – o h i t is R 3 0 0 m il li o n , is t h a t r ig h t ? M R S O K O M B E L A : Ye s C h a ir. 20 CHAIRPERSON: N o w e v e n if i t w a s R 5 0 mi ll io n i n t h e c o n t e x t o f S A t h a t w o u ld b e s i g n i fi c a n t , is it n o t? M R S O K O M B E L A : A b s o l u t e ly C h a ir. CHAIRPERSON: E v e n i f i t w a s R 5 m il li o n w o u l d i t n o t b e s i g n i fi c a n t s t il l? M R S O K O M B E L A : I t w o u l d b e s ig n if ic a n t . Page 76 of 121 21 FEBRUARY 2020 – DAY 217 C H A I R P E R S O N : It w o u l d b e ? MR SOKOMBELA: Hm. CHAIRPERSON: S o i t i s d i ff ic u l t f o r m e t o t h i n k t h a t i f y o u w e r e c o r r e c t in t e r m s o f th e s a m p l e s t h a t y o u t o o k t h a t f o r 2 0 1 6 / 2 0 1 7 t h a t fi n a n c i a l y e a r i f t h e r e w a s a m i n i m u m o f R 3 0 0 m il li o n in te r ms o f fr u i tl e s s a n d w a s te f u l e x p e n d i tu r e it c o u l d b e m u c h m o r e b u t t h e m i n i m u m o f t h is i t is d i ff ic u l t t o t h i n k t h a t t h e p r e v i o u s y e a r t h e r e w a s n o s ig n i f ic a n t fr u i tl e s s a n d w a s t e fu l e x p e n d i tu r e . T h e r e w a s n o t e v e n R 5 m i ll io n th a t y o u r p r e d e c e s s o r s s h o u l d h a v e p ic k e d u p . 10 M R S O K O M B E L A : A b s o l u t e ly. CHAIRPERSON: Ja. A n d if t h e y h a d p i c k e d i t u p o n w h a t y o u h a v e t o l d m e t h e y s h o u l d n o t h a v e g i v e n a c le a n a u d i t f o r th e p r e v i o u s fi n a n c i a l y e a r, is t h a t r ig h t ? MR SOKOMBELA: If they… C H A I R P E R S O N : I f t h e y h a d p i c k e d u p fr u it le s s e x p e n d i t u r e – fr u i tl e s s a n d w a s te f u l e x p e n d i t u r e o f R 5 m i ll io n ? M R S O K O M B E L A : A n d h a v e – i f th e y p i c k e d i t u p a n d h a v e a s s e s s e d it . C H A I R P E R S O N : Ye s . 20 M R S O K O M B E L A : A n d h a v e a r r i v e d a t a d e c i s i o n t h a t i t i s q u a li t a ti v e ly m a t e r i a l. C H A I R P E R S O N : Ye s . MR SOKOMBELA: Then they should not have… C H A I R P E R S O N : Ye s . M R S O K O M B E L A : Is s u e d a c le a n a u d i t . Page 77 of 121 21 FEBRUARY 2020 – DAY 217 C H A I R P E R S O N : Ye s . MR SOKOMBELA: T h a t is w h y i t i s i m p o r ta n t t h e n t h a t i n t e r m s o f w h a t w e r e t h e ir c o n s i d e r a t i o n s ? CHAIRPERSON: yes. M R S O K O M B E L A : W h a t c o n s id e r a ti o n s th e n d i d th e y p u t. C H A I R P E R S O N : Ye s . M R S O K O M B E L A : In t o th a t to a r r iv e a t c e r t a i n d e c is io n s . C H A I R P E R S O N : Ye s . M R S O K O M B E L A : Ye s . 10 C H A I R P E R S O N : W e l l y o u h a v e b e e n w i th – y o u h a v e b e e n w i t h th e – y o u h a v e b e e n i n t h e a u d i t in g p r o f e s s io n f o r a lo n g t i m e i n t e r m s o f y o u r o w n e x p e r i e n c e a n y e n t it y t h a t h a s g o t t h is k i n d o f fr u i tl e s s a n d w a s te f u l e x p e n d i tu r e i n a p a r t ic u l a r y e a r w h a t a r e t h e c h a n c e s t h a t i n t h e p r e v i o u s y e a r i t h a d n o n e a t a ll ? M R S O K O M B E L A : Ve r y lo w. C H A I R P E R S O N : In t e r m s o f e x p e r i e n c e g e n e r a l ly ? M R S O K O M B E L A : T h e c h a n c e s a r e v e r y l o w C h a ir. C H A I R P E R S O N : Ye s . T h a n k y o u . A D V M I C H A E L M B I K I WA : 20 C h a ir t h e r e w a s a f in d in g o f fr u i t le s s a n d w a s te f u l e x p e n d it u r e o f R 7 . 3 m il li o n i n t h e p r io r y e a r. T h a t w il l b e a d d r e s s e d b y Ms H o f m e y r in P W C ’s e v i d e n c e l a t e r. C H A I R P E R S O N : Ye s o k a y. A D V M I C H A E L M B I K I WA : M r S o k o m b e l a I w o u l d l ik e t o n o w f o c u s o n a f e w o f t h e is s u e s a n d tr a n s a c t io n s t h a t t h e c o m m i s s i o n h a s a l r e a d y h e a r d e v i d e n c e a b o u t i n th e c o u r s e o f t h e a v i a ti o n e v i d e n c e h e a r in g s . Page 78 of 121 21 FEBRUARY 2020 – DAY 217 A n d I w o u ld lik e to b e g in w i t h t h e S w is s p o r t G r o u n d H a n d li n g c o n tr a c t . Wa s t h a t a c o n tr a c t t h a t c a m e a c r o s s y o u r r a d a r a s p a r t o f th e a u d i t ? M R S O K O M B E L A : A b s o l u t e ly C h a ir. A D V M I C H A E L M B I K I WA : C a n y o u te ll m e a b o u t t h a t ? M R S O K O M B E L A : I t is p a r t o f th e fi n d i n g s h e r e . A D V M I C H A E L M B I K I WA : Ye s . M R S O K O M B E L A : I t is a tt a c h e d . A D V M I C H A E L M B I K I WA : Ye s I c a n t a k e y o u t h e r e i f i t is h e l p fu l? M R S O K O M B E L A : Ye s – ja m a y b e i f y o u c a n t a k e m e t h e r e . 10 A D V M I C H A E L M B I K I WA : W e – i f y o u i n th e s a m e fi le a n d w e a r e i n the same annexure that we have been in it is 1077. C H A I R P E R S O N : T h a t is D D 2 0 C ? A D V M I C H A E L M B I K I WA : D D 2 0 C C h a ir. C H A I R P E R S O N : Ex h ib i t D D 2 0 C . A D V M I C H A E L M B I K I WA : I n d e e d . C H A I R P E R S O N : P a g e 11 7 ? A D V M I C H A E L M B I K I WA : 1 0 7 7 . CHAIRPERSON: 1077. MR SOKOMBELA: 20 T h a n k y o u C h a ir. C h a ir th is i s t h e – I th i n k th is t e n d e r S w is s p o r t S A t e n d e r. I t i s a – i t w a s o n e o f o u r – w h e n w e w e r e d o i n g t h e r i s k a s s e s s m e n t a t – f o r t h e p u r p o s e s o f o u r a u d i t a t S A A i t is o n e o f t h e t e n d e r s t h a t w e h a v e id e n ti fi e d a s – a s a t e n d e r t h a t w e need to ensure that we test it. I th in k t h e r e w a s a l o t o f m e d ia a tt e n ti o n t o i t a n d t h e r e w e r e l o t o f c h a ll e n g e s I t h i n k t h a t w e r e r e fl e c t e d t h e r e . A n d i t fo r m e d p a r t o f o u r s p e c i f ic s e l e c ti o n . Page 79 of 121 Yo u 21 FEBRUARY 2020 – DAY 217 r e m e m b e r y e s te r d a y I – w h e n I w a s e x p l a i n i n g th e c o n c e p t o f s a m p li n g is th a t a t t i m e s w h e n y o u a r e d o in g y o u r r is k a s s e s s m e n t fo r e x a m p l e t h i n g s t h a t a r e i n t h e m e d i a o r m a y b e t h e r e a r e d iv is io n s a r e d o n e o r m a y b e t h e r e a r e s u s p ic i o n s t h a t t h e p r o c u r e m e n t p r o c e s s w a s n o t f o ll o w e d t h e n w h a t w e n o r m a ll y d o t h e n i s t o i d e n t i fy t h o s e t e n d e r s a n d t e s t t h e m s p e c if ic a l ly. S o t h is i s o n e o f t h o s e C h a ir. So one of the c o n c e r n s t h a t w e h a d w i t h th is t e n d e r C h a ir i s th e f a c t th a t t h is t e n d e r it t o o k f o u r y e a r s b e t w e e n t h e c lo s i n g d a t e o f t h e a w a r d a n d t h e d a t e t h a t t h i s t e n d e r w a s a w a r d e d b y t h e B o a r d o f D ir e c t o r s . 10 A n d t h is is s o m e t h i n g t h e n t h a t o n o u r s i d e w a s a c h a ll e n g e t o s a y, w h y w o u ld a t e n d e r ta k e s o l o n g t o b e a w a r d e d ? A n d y o u w i ll s e e th e r e C h a ir t h a t there is a h e a d in g that is written “ Te n d e r Reference Number G S M 0 2 9 / 0 8 ” . T h a t i s – th a t is b a s i c a lly t h e n – w h a t y o u s e e t h e r e w e a r e te ll in g a s t o r y y o u k n o w i n t e r m s o f – s o th a t w e c a n h a v e a b a c k g r o u n d i n t e r m s o f th is – o f t h i s t e n d e r. A n d t h is t e n d e r w a s a w a r d e d n o t o n ly to S w is s p o r t S A b u t a ls o w a s a w a r d e d to S w is s p o r t S A a s w e ll B i d A ir. A n d i t w a s f o r g r o u n d h a n d l in g a t th e a i r p o r t . A n d t h is t e n d e r w a s a d v e r t is e d o n t h e 11 J u n e 2 0 0 8 a n d S A A – w h a t S A A d i d t h e y w e n t o n a c o n fi n e m e n t p r o c e s s t o c o n fi n e th is g r o u n d h a n d l i n g 20 t e n d e r f r o m t h e li c e n c e d g r o u n d h a n d l in g s e r v i c e s u p p li e r s t h a t t h e y w e r e v e r y f e w y o u k n o w b e c a u s e t h e a ir p o r t ’s c o m p a n y o f S o u th A f r i c a n L ic e n c e s i s t h e o n e t h a t i s t h e lic e n c in g a u th o r it y i n t e r m s w h o – w h ic h c o m p a n i e s w i ll b e g r o u n d h a n d l in g c o m p a n i e s in a p a r tic u la r a ir p o r t . S o i n t h a t y e a r C h a ir I th i n k t h e r e w e r e a b o u t f o u r s u p p l ie r s t h a t w e r e – t h a t w e r e o p e r a ti n g a t t h e a ir p o r t. Th o s e w e r e E q u i ty Av i a t i o n . Page 80 of 121 The 21 FEBRUARY 2020 – DAY 217 o th e r o n e w a s M e n z i e s . A n d t h e n S w i s s p o r t S A a n d t h e n t h e o t h e r o n e w a s B i d A ir. A n d t h e n C h a ir t h is t e n d e r t h e r e q u e s t f o r p r o p o s a l i t in d i c a t e d th a t c r i ti c a l c r i t e r i a w h e r e t h e b i d d e r m u s t h a v e a v a l id A C S A lic e n c e i n o r d e r t o q u a l i fy fo r S A A b u s in e s s . M e a n i n g th a t i f f o r e x a m p l e t h e t e n d e r e r d i d n o t – d i d n o t m e e t th a t r e q u ir e d c r i t e r i a t h e n t h e y w il l b e d is q u a li f ie d fr o m t h e t e n d e r it s e l f . W h a t w e – w h a t w e s a w C h a ir w a s th a t S w is s p o r t S A a t t h e t i m e o r w h e n – o n t h e – a t t h e t i m e t h a t t h e t e n d e r c l o s e d th e y d i d n o t h a v e a lic e n c e fr o m A C S A t o p r o v i d e t h e g r o u n d h a n d li n g s e r v ic e s . 10 I t h i n k t h e c l o s in g d a t e i f I a m n o t m is t a k e n w a s th e 1 J u ly 2 0 0 8 . A n d t h e l e t t e r – t h e r e w a s a l e t t e r C h a ir t h a t w a s – t h a t i s d a te d 1 4 J u ly 2 0 0 8 f r o m I t h i n k fr o m th e S w is s p o r t P r e s i d e n t a n d C E O t h a t w a s a d d r e s s e d t o t h e S A A . T h a t i n d ic a t e d t h a t S w is s p o r t S A h a s b e e n a w a r d e d t h e t h ir d r a m p h a n d l in g l ic e n c e w h ic h w a s e ff e c ti v e fr o m 1 S e p t e m b e r 2 0 0 8 f o r a p e r i o d o f fiv e y e a r s w i th a n o p t io n t o r e n e w. R e m e m b e r C h a ir I s a i d t h e c l o s i n g d a te o f t h e a w a r d w a s t h e 1 J u ly 2 0 0 8 . A n d th e n t h e r e i s a le t t e r fr o m t h e – fr o m t h e S w is s p o r t P r e s id e n t a n d t h e C E O t h a t is w r i t t e n t o S A A i n d ic a ti n g t h a t S w is s p o r t h a s b e e n a w a r d e d t h e h a n d li n g – th e th ir d r a m p h a n d l in g lic e n c e e ff e c ti v e fr o m 1 S e p te m b e r 2 0 0 8 . 20 C H A I R P E R S O N : S o l a te r t h a n t h e c l o s i n g d a t e ? M R S O K O M B E L A : A b s o l u t e ly C h a ir. CHAIRPERSON: Hm. M R S O K O M B E L A : U p o n t h e n m y t e a m t h e n i n s p e c ti n g t h e e m a i l fr o m a n o ffi c i a l fr o m th e A i r p o r ts C o m p a n y o f S o u t h A f r i c a t h a t w a s d a t e d 4 J u n e 2 0 0 8 I t h in k t h e o ff ic i a l is a – w a s a G r o u p M a n a g e r L e g a l a t Page 81 of 121 21 FEBRUARY 2020 – DAY 217 A C S A . I t w a s n o t e d t h a t a t t h e ti m e o f s u b m is s io n o f th e p r o p o s a l b y – t o b i d b y S w is s p o r t a n d E q u i ty Av ia t io n . Th e y w e r e I t h in k b i g – S w is s p o r t a n d E q u it y Av i a ti o n w e r e o n t h e s h o r t l is t a t A C S A f o r th e lic e n c e . T h e y w e r e n o t – th e y w e r e o n l y – t h e y w e r e o n l y s h o r t lis t e d … C H A I R P E R S O N : T h e y w e r e n o t i n p o s s e s s io n ? MR SOKOMBELA: A b s o l u te ly. CHAIRPERSON: As yet. MR SOKOMBELA: lic e n c e . 10 Fo r t h e g r o u n d in g l ic e n c e a n d t h e y d i d n o t h a v e a H o w e v e r t h e c o n c e r n s t h e n th a t w e h a d w a s t h a t S w is s p o r t w a s s ti ll e v a l u a t e d y o u k n o w t h r o u g h th a t c r it ic a l c r i t e r i a f o r h a v i n g a v a l i d A C S A lic e n c e . Yo u k n o w e v e n th o u g h b y 1 J u ly 2 0 0 8 th e y d i d n o t have it. S o t h a t w a s o n e c h a ll e n g e . A n d t h e – d u r i n g th e e v a l u a t io n SAA evaluated also S w is s p o r t a n d Bi d A ir. the proposal s u b m i t te d by E q u i ty Av ia t io n , I th i n k t h e e v a l u a t io n w a s d o n e o n th e 2 2 O c t o b e r 2 0 0 8 a n d a l e t te r o f a w a r d w a s s e n t t o – w a s s e n t t o B id A i r a n d S w is s p o r t i n d ic a ti n g t h a t t h e y h a v e b e e n a w a r d e d t h e c o n tr a c t f o r g r o u n d h a n d l in g s e r v ic e s f o r t h e te n d e r. I t h i n k t h e e ff e c t iv e d a t e a c c o r d i n g to t h e le t t e r o f a w a r d w a s th e 1 F e b r u a r y 2 0 0 9 f o r a p e r io d o f fi v e y e a r s . O n 3 0 J u n e 2 0 0 8 C h a ir o n e o f t h e t e n d e r e r s I t h in k M e n z ie s 20 s e n t a le t t e r to – r e q u e s t in g a n e x t e n s i o n o n t h e s u b m i s s i o n o f t h e b id d o c u m e n t p r o v i d e – th e y w e r e p r o v id i n g r e a s o n s th a t t h e o t h e r s u p p li e r s w e r e a t a n a d v a n t a g e t o s e n d a p r o p o s a l t o S A A b e c a u s e th e y w e r e a l r e a d y d o in g g r o u n d h a n d li n g s e r v ic e s fo r t h e m a n y w a y. So I t h i n g M e n z i e s t h e n f e lt t h a t th e y a r e b e i n g d is a d v a n t a g e d s o t h e y w a n t e d t h e n S A A t o e x t e n d t h e d e a d li n e s o th a t th e y c a n h a v e a n Page 82 of 121 21 FEBRUARY 2020 – DAY 217 o p p o r t u n i ty to s u b m i t th e t e n d e r. However SAA did not grant that extension. A n d th a t e n d e d u p M e n z i e s t h e n ta k i n g S A A t o c o u r t y o u know on and th e 4 December then 2009 the High Court of J o h a n n e s b u r g r u le d in f a v o u r o f M e n z ie s . I t h i n k i t i s u n d e r t h e c a s e n u m b e r 0 9 / 2 2 9 8 8 a n d th e d e c is i o n t h e n t h a t w a s m a d e t h e r e w a s s e t ti n g a s i d e th e t e n d e r p r o c e s s a s i t w a s – a s it w a s f o u n d t o b e u n c o n s t i tu t io n a l a n d u n l a w f u l i n t h a t S e c ti o n 2 1 7 o f T h e C o n s t it u ti o n w a s n o t c o m p l ie d w it h . I n t h a t t h e p r o c e s s w a s n o t in a c c o r d a n c e w i t h t h e s y s t e m w h ic h is f a ir, e q u i t a b l e , tr a n s p a r e n t , c o m p e t i tiv e a n d c o s t 10 e ffe c tiv e . O n th e b a s is th a t S A A g r a n t e d a n u n f a i r a d v a n t a g e to S w is s p o r t a n d B I d A i r s in c e th e y w e r e s u p p ly in g S A A w i t h g r o u n d h a n d l in g s e r v ic e s s ix m o n t h s b e f o r e t h e p r o p o s a l w a s s e n t to – a n d a ls o th a t t h e y w il l b e h a v i n g a l l t h e r e q u ir e m e n t – a l l t h e r e q u ir e d d o c u m e n ts fo r t h e m t o b e a b le to s a ti s fy th e r e q u ir e m e n ts o f t h e proposal. One of the concerns then that we saw there is that even t h o u g h t h a t c o n tr a c t w a s s e t a s i d e i t a p p e a r s th a t S A A c o n t in u e d w i t h t h e c o n tr a c t o f a w a r d . D i d n o t s t o p a n d i t w a s a w a r d e d u n t il t h e e n d o f t h e c o n tr a c t. C H A I R P E R S O N : T h e y j u s t d is r e g a r d e d a c o u r t o r d e r ? 20 M R S O K O M B E L A : T h a t is w h a t – t h a t is w h a t a p p e a r s . C H A I R P E R S O N : Ye s t h a t is w h a t a p p e a r e d . M R S O K O M B E L A : T h a t is w h a t a p p e a r s . CHAIRPERSON: Hm. MR SOKOMBELA: It a p p e a r s t h a t th e y c o n ti n u e d . M y te a m m e m b e r t h a t w a s r e s p o n s ib le f o r th is a l s o e n g a g e d w i t h th is – w i th s o u r c i n g Page 83 of 121 21 FEBRUARY 2020 – DAY 217 s p e c i a lis t s t h a t w a s r e s p o n s i b l e f o r t h is g r o u n d i n g h a n d l i n g – t h a t handled this. I t i s ju s t t h a t I d o n o t h a v e t h e n a m e o f th e s o u r c i n g s p e c i a lis t C h a ir. A n d a p p a r e n tly th is s o u r c in g s p e c i a l is t in d ic a te d t h a t a l t h o u g h t h e H i g h C o u r t s e t a s i d e t h e te n d e r p r o c e s s a s i t w a s f o u n d u n c o n s t i tu t io n a l a n d u n la w f u l . T h e t h e n C E O o f S A A I t h i n k i t w a s M s M z i m e l a , t h e C E O o f S w is s p o r t a s w e l l a s th e C E O o f Bi d A ir a g r e e d t o c o n ti n u e w i t h t h e c o n tr a c t u n ti l t h e e n d o f th e c o n tr a c t . Yo u k n o w s o I do not know what was the basis for… CHAIRPERSON: Ja for that. 10 M R S O K O M B E L A : Fr o m t h e m a g r e e i n g t o s a y th e H ig h C o u r t h a s s e t a s i d e t h e c o n tr a c t b u t th e n it c o n t i n u e d . Yo u k n o w – s o th a t w a s t h e fir s t c o n c e r n t h a t w e h a d w i t h t h i s – w i t h t h e S w is s p o r t t e n d e r. But t h e n C h a ir t h e r e w a s a n o t h e r t e n d e r a ls o I th in k it i s – t h e r e fe r e n c e n u m b e r f o r t h a t te n d e r is G S M 3 9 / 11 . B e c a u s e t h a t te n d e r S A A a g a i n w e n t o n a c o n fi n e m e n t p r o c e s s a g a i n a ls o f o r t h e g r o u n d h a n d l i n g t e n d e r a n d a l s o c o n f i n e d i t t o I th i n k t o t h r e e s e r v i c e p r o v i d e r s t h is ti m e b e i n g S w i s s p o r t , B i d A ir a n d M e n z i e s fo r t h e g r o u n d h a n d li n g s e r v ic e s . A n d t h e c l o s i n g d a t e w a s h e 2 7 M a y 2 0 11 . O n 1 8 M a y 2 0 1 2 it w a s t h e f in a l s e l e c t io n o f s u p p l ie r s a n d t h e c r o s s f u n c t i o n s o u r c i n g 20 t e a m o f S A A r e c o m m e n d e d t h e a w a r d o f th e s e r v ic e s t o B i d A ir t o M e n z ie s a n d S w is s p o r t S A f o r fi v e y e a r s a n d y o u w il l s e e C h a ir t h a t t h e r e is a t a b le – t h e r e i s a t a b l e A i n t h a t fi n d i n g w h e r e t h e t a b l e A t h e n w a s s p e c i fy in g i n t e r m s o f t h e ty p e s o f g r o u n d – th e t y p e o f g r o u n d h a n d li n g s e r v ic e s th a t w h ic h g r o u n d h a n d li n g s e r v i c e s is S A A a w a r d in g t o e a c h s u p p li e r a n d a t w h a t c o s t i s S A A g o in g t o i n c u r o r is Page 84 of 121 21 FEBRUARY 2020 – DAY 217 g o i n g t o a w a r d t h e c o n t r a c t w i t h . I f y o u s e e o n – o n t a b le A th e r a m p h a n d l in g w a s a w a r d e d to S w is s p o r t S A f o r R 1 . 2 b il li o n . A n d th e p o w e r a u x i li a r y u n i t a n d w h e e lc h a ir s e r v ic e s t o S w is s p o r t S A t o th e v a l u e o f R 1 3 1 m i ll io n . And the baggage weighing it was not awarded. Th e g r o u n d p o w e r u n i t t o S w is s p o r t S A t o t h e v a lu e o f R 8 5 m il li o n . The b u s s i n g w a s a w a r d e d t o B i d Ai r t o th e v a l u e o f R 8 1 m il li o n a n d t h e a ir c r a f t i n t e r i o r c le a n i n g w a s a w a r d e d t o S w is s p o r t S A f o r t h e v a lu e o f R 1 0 9 m il li o n . D o c u m e n t v e r i fi c a t io n w a s a w a r d e d t o S w is s p o r t S A f o r t h e v a l u e o f R 2 0 .6 m il li o n . 10 A n d t h e v a lu e – th e t o il e t a n d w a t e r w a s a w a r d e d to M e n z i e s to th e v a l u e o f R 9 6 . 9 m i ll io n . A n d th e n t h e e x p r e s s a n d c o u r ie r c a r g o w a s n o t a w a r d e d p r o v i s i o n o f d r i v e r, f li g h t o p e r a ti o n n o t a w a r d e d . And the crew transport was awarded to S w is s p o r t S A to t h e v a l u e o f R 5 2 m i ll i o n . A D V M I C H A E L M B I K I WA : M r S o k o m b e l a c a n I p a u s e y o u t h e r e ? MR SOKOMBELA: Hm. A D V M I C H A E L M B I K I WA : I t is n o t n e c e s s a r y f o r u s r e a lly to g o t h r o u g h a ll th e d e t a i l o f t h is . M R S O K O M B E L A : O k a y. A D V M I C H A E L M B I K I WA : 20 B e c a u s e i t h a s in f a c t b e e n tr a v e r s e d a lr e a d y i n t h e a v i a ti o n e v i d e n c e . M R S O K O M B E L A : A b s o l u t e ly. A D V M I C H A E L M B I K I WA : J u s t to a s s is t y o u t h e e v i d e n c e w e h a v e h e a r d p r e v i o u s ly is t h a t a t e n d e r p r o c e s s w a s r u n a s y o u h a v e j u s t d e s c r ib e d M R S O K O M B E L A : A b s o l u t e ly C h a ir. Page 85 of 121 21 FEBRUARY 2020 – DAY 217 A D V M I C H A E L M B I K I WA : B u t t h a t n o c o n tr a c t w a s s ig n e d f o r a p e r i o d o f f o u r y e a r s o r s o a n d th a t o v e r th a t p e r i o d S w i s s p o r t p r o v i d e d g r o u n d h a n d l in g s e r v i c e s o n a m o n t h t o m o n th b a s i s b u t t h a t a c o n t r a c t w a s o n ly s u b s e q u e n tl y s i g n e d in 2 0 1 6 a n d th a t t h e r a t i o n a l e w a s th a t t h e 2 0 1 6 c o n tr a c t w a s g r o u n d e d in o r r o u t e d i n th e t e n d e r p r o c e s s t h a t h a d b e e n r u n in 2 0 1 2 . D o e s th a t a c c o r d w it h y o u r m e m o r y ? M R S O K O M B E L A : A b s o l u t e ly C h a ir. A D V M I C H A E L M B I K I WA : C a n I a s k y o u – a n d i t is – t h a t h is t o r y is s e t out on pages 1078. 10 MR SOKOMBELA: Ja. A D V M I C H A E L M B I K I WA : A n d 1 0 7 9 . M R S O K O M B E L A : A b s o l u t e ly. A D V M I C H A E L M B I K I WA : B u t j u s t o n 1 0 7 9 i f y o u c a n g o t o th e fo o t o f the page? C a n y o u t a k e u s t h r o u g h th e l a s t t w o p a r a g r a p h s a t th e bottom of 1079? MR SOKOMBELA: W h e r e C h a ir i t is s a y i n g v a l id i ty p e r io d o f t h e tender? A D V M I C H A E L M B I K I WA : I n d e e d . M R S O K O M B E L A : O k a y. C h a ir t h e y s a y : 20 “ Va li d i t y o f – v a l id i ty t e n d e r p e r i o d o f te n d e r G S M ’s R u l e 3 / 2 0 11 R F P G S M ’s R u l e 3 9 /2 0 11 in d ic a t e d t h a t t h e t e n d e r is v a l i d f o r 3 7 0 d a y s f r o m t h e c l o s i n g d a t e b e i n g 2 7 M a y 2 0 11 . T h e r e f o r e te n d e r w a s v a li d u n t il 3 0 A p r il 2 0 1 2 . O n 3 1 J u ly 2 0 1 2 l e t te r o r a w a r d s w e r e s e n t t o S w is s p o r t S A a n d B i d A ir i n d ic a ti n g t h a t S A A Page 86 of 121 21 FEBRUARY 2020 – DAY 217 w i s h e s t o e x t e n d t h e v a l id i ty o f t h e b id s f o r a f u r th e r p e r i o d o f t h r e e m o n th s a n d i t a ls o i n d ic a t e d t h a t i n t h e e v e n t t h a t S A A d o e s n o t r e c e iv e a n y o b j e c ti o n t o it s i n te n t to e x te n d th e v a l i d i ty p e r io d your a c c e p ta n c e t h e r e t o s h a l l b e a s s u m e d . B a s e d o n t h e in f o r m a ti o n extension on of the fi l e v a li d i t y there was is a ls o no proof requested th a t fr o m M e n z ie s Av ia t io n S o u th A fr ic a P T Y LT D . ” A D V M I C H A E L M B I K I WA : Th a n k y o u . 10 A n d if y o u g o o v e r th e p a g e t h e – t h e a u d i t f i n d i n g s d e a l w i t h s o m e c a s e l a w th e r e b u t if y o u g o b e lo w there it says: “ T h e r e f o r e S A A n e g o t ia t io n s t o e x t e n d t h e v a li d i t y p e r i o d a f t e r e x p ir y w i th S w i s s p o r t S A a n d B i d A ir la c k e d tr a n s p a r e n c y. ” W h a t d i d y o u m e a n w i t h t h a t f i n d in g ? M R S O K O M B E L A : C h a ir w h a t w e m e a n w i t h t h a t f i n d in g is th e f a c t t h a t t h e v a l id i ty p e r io d fo r t h e te n d e r w a s a lr e a d y e x p ir e d a n d t h e r e i s a c o u r t c a s e t h a t y o u k n o w t h a t th e r e is a p r e c e d e n c e o n t h i s p a r tic u la r is s u e b e c a u s e th e c o u r t c a s e C h a ir t h a t – t h a t w e r e fl e c t in g t h e r e is 20 t h a t o f Te lk o m S A v e r s u s M e r i t – I th in k M e r it Tr a d i n g P T Y LT D a n d o th e r s . W h e r e th e n i t w a s h e l d th e n th a t if – t h e – a s s o o n a s th e b i d v a l i d i ty p e r i o d h a s e x p ir e d w i t h o u t m a k i n g a n a w a r d t h e n t h a t t e n d e r t h e n is u n s u c c e s s fu l . T h e n i t d o e s n o t n e e d t o – y o u k n o w w e n e e d t o s t a r t fr o m s c r a tc h . CHAIRPERSON: Ja. Page 87 of 121 21 FEBRUARY 2020 – DAY 217 A D V M I C H A E L M B I K I WA : A n d i n th e m i d d le o f th e p a g e th a t d e a l s w i t h t h e c h r o n o l o g y t h a t I h a v e ju s t t a k e n y o u t h r o u g h w i t h th e s i g n i n g o f t h e c o n tr a c t i n t h e la s t r o w o f th a t ta b le o n th e 1 4 M a r c h . C a n y o u j u s t read the paragraph below the table? M R S O K O M B E L A : J u s t b e l o w t h e t a b l e C h a ir ? A D V M I C H A E L M B I K I WA : Ye s “ i t s h o u l d b e h ig h li g h t e d ” . M R S O K O M B E L A : O k a y. “It s h o u ld be h i g h li g h t e d th a t th e protracted p r o c u r e m e n t p r o c e s s m a y a ls o h i n d e r S A A’ s a b il it y t o 10 f u l fi l i ts m a n d a t e a n d to c a p i t a l is e o n p o r t a n d s h e ll cost savings. The fact that SAA ignored the court r u l i n g t o s e t a s i d e t h e G S M 2 3 9 / 2 0 0 8 te n d e r i s u n l a w f u l a n d t h u s ir r e g u l a r. ” A D V M I C H A E L M B I K I WA : Thank you. Mr S o k o m b e l a j u s t – j u s t e x p l a i n w h a t – y o u k n o w y o u s e le c te d a s a m p l e o f c o n tr a c ts a n d tr a n s a c ti o n s a n d te n d e r s t o l o o k a t. W h a t p u t S w is s p o r t o n y o u r – o n y o u r r a d a r ? W h y d id y o u s e l e c t t h a t a s p a r t o f y o u r s a m p le ? MR SOKOMBELA: C h a i r t h a t w a s – t h a t w a s a s a r e s u l t o f t h e r is k a s s e s s m e n t p r o c e s s t h a t w e h a v e c o n d u c te d a n d th e t e n d e r, t h e 20 S w is s p o r t t e n d e r w a s o n e o f t h o s e t e n d e r s t h a t w a s o n t h e r a d a r f o r u s t o a c tu a lly e n s u r e t h a t w e s e l e c t i t a n d t e s t it b e c a u s e t h e r is k s a s s o c i a t e d w i t h u s n o t te s ti n g t h a t t e n d e r w a s v e r y h ig h . M e a n i n g t h a t f o r u s t o m i t ig a te o u r a u d i t r is k t o a n a c c e p ta b l e l e v e l w e o u g h t t o h a v e e n s u r e d th e n t h a t w e s e l e c t e d a n d t e s t e d t h a t t e n d e r. A D V M I C H A E L M B I K I WA : A n d t h e c o n tr a c t t h a t w a s e n t e r e d i n t o in – Page 88 of 121 21 FEBRUARY 2020 – DAY 217 t h e S w is s p o r t c o n tr a c t w a s e n t e r e d in t o o n t h e 1 4 M a r c h 2 0 1 6 th a t i s t h e p r e v i o u s fi n a n c i a l y e a r. I t d o e s n o t f a l l in t o y o u r f i n a n c ia l y e a r ? M R S O K O M B E L A : A b s o l u t e ly. A D V M I C H A E L M B I K I WA : O f c o u r s e th e t e n d e r p r o c e s s t o o w a s i n a m u c h e a r l ie r f in a n c i a l y e a r. M R S O K O M B E L A : A b s o l u t e ly. A D V M I C H A E L M B I K I WA : A n d i n th a t ti m e t h e r e w a s m o n t h to m o n t h c o n tr a c ts . M R S O K O M B E L A : A b s o l u t e ly. 10 A D V M I C H A E L M B I K I WA : D o y o u – h a d y o u b e e n a u d i ti n g th e p r e v i o u s y e a r ? W o u l d t h i s h a v e b e e n a c o n tr a c t y o u w o u l d h a v e in c l u d e d i n y o u r s a m p le ? M R S O K O M B E L A : C h a ir I w o u l d h a v e i n c l u d e d i t i n m y s a m p le if i t w a s n o t s e le c t e d b y t h e p r e v io u s a u d i to r s a n d i f t h e y d i d n o t te s t it . T h e n – a n d a ls o if th e c o n tr a c t w a s s ti ll e ff e c t iv e i n t h e c u r r e n t y e a r. S o r r y I w o u ld h a v e – j a – i t w o u l d h a v e f a l le n w i t h i n my s c o p e o f w o r k . A D V M I C H A E L M B I K I WA : C h a ir I s e e w e h a v e r e a c h e d o n e o ’ c l o c k . CHAIRPERSON: Ye s . Remember you were along in making an a s s e s s m e n t y e s t e r d a y. 20 A D V M I C H A E L M B I K I WA : I d e e p l y r e g r e t t h e a s s e s s m e n t C h a ir. C H A I R P E R S O N : H o w fa r a r e y o u fr o m f in i s h i n g w i th t h e w it n e s s ? A D V M I C H A E L M B I K I WA : C h a ir I w a n t t o ta k e Mr S o k o m b e l a t h r o u g h t w o o r t h r e e o th e r tr a n s a c t i o n s t h a t w e h a v e d e a l t w it h i n t h e a v ia t i o n evidence and then we are just about done. C H A I R P E R S O N : H o w l o n g d o y o u e s ti m a t e i t to t a k e ? Page 89 of 121 21 FEBRUARY 2020 – DAY 217 A D V M I C H A E L M B I K I WA : I tr ie d to a v o i d a n s w e r i n g t h a t . C h a ir … CHAIRPERSON: Well we need to look at that. A D V M I C H A E L M B I K I WA : Ye s . CHAIRPERSON: F o r th e r e a s o n t h a t t o d a y w e c a n n o t g o b e y o n d f o u r o ’c l o c k . A D V M I C H A E L M B I K I WA : I n d e e d . C H A I R P E R S O N : S o w e n e e d t o s e e w h e t h e r w e w i ll s ta r t w i t h t h e n e x t w i t n e s s o r n o t b e c a u s e i f w e w il l n o t s t a r t w i t h t h e w i tn e s s th e n i t m a y w e ll b e th a t th e y c a n b e r e l e a s e d t o a d a t e t h a t w e m u s t – w e w ill u s e . 10 S o t h a t is w h y I a m t r y in g – b e c a u s e i f h e is g o in g t o – i f y o u a r e g o i n g t o n e e d a n h o u r fr o m t w o t o t h r e e t h e n w e a r e le f t w it h a n o t h e r h o u r s o t h e q u e s t io n is w h e t h e r i f w e fi n i s h a t t h r e e w i t h h i m w e w o u l d u s e th e n e x t h o u r f o r t h e w it n e s s o r w h e t h e r w e w o u ld lo o k f o r a n o th e r d a y. B u t i t m a y b e t h a t w e s h o u l d u s e th e n e x t h o u r b u t w h a t i f y o u m i g h t g o t o b e y o n d t h r e e o ’c l o c k ? W e m u s t th i n k a b o u t th a t . A D V M I C H A E L M B I K I WA : Ye s . C h a ir I d o t h i n k I w o u l d c o n c l u d e b y t h r e e o ’c l o c k . C H A I R P E R S O N : By t h r e e o ’ c l o c k ? A D V M I C H A E L M B I K I WA : Ye s . 20 CHAIRPERSON: A n d I k n o w th a t y o u w o u l d b e s a y i n g i n te r n a l ly s u b j e c t to t h e C h a ir p e r s o n ’s q u e s ti o n s . A D V M I C H A E L M B I K I WA : A l w a y s s u b j e c t to t h e C h a ir p e r s o n ’s q u e s t io n s . CHAIRPERSON: A n d t h e n w e c o u ld u s e w h a t e v e r t i m e is l e f t f o r t h e n e x t w it n e s s . Page 90 of 121 21 FEBRUARY 2020 – DAY 217 A D V M I C H A E L M B I K I WA : Th e r e m a i n in g h o u r y e s I th i n k s o C h a ir. C H A I R P E R S O N : J a . O k a y a lr i g h t . L e t u s t a k e t h e lu n c h a d j o u r n m e n t w e w i ll – i t is a b o u t t h r e e m i n u t e s p a s t o n e w e w i ll r e s u m e a t fiv e p a s t o n e – f iv e p a s t t w o . W e a d jo u r n . R E G I S T R A R : Al l R is e . IN Q U IRY A DJ O U RN S INQUIRY RESUMES CHAIRPERSON: Are we ready? A D V M I C H A E L M B I K I WA : W e a r e i n d e e d C h a ir. 10 C H A I R P E R S O N : T h a n k y o u . L e t u s c o n ti n u e . A D V M I C H A E L M B I K I WA : T h a n k y o u . M r S o k o m b e l a , y o u w e r e te ll i n g u s b e f o r e t h e l u n c h a d j o u r n m e n t a b o u t t h e G r o u n d H a n d l in g C o n tr a c t with Swissport. I w a n t t o d e a l w i t h j u s t a f e w o th e r c o n tr a c ts a n d tr a n s a c ti o n s t h a t h a v e f o r m e d p a r t o f t h e a v i a ti o n e v id e n c e s o f a r. T h e fir s t is o n e t h a t y o u h a v e a c t u a lly d e a l t w it h a lr e a d y w h i c h w a s t h e 3 0 p e r c e n t s e t a s id e d e c id e d fo r - b y t h e B o a r d fo r p r o c u r e m e n t fr o m SMMEs. W e a r e b a c k in F il e D D 2 0 C a t p a g e 1 - 0 - 8 - 1 . n e c e s s a r y fo r u s t o d e a l w i t h a n y o f t h i s . 20 I t is n o t I t - i t r e a ll y y o u - y o u d id s u m m a r i s e i t e a r li e r. I j u s t w a n t to g o to p a g e 1 - 0 - 8 - 2 . Th e - t h e tw o p a r a g r a p h s a b o v e “ P r o c e s s a n d S e l e c t io n Aw a r d o f B E E C o m p a n i e s ” . T h a t is t h e f in d i n g o f t h e A u d it o r - G e n e r a l. W il l y o u j u s t r e a d t h o s e paragraphs? MR SOKOMBELA: C h a ir, is t h is - I s e e t h a t th e r e is a - a p a r a g r a p h a n d o n e s e n t e n c e . I s - is t h a t th o s e … ? Page 91 of 121 21 FEBRUARY 2020 – DAY 217 A D V M I C H A E L M B I K I WA : I n d e e d . MR SOKOMBELA: Those two? O k a y C h a ir. That one is - reads as f o ll o w s : “ B a s e d o n t h e i n f o r m a ti o n p r o v i d e d to t h e A G S A . T h e p r a c t ic e o f a ll o c a ti n g o r s e l e c ti n g o r s e t ti n g aside of 30 percent of the contract award to BBBEE s u p p li e r s i s n o t in a c c o r d a n c e w i t h S A A’s S C M P o lic y o r a n y s p e c if ic p r o c u r e m e n t l e g a l f r a m e w o r k a n d S e c t i o n 2 1 7 o f t h e C o n s ti t u t i o n . T h e s e le c t i o n a n d th e v a l u a t i o n p r o c e s s fo r t h e B B B E E s u p p li e r s 10 is f u r t h e r d is c u s s e d b e l o w. ” A D V M I C H A E L M B I K I WA : Th e - t h e e v i d e n c e y o u g a v e e a r l ie r w a s t h a t b o t h N a ti o n a l Tr e a s u r y a n d t h e D e p a r t m e n t o f Tr a d e a n d I n d u s t r y in d i c a t e d th a t t h e 3 0 p e r c e n t s e t a s i d e w a s u n l a w fu l . Is t h a t - w a s th a t r ig h t ? M R S O K O M B E L A : A b s o l u t e ly C h a ir. A D V M I C H A E L M B I K I WA : Do you remember when the Board decision w a s t a k e n a n d w h e n t h a t a d v i c e w a s g iv e n ? Do - do you remember w h a t y e a r t h a t w a s in ? 20 MR SOKOMBELA: C h a ir, i f - i f y o u g o i n to - t o t h e - t o t h e p r e v i o u s p a g e . I th i n k i t i s p a g e 1 0 - 8 - 1 . T h a t i s - t h a t i s w h e r e w e a r e d e a l i n g t h e n w i t h s p e c i fic c o r r e s p o n d e n c e s b e t w e e n t h e D e p a r t m e n t o f Tr a d e a n d In d u s tr y. N o s o r r y. N o t D e p a r t m e n t o f Tr a d e a n d I n d u s tr y. I t h i n k it is t h e - i t i s t h e B B B E E C o m m is s i o n . I f I a m n o t m i s ta k e n . F o r t h e B B B E E A c t a n d a ls o t h e n th e N a t io n a l Tr e a s u r y. Page 92 of 121 21 FEBRUARY 2020 – DAY 217 I t h i n k w h a t - w h a t i s - w h a t is w o r th n o t i n g h e r e i s t h a t w e w e o b t a i n e d a l e t te r - I th i n k - d a t e d 1 3 S e p t e m b e r 2 0 1 5 fr o m th e - th e o ffic e w it h in t h e D e p a r t m e n t o f Tr a d e a n d I n d u s tr y o f t h e - o f th e B B B E E C o m m is s i o n e r. T h a t w a s a d d r e s s e s t o t h e - t h e C h a ir p e r s o n o f t h e B o a r d w h e r e in i t - i t w a s - I d o n o t k n o w C h a ir i f y o u w a n t m e t o g o through in terms of what …? A D V M I C H A E L M B I K I WA : I a m - I a m a c tu a l ly o n ly a s k in g … CHAIRPERSON: Hm. MR SOKOMBELA: Hm. 10 A D V M I C H A E L M B I K I WA : W h e t h e r t h i s - m y u n d e r s t a n d i n g i s t h a t th is w o u ld - t h e s e d e c i s i o n s w e r e t a k e n a n d t h i s a d v i c e w a s g iv e n … M R S O K O M B E L A : A b s o l u t e ly. A D V M I C H A E L M B I K I WA : A c tu a lly in t h e p r e v i o u s a u d i t y e a r. M R S O K O M B E L A : C h a ir … A D V M I C H A E L M B I K I WA : Is t h a t c o r r e c t ? MR SOKOMBELA: A b s o l u t e ly C h a ir, b e c a u s e I - I t h i n k y o u a s k e d C h a ir t h e l e t te r s w h e n - w h e n t h e le t t e r s … A D V M I C H A E L M B I K I WA : I n d e e d . M R S O K O M B E L A : M a y b e l e t m e g iv e y o u t h e d a t e s . 20 A D V M I C H A E L M B I K I WA : Th a n k y o u . M R S O K O M B E L A : T h e d a t e f o r t h e o ffi c e o f t h e B B B E E C o m m i s s i o n e r w a s o n 1 3 S e p t e m b e r 2 0 1 5 a n d t h e l e t t e r fr o m N a ti o n a l Tr e a s u r y w a s 28 September 2015. CHAIRPERSON: Hm. A D V M I C H A E L M B I K I WA : Th a n k y o u . Page 93 of 121 21 FEBRUARY 2020 – DAY 217 CHAIRPERSON: Ja. Pr o b a b ly t h a t i s ju s t t h e p a r t t h a t i s i m p o r t a n t, b e c a u s e j u s t t o p u t t h e c o n te x t , b e c a u s e I h a v e h e a r d a lo t o f e v i d e n c e a b o u t t h o s e l e tt e r s a lr e a d y. A D V M I C H A E L M B I K I WA : I n d e e d . M R S O K O M B E L A : O k a y. A D V M I C H A E L M B I K I WA : Thank you C h a ir. The next M r S o k o m b e l a w a s t h e s e l e c ti o n o f S w i s s p o r t ’s B E E c o m p a n i e s . is s u e Can y o u r e c a ll w h a t is s u e s th e A u d i to r - G e n e r a l fo u n d in t h a t r e g a r d ? M R S O K O M B E L A : C h a ir, i t is i m p o r t a n t f o r - f o r - t o - t o n o t e th a t w e 10 d i d n o t s e e th e r e q u ir e m e n t i n th e t e n d e r t h a t - o f th e - o f th e B B B E E . H o w e v e r I t h i n k i n 2 0 1 6 i n a m e m o th a t t h e - t h e C h ie f Fi n a n c i a l O ff ic e r o f S A A t o t h e B o a r d it w a s n o t e d t h e n t h a t t h e - t h e s e l e c ti o n o f th e B B B E E f ir m i t w a s n o t c l e a r i n t e r m s o f t h e n h o w t h a t s e l e c t i o n p r o c e s s w a s d o n e a n d w h a t - w h a t is - w h a t i s i m p o r t a n t t h e n to n o te is th a t , b e c a u s e I th in k t h e - th e S w is s - S w is s p o r t a n d S A A c o u ld n o t a g r e e o n h o w th e B B B E E f ir m s h o u l d b e - s h o u l d b e a p p o in t e d o r s e l e c t e d a n d t h e n th e - th e - I t h in k S A A t h e n t e r m i n a t e d t h e - t h e s e r v ic e s - s o r r y. Te r m i n a te d th e n t h e c o n tr a c t w i t h - w i t h S w i s s p o r t . I t h i n k o n t h e 1 6 t h - i t - i t s a i d i t te r m in a te d o n 1 6 F e b r u a r y 2 0 1 6 w h e r e i n S A A h a s 20 t h e n p r o v i d e d th e m w i th a t e r m i n a t io n n o t ic e o f 6 0 d a y s . S o t h a t is t h a t is o n e o f t h e - o f t h e t h i n g s th e n t h a t w e f o u n d a n d a ls o w h a t w e a ls o f o u n d th a t i n t h a t m e m o r a n d u m is t h a t it w a s r e c o r d e d i n t h e m e m o r a n d u m t h e n t h a t a f t e r t h e n t h a t t e r m in a ti o n - l e t t e r o f - o f t e r m in a ti o n w a s is s u e d t o - to S w is s p o r t . T h e n t h e S A A a n d S w is s p o r t r e p r e s e n t a ti v e s h e ld o ff r e c o r d Page 94 of 121 21 FEBRUARY 2020 – DAY 217 d is c u s s io n s a n d a n a g r e e m e n t w a s r e a c h e d i n t o - t o e n t e r in t o a f iv e year - into a fi v e year c o n tr a c t b e g i n n in g 1 April 2016 u n ti l 3 1 M a r c h 2 0 2 1 . S o I t h in k th o s e w e r e t h e - th o s e w e r e t h e k e y is s u e s a n d a ls o w h a t w e w e r e c o n c e r n e d a b o u t is w h y w e r e th e d is c u s s i o n s d o n e o ff t h e r e c o r d … A D V M I C H A E L M B I K I WA : H m . MR SOKOMBELA: A n d o k a y w e f u r t h e r r e q u e s t e d th e m t o s a y, o k a y m a y b e s o m e b o d y m ig h t h a v e w r i tt e n n o te s i n t e r m s o f w h a t w e r e t h e d e li b e r a t i o n s th e r e . S o t h a t w e c a n s e e in t e r m s o f h o w d i d t h e y a r r i v e 10 a t - a t t h a t d e c is i o n , b u t I t h in k m a n a g e m e n t t h e n s a i d to u s i f o ff r e c o r d d is c u s s i o n s d o n o t h a v e - d o n o t h a v e n o t e s . Yo u k n o w. S o I t h i n k t h a t w a s - th a t w a s th e is s u e o n th a t - o n th a t s e l e c t i o n o f th e - o f th e B B B E E f i r m . I think another issue, because w h a t w e d i d t h e n b e c a u s e J M Av ia t io n w a s - w a s I th in k w a s t h e n t h e B B B E E f ir m t h a t S w is s p o r t u t il is e d a n d i t w a s n o t c l e a r i n t e r m s o f h o w J M Av i a ti o n w a s a p p o in t e d t o b e t h i s B B B E E f ir m , b u t w e d id ju s t a t a high level some background checks. Yo u k n o w u s i n g t h e - t h e C o m p a n ie s a n d I n te ll e c t u a l Pr o p e r t y C o m m i s s i o n w e b s i t e a n d w e r e a l is e d t h a t t h e r e is - t h e r e is c o m m o n 20 D ir e c t o r s b e tw e e n S w i s s p o r t S A a s w e ll a s - a s w e l l a s J M Av i a t i o n a n d t h e s e - t h e s e c o m m o n D ir e c t o r - t h e s e c o m m o n D ir e c t o r s th e n - i t w a s that was a concern for us. To s a y t h e r e i s t h i s B B B E E f i r m th a t h a s b e e n - th a t n o w i s g o i n g t o b e a B B B E E f ir m o f S w is s p o r t, b u t i t a p p e a r s t h a t t h e r e is a D ir e c t o r - t h i s - th e r e is a D i r e c t o r a t S w is s p o r t t h a t i s a ls o a D i r e c t o r a t - a t J M Av ia t io n . Page 95 of 121 21 FEBRUARY 2020 – DAY 217 S o th a t w a s a r e d f l a g fo r u s t o s a y t h is s h o u l d h a v e b e e n a c o n fli c t o f i n te r e s t a l s o . W h y th is th i n g w a s n o t - w a s n o t - y o u k n o w id e n t i fi e d o r w h y t h is t h i n g ? S o - s o to a s k h o w th is t h i n g i t r e f l e c te d . Yo u r e m e m b e r C h a ir y e s t e r d a y I s a i d o u r r e s p o n s i b i li ty a s t h e - a s t h e a u d it o r s is n o t to a u d i t - t o i d e n ti fy fr a u d , b u t w h e r e w e i d e n ti f y p o t e n t i a l a r e a s w e h i g h l ig h t t h e m to m a n a g e m e n t a n d t h is is o n e o f th e a r e a s w h e r e b y w e s a i d t h is is a n i n d i c a t o r a n d t h e n w e s a i d t o m a n a g e m e n t p le a s e i n v e s ti g a te th is th i n g f u r t h e r in te r ms o f w h a t happened. 10 A D V M I C H A E L M B I K I WA : I n d e e d . I w a s a b o u t t o t a k e y o u t o p r e c is e l y t h a t . C a n y o u t u r n t o 1 - 0 - 8 - 4 ? S o r r y. Yo u a c tu a lly g o b a c k t o 1 - 0 - 8 - 3 a n d r ig h t a t t h e b o t t o m o f t h e p a g e i t s a y s : “ R e c o m m e n d a t io n - M a n a g e m e n t s h o u l d … ” Do you see that? M R S O K O M B E L A : Ye s C h a ir. A D V M I C H A E L M B I K I WA : A n d th e n - a n d t h e n … C H A I R P E R S O N : W e l l m a y b e h e s h o u ld id e n t i fy th e … M R S O K O M B E L A : Ye s . C H A I R P E R S O N : P e o p le w h o w e r e D ir e c to r s i n b o th . 20 A D V M I C H A E L M B I K I WA : Ye s . C H A I R P E R S O N : J a . W il l y o u ju s t d o t h a t ? MR SOKOMBELA: C h a ir, t h e - t h e c o m m o n D ir e c t o r t h a t w e s a w w a s o n e D ir e c to r b y t h e n a m e o f Vu y i s i le A a r o n N d z e k u . Who was a D ir e c t o r fo r b o t h S w is s p o r t a s w e l l a s J M Av i a ti o n a n d t h e s t a tu s in th e C I P C w e b s it e w a s a c t iv e . Page 96 of 121 21 FEBRUARY 2020 – DAY 217 C H A I R P E R S O N : Ye s . O k a y. T h a n k y o u . A D V M I C H A E L M B I K I WA : Th a n k - th a n k y o u C h a ir. CHAIRPERSON: Ja. A D V M I C H A E L M B I K I WA : Mr S o k o m b e la , a t t h e b o t t o m o f 1 - 0 - 8 - 3 i t says: “ M a n a g e m e n t s h o u ld … ” A n d i t i s u n d e r t h e h e a d in g o f “ R e c o m m e n d a t io n ” . M R S O K O M B E L A : Ye s C h a ir. A D V M I C H A E L M B I K I WA : 10 I f y o u - i f y o u g o o v e r t h e p a g e t h e r e is a s e r ie s o f r e c o m m e n d a ti o n s i m p r o v i n g c o n tr o l s , c o n d u c ti n g c o n tr a c t u a l n e g o ti a ti o n s i n a ti m e ly m a n n e r. T h e - t h e f o u r th b u l le t p o i n t w i ll y o u read that one? M R S O K O M B E L A : “ R e c o n s i d e r t h e a p p r o a c h o f th e S u p p li e r Development Program and the 30 percent BBBEE C o n tr a c t a ll o c a ti o n a n d e n s u r e t h a t p r i n c ip l e s o f S e c t io n 2 1 7 o f t h e C o n s ti t u t i o n a n d i n s tr u c ti o n s o f N a t io n a l Tr e a s u r y a n d D TI a r e a d h e r e d t o . ” A D V M I C H A E L M B I K I WA : A n d th e fo ll o w i n g o n e ? MR SOKOMBELA: 20 “ C o n s id e r u n d e r t a k in g a n in v e s ti g a t io n in t o t h e s e l e c t io n p r o c e s s o f J M Av i a t io n a s a B B B E E s u p p li e r. ” A D V M I C H A E L M B I K I WA : A n d th e l a s t o n e . MR SOKOMBELA: “Consider and d is c l o s e ir r e g u la r e x p e n d i t u r e o f 3 6 2 m i ll i o n a r i s i n g fr o m t h e a b o v e m e n ti o n e d fi n d i n g s . ” Page 97 of 121 21 FEBRUARY 2020 – DAY 217 A D V M I C H A E L M B I K I WA : T h a n k y o u . N o w y o u i n d i c a t e d th a t t h e s e o ff t h e r e c o r d d is c u s s i o n s c o u l d b e a n i n d i c a t o r o f fr a u d . f o r m e d p a r t o f th e a u d i to r ’s c o n c l u s i o n . That in fact If I can take you to 1-0-8-5. T h e h e a d i n g t h e r e a t th e v e r y b o t t o m o f t h e p a g e i s “ A u d it o r ’s Conclusion” and it says: “ M a n a g e m e n t ’s r e s p o n s e is n o t e d a n d a d d it i o n a l e n g a g e m e n ts were held w i th Management on 1 2 S e p t e m b e r 2 0 1 7 a n d M a n a g e m e n t a g r e e d th a t t h e r e w e r e n u m e r o u s i s s u e s r e l a ti n g t o t h e t e n d e r 10 and if you go over the page.” And if you go over the page. “ T h e fi n d i n g is b a s e d on th e r e q u ir e m e n ts o f S e c t io n 2 1 7 o f t h e C o n s t i tu t io n o f S o u t h A fr i c a w h ic h r e q u ir e s a n o r g a n o f S t a t e w h ic h c o n tr a c ts f o r g o o d s o r s e r v ic e s t o d o s o i n a c c o r d a n c e w i t h t h e s y s t e m w h i c h is f a ir, e q u it a b l e , tr a n s p a r e n t , c o m p e ti t iv e a n d c o s t e ff e c ti v e . ” C a n y o u g o d o w n t o th e - th e l a s t h e a d in g w h ic h s a y s “ C o n tr a c t A ll o c a ti o n S e t A s i d e t o B B B E E S u p p li e r s a n d P r o c e s s a n d 20 S e le c t i o n Aw a r d … ” M R S O K O M B E L A : Ye s C h a ir. A D V M I C H A E L M B I K I WA : “ … o f B E E C o m p a n ie s ” a r e y o u t h e r e ? M R S O K O M B E L A : Ye s C h a ir. A D V M I C H A E L M B I K I WA : T h e - th e s e c o n d p a r a g r a p h u n d e r t h a t heading says: Page 98 of 121 21 FEBRUARY 2020 – DAY 217 “ W i th r e g a r d s t o t h e o ff t h e r e c o r d m e e ti n g h e l d w i t h S w is s p o r t b y M a n a g e m e n t . T h a t w i ll n o t b e a c c e p te d a s t h e a u d i t - a u d it o r s c a n n o t v a li d a t e th e d is c u s s io n s h e l d b e c a u s e t h e y w e r e n o t r e c o r d e d . This is an in d ic a t o r of fr a u d and further in v e s t i g a t io n m u s t b e d o n e . ” D o y o u k n o w w h e t h e r f u r t h e r i n v e s ti g a ti o n w a s t h e r e a f t e r d o n e ? MR SOKOMBELA: C h a ir, I d o n o t h a v e a n id e a i f th a t f u r th e r in v e s t i g a t io n w a s d o n e o r n o t . 10 A D V M I C H A E L M B I K I WA : T h a n k y o u . T h e l a s t tr a n s a c t i o n I w o u ld li k e … C H A I R P E R S O N : Mr M b ik iw a … A D V M I C H A E L M B I K I WA : Ye s C h a ir. CHAIRPERSON: Yo u asked the witness to lo o k at the r e c o m m e n d a ti o n s w h ic h - w h e r e i t s a y s M a n a g e m e n t s h o u ld , b u t I s e e b e l o w t h a t t h e r e is a r e s p o n s e fr o m M a n a g e m e n t . A D V M I C H A E L M B I K I WA : I n d e e d C h a ir. CHAIRPERSON: D i d y o u - w a s it o v e r s i g h t n o t t o a s k h i m t o t e ll m e w h a t th e r e s p o n s e w a s ? 20 A D V M I C H A E L M B I K I WA : I t w a s C h a ir. CHAIRPERSON: Hm. A D V M I C H A E L M B I K I WA : T h e - t h e - I - I w e n t s tr a i g h t t o t h e a u d i to r s ’ c o n c l u s i o n w h ic h in c o r p o r a te s w h a t M a n a g e m e n t ’s r e s p o n s e w a s , b u t but perhaps Management Mr S o k o m b e la you c o u ld responded the r e c o m m e n d a t io n s to - Page 99 of 121 you could t e ll u s raised by how the 21 FEBRUARY 2020 – DAY 217 Auditor-General. MR SOKOMBELA: C h a ir, I th in k in i ti a l ly t h e r e w a s - t h e r e w a s p u s h b a c k fr o m M a n a g e m e n t r e g a r d i n g t h is fi n d i n g . They did not agree to t h e - to t h e f in d i n g i t s e l f a n d w h a t - w h a t i s - w h a t is i m p o r ta n t w a s t h a t M a n a g e m e n t e v e n d is t a n c e d t h e m s e l v e s fr o m t h e a p p o i n t m e n t o f t h e B B B E E f ir m s a y in g th a t i s a m a t t e r th a t i s b e t w e e n S w is s p o r t a n d J M Av i a ti o n . I t h a s g o t n o th i n g t o d o w i t h t h e m . S a v e t o s a y t h e B o a r d o f - t h e B o a r d o f D ir e c t o r s w e r e t h e o n e s t h a t m a d e a R e s o l u ti o n i n te r ms o f h o w - h o w t h e y n e e d to - h o w 10 t h is c o n tr a c t o u g h t t o - t o l o o k lik e a n d if y o u l o o k a t t h e e v i d e n c e t h a t I p r e s e n te d C h a ir. T h e r e w a s th a t m e m o w h e r e th e - th e c o n t r a c t w a s w a s t e r m i n a t e d a n d t h e r e w a s 6 0 d a y s ’ n o tic e a n d t h e n t h e r e w e r e o ff r e c o r d d is c u s s io n s a n d a f t e r t h e o ff r e c o r d d is c u s s i o n s a l l o f a s u d d e n t h e n J M Av ia t io n is c o m i n g t o t h e f o r e . S o t h a t w a s t h e is s u e . S o w e d e li b e r a t e d w h e r e … CHAIRPERSON: W e ll I a m s u r p r is e d t h a t is w h a t t h e y t o l d y o u , b e c a u s e e v i d e n c e h a s b e e n g iv e n h e r e t h a t p a r t o f t h e B o a r d a n d p a r t o f M a n a g e m e n t e v e n t o o k a tr ip t o t h e U S . S o - j a . O k a y. M R S O K O M B E L A : J a , C h a ir. J a a n d - a n d C h a ir w e - w e - I t h i n k o n 20 1 2 S e p t e m b e r 2 0 1 7 w e - w e m e t t h e n e s p e c i a lly th e - t h e th e n A c t i n g C h i e f P r o c u r e m e n t O ff ic e r, b e c a u s e h e w a s th e o n e t h e n t h a t w a s r e s p o n d i n g t o t h e s e - t o t h e - t o th e f in d in g i t s e l f, b e c a u s e t h e y c o u l d based on what we found. I t w a s v e r y d i ff ic u l t fo r t h e m to d e f e n d i t. Yo u k n o w a n d th e y e n d e d u p c o n c e d in g t o - to th e f i n d in g i ts e l f . H e n c e t h e n w e e n d e d u p Page 100 of 121 21 FEBRUARY 2020 – DAY 217 in t h e a u d i t o r s r e s p o n s e . T h e n r e c o m m e n d i n g f u r t h e r i n te r ms o f w h a t w e - w h a t - w h a t n e e d s to b e d o n e r e g a r d i n g t h i s p a r ti c u la r t r a n s a c t io n . A D V M I C H A E L M B I K I WA : M r S o k o m b e l a , d o y o u r e c a ll w h e t h e r a c o n tr a c t i n v o lv i n g T h e N e w A g e M e d i a f o r m e d p a r t o f y o u r s a m p le ? MR SOKOMBELA: C h a ir, I - I - w h a t I - w h a t I r e m e m b e r w a s t h a t t h e r e w a s a - a c o n t r a c t t h a t w e s e le c te d r e l a ti n g to t h e c o m p a n y th a t owns New - New Age Media. I t is c a ll e d - C h a ir - I j u s t f o r g e t th e name. A D V M I C H A E L M B I K I WA : I c a n - I c a n ta k e y o u t o t h e p a g e . 10 MR SOKOMBELA: Ja. TNA. A D V M I C H A E L M B I K I WA : I t i s 1 - 0 … C H A I R P E R S O N : T N A - T N A M e d i a . I s i t? A D V M I C H A E L M B I K I WA : TN A M e d ia . M R S O K O M B E L A : A b s o l u t e ly C h a ir. CHAIRPERSON: TNA Media. M R S O K O M B E L A : J a , T N A M e d i a . Ye s . A D V M I C H A E L M B I K I WA : I t i s a t 1 - 0 - 9 - 1 . M R S O K O M B E L A : Ye s . Th a n k y o u C h a ir. A D V M I C H A E L M B I K I WA : A n d - s o r r y. I f y o u g o b a c k t o 1 - 0 - 9 - 0 t h a t 20 t e ll s y o u w h a t t h is t a b l e is . M R S O K O M B E L A : Ye s C h a ir. A D V M I C H A E L M B I K I WA : W h a t w e r e - w h a t w a s th e is s u e id e n ti fi e d in r e s p e c t o f th e T N A M e d i a C o n tr a c t ? MR SOKOMBELA: C h a ir, w e d id n o t g e t t h e i n f o r m a ti o n fo r u s to e n a b l e u s t o b e a b l e t o - to a u d i t t h is t e n d e r. Page 101 of 121 It w a s o n e o f t h e 21 FEBRUARY 2020 – DAY 217 in f o r m a ti o n t h a t w a s a l i m it a ti o n o f s c o p e . A D V M I C H A E L M B I K I WA : A n d c a n I a s k t h a t c o n tr a c t v a l u e is R 1 . 3 m il li o n w h ic h i n th e s c h e m e o f th i n g s i s v e r y s m a ll . Why would you h a v e s e le c te d th a t c o n tr a c t a s p a r t o f y o u r s a m p le ? MR SOKOMBELA: C h a ir, I th i n k a s p a r t o f th e r is k a s s e s s m e n t p r o c e s s th a t w e - w e d i d a t S A A . W e - t h e r e is - t h e r e is a l o t o f c o n tr a c ts t h a t w e h a v e i d e n t if i e d a s r i s k y - a s r is k c o n tr a c ts d u e to a n u m b e r o f r e a s o n s . Fo r a n e x a m p l e th e - t h e TN A M e d ia C o n tr a c t w a s a s u b je c t o f m e d i a r e p o r ts . Yo u k n o w. 10 S o i n a s m u c h a s t h e v a l u e i s v e r y l o w. H o w e v e r t h e p u b l ic in t e r e s t a s f a r a s t h a t - t h a t c o n tr a c t w a s c o n c e r n e d w a s v e r y h i g h . T h a t w a s t h e r e a s o n a n d i t is p a r t o f th e s p e c i f ic s e le c ti o n s th a t w e t h a t w e s e le c te d s p e c i f ic a l ly - th a t o n e . A D V M I C H A E L M B I K I WA : A n d o n th e r ig h t h a n d s i d e - t h i s is o n p a g e 1 - 0 - 9 - 1 - i n t h e r ig h t h a n d c o l u m n w h e r e i t l is ts t h e i n fo r m a t i o n n o t s u b m i tt e d I u n d e r s t a n d t h a t is w h a t S A A f a il e d t o p r o v i d e t o y o u … M R S O K O M B E L A : A b s o l u t e ly C h a ir. A D V M I C H A E L M B I K I WA : A n d th e s e d o c u m e n ts … CHAIRPERSON: That seems a lot. 20 A D V M I C H A E L M B I K I WA : I w a s g o i n g to s a y. M R S O K O M B E L A : I t is a l o t. A D V M I C H A E L M B I K I WA : I t s e e m s to b e v ir t u a lly e v e r y d o c u m e n t t h a t w o u ld h a v e f o r m e d p a r t o f a p r o c u r e m e n t p r o c e s s . M R S O K O M B E L A : A b s o l u t e ly C h a ir. A D V M I C H A E L M B I K I WA : A n d … Page 102 of 121 21 FEBRUARY 2020 – DAY 217 M R S O K O M B E L A : I t is a … A D V M I C H A E L M B I K I WA : W o u ld i t b e s t a n d a r d p r a c ti c e fo r y o u to a s k f o r e v e r y d o c u m e n t t h a t o r t h a t w o u ld f o r m p a r t o f s u c h a p r o c e s s t o id e n t i fy c o m p li a n c e w i t h S C M P o li c y ? M R S O K O M B E L A : A b s o l u t e ly C h a ir, b e c a u s e w e n e e d t o r e p e r f o r m t h e - t h e a w a r d in g . CHAIRPERSON: Hm. A D V M I C H A E L M B I K I WA : And that would include BEC and BAC Minutes? 10 M R S O K O M B E L A : A b s o l u t e ly C h a ir. A D V M I C H A E L M B I K I WA : Thank you. M r S o k o m b e la , I w o u l d li k e to n o w t a k e y o u b a c k t o y o u r a ffi d a v i t . T h a t is i n D D 2 0 A a n d w e c a n p ic k it u p a t p a g e 3 8 . C a n y o u - y o u h a v e - y o u h a v e n o w ta k e n u s th r o u g h t h e i s s u e s - t h e k i n d o f k e y c o n c e r n s t h a t y o u i d e n ti f ie d d u r i n g t h e c o u r s e o f t h e a u d i t. Can you - can you take us through what in the audit opinion in - in y o u r fi n a l a u d i t r e p o r t w h a t f i n d i n g s y o u m a d e a n d th e - th e q u a li fi c a t io n s a n d r e s t a te m e n ts t h a t y o u m a d e ? MR SOKOMBELA: 20 T h a n k y o u v e r y m u c h C h a ir. C h a ir, i t is - i t is i m p o r t a n t to n o t e t h a t t h e - t h e - w e - w e d o c u m e n t e d - i n t h e E x e c u ti v e S u m m a r y o f t h e M a n a g e m e n t R e p o r t i s a n a t t a c h m e n t to t h is a ffi d a v it a s P S 2 5 w h e r e w e h a v e d o c u m e n t e d o u r k e y i n s i g h ts in - i n - i n t o t h e a u d it r e p o r t e s p e c i a ll y th e q u a l i fi c a t io n a r e a s o r - o r t h e m o d i f ic a t i o n areas. I t h i n k t h a t is fr o m p a g e s 1 0 t o 1 2 o f th e E x e c u t iv e S u m m a r y, Page 103 of 121 21 FEBRUARY 2020 – DAY 217 b u t th e c o n c e r n s t h a t w e - w e h a d C h a i r w a s t h a t th e - o n e o f th e q u a li fi c a t io n a r e a s w a s o n P r o p e r ty, A ir c r a f t a n d E q u i p m e n t . W e h a v e it w a s m o d i fi e d a s a r e s u l t o f a n u m b e r o f m a t e r ia l fi n d i n g s t h a t w e t h a t w e r a is e d a n d th is li n e i te m i n t h e a n n u a l f in a n c ia l s ta t e m e n ts a n d if I - i f I c a n e x p l a in t h a t C h a ir. Is t h a t th e r e i s v a r i o u s fi n d i n g s t h e r e i n t h a t b a l a n c e - in t h e - i n th e b a la n c e s h e e t th a t w e fi n d . O n e o f t h e is s u e s t h a t w e h a d is t h a t t h e r e is - t h e r e - th e e x is te n c e . S A A b u y s a lo t o f c o m p o n e n ts f o r t h e a ir c r a ft s a n d t h e s e c o m p o n e n ts C h a i r a r e v e r y, v e r y e x p e n s iv e . A n 10 e n g in e c a n c o s t a s m u c h a s R 6 0 m il li o n t o R 9 0 m il li o n a t ti m e s a n d i f I r e m e m b e r c o r r e c t ly w e c o u l d n o t v e r i fy e x is te n c e o f c o m p o n e n ts o f t h e - o f t h e c r a f t o r w e c a l l t h e m m a j o r s p a r e p a r t s o r a t - a t t h e a ir li n e in d u s tr y t h e y a r e c a l le d A C la s s R o t a b l e s - to t h e v a l u e o f o v e r R 2 b i ll io n . W e c o u l d n o t v e r i fy e x is te n c e to t h o s e - t o t h o s e a ir c r a f t - t o those major spare parts. For - for us that was a - a big concern, b e c a u s e a ls o e v e n f o r th e - t h a t is a r e q u ir e m e n t fo r e v e n i n t h e - i n t h e - f o r a ir w o r th in e s s o f th e - o f t h e a ir c r a ft t o e n s u r e th e n t h a t w h e r e t h o s e m a j o r s p a r e p a r t s a r e . F o r a n e x a m p l e if t h e s p a r e p a r t h a s b e e n 20 s t o r e d in a n a ir c r a f t . Yo u o u g h t t o - t o h a v e a s o u r c e d o c u m e n t t h a t w i ll t e l l t h e a u d it o r to s a y t h is a ir c r a f t - th is - t h is p a r t h a s b e e n i n s ta ll e d i n A 3 4 0 6 0 0 f o r a n e x a m p le o r w h a t - w h a t e v e r a ir c r a f t i t i s a n d t h e y c a l l th o s e d o c u m e n ts d ir ty f in g e r s , b e c a u s e t h e te c h n ic ia n t h a t is t h e o n e t h e n t h a t i s in s t a ll in g t h e s e p a r ti c u l a r p a r ts n e e d s t o w r i t e in a j o b c a r d i n Page 104 of 121 21 FEBRUARY 2020 – DAY 217 t e r m s o f w h a t a r e ( i n d i s t i n c t) a n d y o u w i l l f in d th e n t h a t t h e j o b c a r d it s e l f th e n w i ll h a v e o i l a n d - a n d s tu ff a n d t h e y - t h e y c a ll i t th e d ir ty fi n g e r s . S o - s o t h a t - t h a t w a s - t h a t w a s th e ty p e o f i n f o r m a t io n t h a t w e c o u ld n o t g e t. A t t i m e s fo r e x a m p l e t h e y w i ll s e n d m a y b e a c e r t a i n p a r t f o r r e p a ir s m a y b e s o m e w h e r e in E u r o p e o r A m e r ic a . T h e n th e y c o u l d n o t - t h e r e s h o u l d b e s o u r c e d o c u m e n ts a ls o t h a t w i ll t e l l u s t o s a y, n o th is - th is s p a r e p a r t h a s b e e n d i s p a t c h e d t o w h e r e v e r l o c a t i o n t h e y - t h e y n e e d t o s e n d it . S o t h a t it c a n b e - i t c a n b e v e r i fi e d t h a t i t w a s s e n t fo r 10 r e p a ir s . S o w h e n i t c o m e s th e n fo r u s t e s ti n g w h e th e r t h e n t h e a s s e t s e x i s ts - th e s e m a j o r s p a r e p a r ts e x is t o r n o t. o u r s e lv e s w i th t h a t. W e c o u l d n o t s a tis fy A n o t h e r c h a l le n g e t h a t w e h a d o n a s s e ts C h a ir w a s t h e c h a ll e n g e o f … C H A I R P E R S O N : I a m s o r r y. D o e s t h a t m e a n t h a t th e r e w e r e r e c o r d s w h ic h s u g g e s te d t h a t c e r t a i n p a r ts h a d b e e n i n s t a l le d , b u t y o u c o u l d n o t - t h e r e w a s n o - n o p r o o f o f s u c h i n s t a ll a ti o n o r w a s t h e p o s i ti o n t h a t t h e r e w e r e n o r e c o r d s i n d i c a t in g a n y i n s t a l la t io n o f - o f p a r ts o r w h e r e c e r t a i n p a r t s t h a t a r e i m p o r t a n t to - fo r a n a ir li n e t o k e e p w h e r e 20 they were kept? MR SOKOMBELA: C h a ir, w h e n - w h e n w e a r e d o i n g t h e p h y s i c a l v e r i fic a ti o n . CHAIRPERSON: Hm. M R S O K O M B E L A : Th e e x p e c t a t i o n e s p e c i a l ly f o r th e m a j o r s p a r e p a r ts …. Page 105 of 121 21 FEBRUARY 2020 – DAY 217 CHAIRPERSON: Hm. MR SOKOMBELA: T h e e x p e c ta t io n w o u l d w h e t h e r m a y b e t h i s m a jo r spare parts are in a warehouse or in a storeroom or if they are not in a - t h e y a r e n o t in a w a r e h o u s e . T h e y a r e e i t h e r i n s t a l le d in a n a ir c r a f t o r i f t h e y a r e n o t i n s t a l l e d i n a n a i r c r a ft . T h e n t h e y - m a y b e t h e y h a v e b e e n s e n t s o m e w h e r e f o r r e p a i r s . T h e n i n a l l o f t h o s e i n s ta n c e s if w e c a n n o t fi n d t h e m t o v e r i fy t h e m p h y s i c a l ly a t - a t t h e - a t t h e warehouse. T h e n t h e y n e e d t o p r o v e t h e n t o u s t o s a y, n o . T h e y a r e n o t 10 h e r e a t t h e w a r e h o u s e . T h e y a r e in s t a ll e d in t h e a ir c r a f t. I f t h e y - t h e n t h e y a r e i n s t a l le d i n t h e a ir c r a f t . T h e n w e n e e d t o s e e t h e n d o c u m e n ts t h a t p r o v e s t h e n t h a t t h e y w e r e i n s t a ll e d i n th e a ir c r a f t . I f th e n t h e y w e r e n o t in s ta ll e d i n t h e a ir c r a f t m a y b e t h e y w e r e s e n t fo r r e p a ir s . T h e n th e y n e e d to s h o w u s d o c u m e n t s t h e n t o s a y n o , n o , n o . T h i s e n g in e s e r i a l n u m b e r s o a n d s o h a s b e e n s e n t m a y b e t o R o l ls R o y c e o r w h e r e v e r it - it w a s s e n t . S o t h a t i t c a n b e - fo r r e p a ir s . S o t h a t i t c a n c o m e b a c k . S o t h a t is th e r e a s o n w h y I m e n t io n e d t h a t C h a ir t o s a y w e d id n o t ju s t g o to t h e w a r e h o u s e a n d w h e n w e c h e c k e d t h e w a r e h o u s e w e d i d n o t s e e th e - th e m a j o r s p a r e p a r ts a n d th e n w e 20 m a d e a c o n c l u s io n . We probed further in terms of what - what might have happened. CHAIRPERSON: Thank you. MR SOKOMBELA: Ja. C h a ir, I w a n t e d t o h ig h l i g h t a ls o o n - o n t h e s a m e c a t e g o r y. O n e o t h e r a s p e c t th a t w e s a w t h a t w a s a c h a l le n g e o n a s s e ts w a s th e is s u e o f t h e - t h e - S A A h a s b e e n m a k in g lo s s e s . Yo u Page 106 of 121 21 FEBRUARY 2020 – DAY 217 k n o w. M e a n in g t h a t t h e a s s e t s t h e n th a t t h e y h a d d id n o t h a v e a n a b il i ty t o g e n e r a t e e c o n o m i c b e n e fi t s . Yo u k n o w. S o t h e n - t o u s th e n t h a t p r o v e d t h a t a s - is a n in d ic a t o r t h e n th a t th e a s s e ts m i g h t h a v e been impaired. T h e n th e r e i s a n - a n a c c o u n ti n g s ta n d a r d th e n t h a t r e q u ir e s t h e n th e p r e p a r e r s t h e n o f fi n a n c i a l s ta t e m e n t s to t e s t w h e t h e r t h e a s s e ts h a v e b e e n i m p a ir e d o r n o t a n d w e c o u l d fi n d t h e n t h a t e v i d e n c e t h e n t h a t M a n a g e m e n t h a v e - h a v e d o n e t h a t - h a v e t e s t e d t h o s e a s s e ts f o r i m p a i r m e n t a n d t h a t - t h a t w a s o n e o f t h e li m i t a ti o n s t h e n t h a t - t h a t 10 we had. H o w e v e r I th i n k f o r t h e a i r c r a ft s . T h e y - a t l e a s t th e y m a n a g e d t o - e s p e c i a lly t h e o w n e d a ir c r a ft s . They managed to - we m a n a g e d - th e y m a n a g e d t o d o s o m e t h i n g , b e c a u s e th e r e a r e v a l u e s I t h i n k t h a t a r e p u b l is h e d b y a - a c e r t a in c o m p a n y. n a m e o f th e c o m p a n y n o w. I just forgot the Th a t w i ll h a v e r e s a l a b l e v a l u e s o f t h e a ir c r a f t s . S o w e c o u l d a t l e a s t d e te r mi n e in te r ms o f t h e n w h a t a r e t h e v a l u e s o f t h o s e a ir c r a f ts . T h e n w h e n w e c o m p a r e th e v a l u e s o f t h o s e a ir c r a f ts w i t h t h e v a l u e - w i th t h e c a r r y i n g a m o u n t s a s - a s p e r t h e b a l a n c e s h e e t . 20 We a r e s a tis f ie d t h e n t h a t th e a ir c r a f ts a r e n o t - a r e n o t i m p a ir e d . T h o u g h t h e o w n e d a ir c r a f ts a r e n o t i m p a ir e d . H o w e v e r f o r t h e o th e r e q u ip m e n t lik e y o u r m a j o r s p a r e p a r ts , b e c a u s e t h e y a r e a ls o s u b j e c t t o ( in d is ti n c t) y o u r m a jo r s p a r e p a r t s . O ther - other equipment for e x a m p l e l ik e s i m u l a to r s a n d s t u ff . W e c o u l d n o t f in d e v id e n c e w h e th e r t h e n t h e y a r e i m p a ir e d o r Page 107 of 121 21 FEBRUARY 2020 – DAY 217 n o t . S o - j a . S o th o s e w e r e t h e - t h o s e w e r e t h e m a jo r - t h o s e w e r e t h e m a j o r fi n d i n g s a s f a r a s t h e - a s t h e a s s e ts a r e c o n c e r n e d . A ls o a ls o o n e o t h e r q u a li f ic a t i o n a r e a w a s o n m a in t e n a n c e c o s ts , b e c a u s e w h a t - w h a t w e r e a l is e d is t h a t m a i n te n a n c e c o s ts t h e r e w e r e - t h e r e were c h a ll e n g e s there r a n g in g there fr o m SAA recognising th e e x p e n d i t u r e w h e n t h e y - w h e n t h e y m a k e p a y m e n t a s o p p o s e d to r e c o g n is in g e x p e n d i t u r e w h e n t h e y i n c u r i t . F o r a n e x a m p l e w h e n t h e y r e c e iv e i n v o ic e s . Th e y w ill k e e p t h e i n v o ic e s a n d n o t r e c o r d t h e m i n t h e b o o k s a n d t h e n w h e n th e y a r e 10 m a k i n g p a y m e n ts . It is b y th e n th a t th e y w i ll - t h e y w il l r e c o r d in t h e b o o k s a n d in t e r m s o f t h e I n t e r n a t io n a l Fi n a n c i a l R e p o r ti n g S t a n d a r d s w h ic h i s a n a c c r u a l a c c o u n t in g fr a m e w o r k . T h a t is n o t a l lo w e d . S o t h e y c o u l d n o t - th e y c o u ld n o t - t h e y. is s u e . So that was an O n e o th e r is s u e is t h a t t h e r e is a n o t h e r m a j o r m a in t e n a n c e - y o u k n o w. In th e a i r l in e in d u s tr y th e r e is - t h e r e i s c e r t a i n m a i n t e n a n c e - t h e r e a r e c e r ta in m a i n t e n a n c e s t h a t t h e a ir l in e s n e e d t o m a k e . O n e is c a l l e d th e C c h e c k m a in t e n a n c e . T h e C c h e c k m a in t e n a n c e is d o n e m a y b e e v e r y tw o y e a r s o v e r o n e to t w o y e a r s a n d t h e n th e r e i s a - a b i g m a in t e n a n c e . 20 I t i s b a s ic a lly l ik e a n o v e r h a u l o f t h e a ir c r a ft , I t h in k i t ’s d o n e every four years. S o S A A t h e n d i d n ’ t h a v e a p o lic y i n t e r m s o f h o w t h e n t h e y n e e d t o d e a l – e s p e c i a l ly s p e c i f ic a ll y w i t h t h e C c h e c k s . S o t h e w a y t h e n t h a t S A A , f o r e x a m p le t h e y w o u l d p a y – th e y h a d a c o n tr a c t fo r th o s e C c h e c k s t h a t w a s c a l l e d , I t h in k t h e P o w e r b y th e H o u r c o n tr a c t w h e r e t h e n th e y w o u l d m a k e p a y m e n t s , m a y b e to S o u t h Page 108 of 121 21 FEBRUARY 2020 – DAY 217 A fr ic a n Ai r w a y s Te c h n ic a l a n d t h e n S o u t h A fr ic a n A ir w a y s Te c h n ic a l t h e n s o m e ti m e in f u tu r e w i ll th e n p e r f o r m t h e n th e C c h e c k s o r t h e y w il l g e t a s u p p li e r m a y b e t o p e r f o r m t h e n t h o s e C c h e c k s o n t h e ir b e h a l f b u t h o w S A A w a s r e c o g n is in g t h e s e c h e c k s w a s t h a t , w h e n th e y ’r e m a k in g t h e p a y m e n t t h e y w i ll r e c o g n i s e i t a s a n e x p e n d it u r e e v e n t h o u g h i t ’s a p r e p a y m e n t . M e a n i n g t h a t i t ’s n o t s u p p o s e d t o b e r e c o g n is e d in p r o f i t a n d l o s s i t ’s s u p p o s e d t o b e r e c o g n is e d a s a p r e p a y m e n t i n t h e b a la n c e sheet. S o t h o s e w e r e p a r t o f t h e c h a ll e n g e s t h a t w e h a d i n t h e m a in t e n a n c e e x p e n d i t u r e a t S A A . 10 T h e n t h e r e w a s a ls o a q u a li f ic a t i o n a t a s u b s id i a r y o f S A A w h ic h i s S o u t h A fr ic a n A ir w a y s Te c h n ic a l b e c a u s e t h e c o n tr o l s t h e r e o f in v e n to r y w e r e v e r y w e a k a n d S o u th A fr ic a n A ir w a y s Te c h n i c a l b u y s a lo t o f s t o c k i n t h e f o r m o f c o m p o n e n ts a l s o fo r t h e a ir c r a f ts b e c a u s e t h e y a r e a M R O s o t h e y n e e d to h a v e p a r ts th a t t h e y w ill u s e t h e n t o s e r v ic e i ts c li e n ts , s p e c if ic a l ly S A A a n d o th e r a ir l in e s . So then they w i ll h a v e t h e n t h o s e c o m p o n e n ts , y o u r ty r e s , y o u r t h r u s t r e v e r s a ls a m o n g o t h e r s i n t e r m s o f t h e n w h a t t h o s e p a r ts a r e b u t t h e c h a l le n g e t h a t w e h a d th e r e is th a t t h e c o n tr o l s w e r e v e r y p o o r t h e r e . Th e s t a n d a r d – w h a t t h e s t a n d a r d r e q u ir e s t h e n th a t th e i n v e n to r y o r s t o c k 20 n e e d s t o b e r e c o g n is e d – n e e d s to b e m e a s u r e d i n t h e b o o k s i n t h e l a w o f c o s t o r n e t r e a l is a b l e v a l u e . W h a t t h a t m e a n s is t h a t i f y o u b u y t h e s t o c k , le t ’s s a y b e g in n i n g o f th e y e a r, y o u b u y i t f o r R 1 0 0 m a y b e b y 3 1 s t o f D e c e m b e r t h e v a lu e i n th e m a r k e t o f t h a t s to c k m ig h t h a v e b e e n o b s o le t e b e c a u s e m a y b e t h e n e w p r o d u c t h a s c o m e , n o w i t’s n o l o n g e r R 1 0 0 m a y b e it ’s Page 109 of 121 21 FEBRUARY 2020 – DAY 217 R50. S o th e s t a n d a r d t h e n r e q u ir e s y o u to w r i te it d o w n t o R 5 0 b u t w h a t w e d i d n ’ t fi n d t h e r e a t S o u th A fr ic a n A ir w a y s Te c h n ic a l i s h o w th e n S A A Te c h n ic a l c o m p li e s w it h t h a t i m p o r ta n t r e q u ir e m e n t o f th e s t a n d a r d a n d th a t t h e n m a d e u s t h e n to q u a li fy th e m a n d a ls o th e y h a d a c h a l le n g e a ls o o n t h e i n v e n t o r y s y s t e m t h a t t h e y w e r e u s i n g b e c a u s e t h e r e w a s a s y s t e m t h e y w e r e u s in g c a l l e d M e n a c e s y s te m a n d th a t s y s te m – I r e m e m b e r fr o m 3 1 s t – b y 3 1 s t o f M a r c h 2 0 1 7 th e y d is c o n t in u e d t h a t s y s t e m a n d th e n t h e y p r o c u r e d a n o th e r s y s t e m t h a t w a s c a l le d A m o s s y s t e m a n d w e w e r e c o n c e r n e d a b o u t t h a t b e c a u s e 10 t h e c r e d i b i li t y o f t h e d a t a th a t w a s o n t h a t s y s t e m a l s o w a s n o t r e li a b l e a n d th e y t o o k t h e in f o r m a t io n f r o m t h e M e n a c e – it ’s lik e g a r b a g e i n , g a r b a g e o u t k in d o f. Yo u k n o w t h e y t o o k t h is d a ta t h e n f r o m t h is M e n a c e s y s t e m t o th e A m o s s y s t e m a n d w e – th e r e w a s n o p r o p e r p r o c e d u r e s th a t w e r e d o n e t h e r e lik e y o u r d a t a m ig r a ti o n a n d s tu ff . S o w e e n d e d u p t h e n q u a l i fy i n g t h e in v e n t o r y b u t th e q u a l i fic a ti o n t h e n t h a t fr o m t h e s u b s i d ia r y w h ic h i s S o u th A fr ic a n A ir w a y s Te c h n i c a l . W h e n w e e v a l u a t e d i t a t c o n s o li d a te d l e v e l w e f o u n d th a t t h i s is m a t e r i a l fo r o u r o w n c ir c u m s ta n c e s a n d h e n c e t h e n y o u ’l l s e e i t is a q u a li fi c a t io n i n th e a u d it r e p o r t o f S o u t h A f r ic a n A ir w a y s . 20 I think C h a ir, we’ve transversed a lo t about ir r e g u la r e x p e n d i t u r e I ’ m n o t g o i n g t o s p e n d a l o t o f ti m e th e r e b u t i t w a s a m a t t e r o f , w e q u a li f ie d t h e m o n ir r e g u la r e x p e n d i tu r e a s w e ll a s fr u i tl e s s a n d w a s te f u l e x p e n d i t u r e . W e – t h e r e w a s a q u a li fi c a t io n t h a t we had there. A D V M I C H A E L M B I K I WA : Thank you. Page 110 of 121 21 FEBRUARY 2020 – DAY 217 CHAIRPERSON: Ye s , m a y b e y o u g o fir s t Mr M b ik i w a , m a y b e y o u a r e going to ask what I wanted to ask. A D V M I C H A E L M B I K I WA : W e l l C h a ir I w a s g o in g to a s k a b o u t th e c o n c l u s i o n o f t h e a u d i t , s o i f y o u r q u e s t i o n is o n th e s u b s ta n c e t h a t h e ’s ju s t d is c u s s e d th e n p e r h a p s … [i n t e r v e n e s ]. CHAIRPERSON: No ask him, we can always come back to it. A D V M I C H A E L M B I K I WA : M r S o k o m b e la y o u i n d ic a t e d e a r li e r th a t t h e r e w a s a d e l a y i n c o n c l u d i n g t h e a u d it a n d t h a t i t w a s o n l y c o n c l u d e d i n D e c e m b e r w h e n t h e fi n a n c i a l y e a r h a d e n d e d i n M a r c h . 10 C a n y o u g iv e u s a n i n d ic a ti o n o f w h a t a n a u d it o r d o e s w h e n th e r e is a d e l a y a n d e v e n ts o c c u r in t h e i n te r v e n in g p e r i o d , d o y o u r e - v is i t t h i n g s , d o y o u i n c lu d e th e m s o m e h o w, w h a t d o e s a n a u d i to r d o ? MR SOKOMBELA: C h a ir it d e p e n d s o n t h e n a t u r e o f th o s e e v e n ts i n t e r m s o f w h a t t h o s e e v e n t s a r e , b u t t h e r e ’s a c o n c e p t o f s u b s e q u e n t events that, that concept is covered by the accounting standards and a ls o b y t h e a u d i ti n g s ta n d a r d s a s w e l l . F o r th e a c c o u n t in g s t a n d a r d s it ’s fo r t h e p r e p a r a l s o f t h e f in a n c i a l s t a t e m e n ts t o k e e p – t o b e o n t h e lo o k o u t i n te r ms o f w h a t a r e t h e e v e n ts t h a t – w h a t a r e th e m a t e r ia l e v e n t s t h a t m i g h t r e q u ir e t h e m , a s m a n a g e m e n t t o – e i t h e r t o d is c l o s e 20 t h e m i n t h e fi n a n c i a l s t a t e m e n t s o r to a d ju s t t h e fi n a n c i a l s t a t e m e n t s . I t h i n k it ’s c a ll e d – th o s e e v e n t s m a y q u a li f y c a n b e a d j u s t i n g e v e n ts o r n o n - a d j u s ti n g e v e n ts . T h e a d j u s ti n g e v e n ts f o r a n e x a m p le i f I c a n m a k e a n e x a m p l e is S A A – I t h in k a t S A A ja , I c a n m a k e a n e x a m p l e a t S A A b e c a u s e S A A , t h e is s u e – r e m e m b e r th e r e w a s th e C o m p e ti t io n C o m m i s s i o n t h e r e w a s a c a s e o f t h e C o m p e t i ti o n C o m m is s i o n a n d i f I Page 111 of 121 21 FEBRUARY 2020 – DAY 217 r e m e m b e r w e ll , t h e j u d g m e n t c a m e s u b s e q u e n t to t h e y e a r e n d i n 2 0 1 7 , I’ m g o i n g d o w n m e m o r y l a n e n o w b u t – a n d i t s a i d S A A n e e d s t o p a y I t h i n k Br i tis h A ir w a y s o r C o m A ir I th in k a n a m o u n t , I t h i n k it w a s a p p r o x i m a te ly R 1 b il li o n o r s o . S A A h a d to g o b a c k a n d a d ju s t th e f in a n c ia l s ta t e m e n t s a n d r e fl e c t th a t l ia b ili t y e v e n t h o u g h i t w a s – I th i n k t h e y w e r e r e fl e c t in g i t a s a c o n ti n g e n t l ia b ili t y b e f o r e , m e a n in g t h a t i t w a s n o t in t h e fa c e o f t h e f i n a n c ia l s t a t e m e n t s . S o t h e y h a d t o g o b a c k a n d a d ju s t i t b e c a u s e it w a s a n e v e n t t h a t w a s – b e f o r e y e a r e n d i t w a s t h e r e , e v e r y b o d y 10 k n e w a b o u t i t b u t t h e n i t w a s c o n fir m e d n o w a f te r y e a r e n d , s o th e y h a d t o g o b a c k a n d a d j u s t it b u t t h e n t h e r e a r e o th e r e v e n ts , f o r e x a m p le t h a t m a y b e n o n - a d j u s ti n g e v e n ts . N o n - a d j u s ti n g e v e n t s a r e t h o s e e v e n t , f o r e x a m p l e t h a t t h e r e w a s n o in d ic a t io n t h a t t h e y w e r e g o in g okay before year end but they okayed before year end. Then the r e q u ir e m e n t i s s t il l fo r t h e m t o d i s c l o s e t h e m i n t h e fi n a n c i a l s ta t e m e n t t o s a y th e r e ’s t h is m a t e r ia l e v e n t t h a t h a s h a p p e n e d b u t w e a r e n o t g o i n g t o a d j u s t o u r f in a n c ia l s t a t e m e n ts w i t h i t . O n th e a u d it i n g s i d e , a ls o t h e r e ’s a n a u d i ti n g s t a n d a r d th a t r e g u la t e s h o w th e n a u d i t o r s n e e d s to a u d i t th o s e s u b s e q u e n t e v e n ts 20 w h ic h in c l u d e s , a m o n g o t h e r s , a u d i to r s h a v in g t o lo o k a t t h e m i n u te s o f t h e B o a r d o f D ir e c t o r s , s c a n t h e e n v ir o n m e n t i n t e r m s o f w h a t is h a p p e n in g i n t h e e n v ir o n m e n t , w h a t a r e m a j o r tr a n s a c ti o n s t h a t a r e h a p p e n in g w i t h i n t h e e n ti ty, e n g a g in g w i t h p e o p l e t h a t a r e r e s p o n s i b le f o r – in t h e e n ti ty t o i d e n ti f y, y o u k n o w, th a t a r e o n t h e l o o k o u t f o r t h o s e e v e n ts a m o n g o th e r s . S o t h a t is t h e p r i n c i p l e , y o u k n o w, i n t e r m s Page 112 of 121 21 FEBRUARY 2020 – DAY 217 o f t h e n t h e s u b s e q u e n t e v e n ts b e c a u s e a s a n a u d i t o r y o u d o n ’ t w a n t t o f a c e a s i t u a t i o n w h e r e b y y o u s ig n th e a u d it r e p o r t b u t th e r e a r e m a j o r e v e n t s t h a t h a s h a p p e n e d b e t w e e n t h e d a t e o f t h e i s s u e o f th e f in a n c ia l s t a te m e n t – t h e d a t e th a t th e fi n a n c i a l s t a te m e n ts w e r e is s u e d t o y o u a n d t h e d a t e t h a t y o u s i g n e d t h e a u d it r e p o r t . S o t h a t is , in p r i n c ip le , that is the concept. A D V M I C H A E L M B I K I WA : T h a n k y o u , Mr S o k o m b e l a b e f o r e w e p r o c e e d to t h e c o n c lu d in g p a r t o f y o u r e v i d e n c e I w a n t to r e t u r n t o s o m e t h i n g y o u s p o k e a b o u t e a r li e r. 10 Yo u m e n t i o n e d t h a t y o u ’ d h a d e n g a g e m e n ts w i t h t h e p r e v i o u s a u d i t o r s d u r i n g t h e c o u r s e o f y o u r a u d it a n d t h a t th e y h a d d is c u s s e d th e i r a p p r o a c h w i t h y o u , i n p a r t ic u l a r t o c o m p li a n c e w it h l e g i s l a ti o n . C a n y o u te ll u s a b o u t t h o s e e n g a g e m e n ts ? MR SOKOMBELA: C h a ir w e h a d v a r io u s e n g a g e m e n t w i t h t h e p r e v i o u s a u d i t o r s a n d m y s e l f – I to o k i t u p o n m y s e l f to e n s u r e t h a t I e n g a g e t h e m a s m u c h a s I c a n , m y s e l f a n d m y t e a m a n d – e s p e c i a l ly o n t h e f in d in g s t h a t w e ’r e g e t ti n g i t a s a , y o u k n o w – a n d a ls o th e li m i ta t io n s t h a t w e f o u n d i n th e a u d i t fi le s a n d t o e n s u r e t h e n t h a t a t le a s t w e g e t a n u n d e r s ta n d i n g o f w h a t t h e is s u e s a r e b u t w h a t m y t e a m h a s r e a l is e d w h i le r e v i e w i n g th e a u d i t fi le w a s th a t t h e r e w a s n o t m u c h 20 w o r k t h a t w a s d o n e o n t h e c o m p l i a n c e a n d S u p p ly C h a i n M a n a g e m e n t a r e a a n d I th i n k – th e r e w a s a m e e ti n g t h a t w e h a d , i f I r e m e m b e r w e ll s o m e w h e r e in S e p te m b e r w h e r e w e m e t … [i n te r v e n e s ] . CHAIRPERSON: MR SOKOMBELA: September 2017? Ye s C h a ir, S e p te m b e r 2 0 1 7 w h e r e w e m e t th e p r e v i o u s a u d i to r s a n d I t h in k I w r o te t h e m a n e m a il i n t e r m s o f t h o s e Page 113 of 121 21 FEBRUARY 2020 – DAY 217 d e li b e r a t i o n s t h a t w e h a d a n d a ls o w h e r e , y o u k n o w, a ll a g r e e d t h a t t h e w o r k th a t w a s d o n e o n S u p p ly C h a i n M a n a g e m e n t a r e a w a s n o t adequate. CHAIRPERSON: Wa s t h i s n o w t h e s e c o n d a r e a w h e r e th e y c o n c e d e d t h a t , e i t h e r t h e y d i d n ’ t d o th e w o r k o r t h e w o r k t h e y d i d w a s n o t a d e q u a t e o r is i t t h e s a m e t h a t w e t a l k e d a b o u t b e f o r e l u n c h , s a m e area? MR SOKOMBELA: I t is t h e s a m e a r e a C h a ir b e c a u s e I t h i n k , t o u s , w h e n w e a r r iv e d a t S A A w e d i d a d e e p d i v e o n S u p p ly C h a i n 10 M a n a g e m e n t b u t i t w a s i m p o r ta n t t o u s b e c a u s e t h e r e ’s a d is c l o s u r e i n t h e fi n a n c i a l s t a t e m e n t s o f ir r e g u l a r e x p e n d i t u r e . I t’s i m p o r t a n t th e n t o u s , b e f o r e w e g o a n d s e l e c t s a y b i g te n d e r s a t S A A , t o u n d e r s ta n d w h e t h e r m a y b e t h o s e b i g t e n d e r s w h e th e r t h e y ’v e b e e n t e s t e d b e f o r e o r t h e y w e r e n o t t e s t e d b e f o r e , y o u k n o w, s o th a t ’s w h y t h e n w h e n m y t e a m t h e n l o o k e d in t e r m s o f t h e n th a t w o r k i t w a s n o t c o m m is e r a te in t e r m s o f h o w w e w o u l d t e s t o u r w o r k a n d th e n w e a g r e e d th e n th a t o u r s e lv e s w e w il l t h e n n o t r e ly o n t h a t w o r k t h a t w a s d o n e . CHAIRPERSON: MR SOKOMBELA: 20 W a s it t h a t b a d ? I d o n ’ t w a n t t o s a y i t w a s b a d C h a ir, I d o n ’ t w a n t t o s a y it w a s b a d . CHAIRPERSON: O k a y b u t y o u f o u n d th a t y o u c o u l d n o t s a fe ly r e l y o n it . MR SOKOMBELA: CHAIRPERSON: A b s o l u te ly C h a ir. J a o k a y. A D V M I C H A E L M B I K I WA : M r S o k o m b e l a w h o w a s a t th a t m e e t i n g ? Page 114 of 121 21 FEBRUARY 2020 – DAY 217 MR SOKOMB ELA: I th in k M r M o ti b e a n d M s M a s s a s a i f I r e m e m b e r w e ll , i f I r e m e m b e r w e ll b e c a u s e – I w il l h a v e t o g o b a c k t o m y n o te s a n d a ls o th e i r t e a ms , I d o n ’ t r e m e m b e r, s p e c i f ic a l ly th e ir n a m e s , y o u k n o w i n t e r m s o f th e n w h o t h e ir t e a m s a r e . I think those were the p e o p l e w h o I th i n k w e r e i n t h a t m e e ti n g a n d j a w e ’v e m e t w i t h t h e m i n v a r io u s in s t a n c e s e v e n b e f o r e w e s i g n e d th e r e p o r t w e r e q u e s t e d t o h a v e a n e n g a g e m e n t w i th t h e m b u t u n f o r t u n a t e ly I t h i n k M r M o ti b e h a d a n e n g a g e m e n t i n N a m ib i a i n D e c e m b e r a n d w e e n d e d u p m e e t in g , I t h i n k , o n th e 1 5 t h o f J a n u a r y 2 0 1 8 b u t i n t h a t m e e t i n g w e d i d n ’ t t a l k 10 a b o u t S u p p l y C h a i n M a n a g e m e n t b e c a u s e i t w a s a m a t te r t h a t w e d is c u s s e d p r e v i o u s l y – t h e p r e v i o u s y e a r b u t w h a t w e t a l k e d a b o u t i n t h e m e e t in g o n t h e 1 5 t h o f J a n u a r y 2 0 1 8 w e r e t h e n t h e q u a l i fic a ti o n a r e a s , e s p e c ia ll y i n th e p r e v i o u s y e a r s t h a t h a v e g o t a n i m p a c t o n t h e previous years’ balances. S o th a t w a s – I t h in k t h a t w a s t h e l a s t m e e ti n g t h a t w e h a d w i th b o t h M r M o t i b e a s w e l l a s M s M a s s a s a . A D V M I C H A E L M B I K I WA : A n d y o u m e n t io n e d t h a t a n e m a i l w a s s e n t a ft e r th e 2 0 1 7 m e e ti n g , a t w h ic h c o m p l ia n c e w i th l e g i s l a ti o n w a s d is c u s s e d . MR 20 SOKOMBELA: Ja there is an e m a il – t h e r e ’s various c o r r e s p o n d e n c e s th a t I s e n t t o th e m , y o u k n o w, b e c a u s e w h a t I n o r m a l ly d o is t h a t w h e n I m e e t a p e r s o n th e n I w r i t e a n e m a i l to s a y t h is is w h a t w e d is c u s s e d ju s t t o c o n f ir m w h a t w e d is c u s s e d . CHAIRPERSON: I s e e y o u d o w h a t a t t o r n e y s d o . [l a u g h t e r ] , a t t o r n e y s a r e w e l l k n o w n fo r t h a t . MR SOKOMBELA: A b s o l u te ly. Page 115 of 121 21 FEBRUARY 2020 – DAY 217 A D V M I C H A E L M B I K I WA : Thank you. Mr S o k o m b e l a I d o n ’ t t h i n k y o u ’v e i n c l u d e d t h a t c o r r e s p o n d e n c e w i th y o u r a ff id a v i t h e r e a n d w e ’d c e r t a i n l y a p p r e c i a te i t i f y o u c o u l d h a v e a lo o k f o r t h a t a n d p r o v id e i t to us. MR SOKOMBELA: I’ ll c e r t a i n l y p r o v id e t h a t. A D V M I C H A E L M B I K I WA : Thank you. Mr Sokombela the concluding a s p e c t i s th e e n g a g e m e n t s th a t y o u h a d w it h S A A d u r in g t h e c o u r s e o f the audit. W e to u c h e d o n t h a t in t h e c o n te x t o f ir r e g u l a r e x p e n d i tu r e a n d fr u i t le s s a n d w a s t e f u l e x p e n d i t u r e a n d i n t h e S w i s s P o r t c o n te x t 10 a n d I d o n ’ t t h i n k i t ’s n e c e s s a r y f o r y o u t o g o t h r o u g h a ll th e correspondence. I n g e n e r a l t e r m s , c a n y o u t e ll u s , w h a t t h e a t ti t u d e w a s o f S A A M a n a g e m e n t d u r in g th e c o u r s e o f t h e a u d i t a n d to y o u r fi n d i n g s a n d q u a l i fic a ti o n s th a t y o u w o u l d r e p o r t t o t h e m ? MR SOKOMBELA: at SAA and C h a ir I m u s t s a y w e d i d n ’ t e x p e r i e n c e p u s h - b a c k s the reason why I’ m s a y in g that is because S A A … [ i n te r v e n e s ] . CHAIRPERSON: E x c e p t w h e n y o u m a d e fi n d i n g s , in i ti a l ly, y o u s a i d there was a push-back from Management. MR SOKOMBELA: 20 C h a ir I t h i n k , n o t s ig n i f ic a n t , y o u k n o w, t o t h e e x t e n t o f a v e r y h e c tic o n e n o I w o u ld b e ly in g i f I s a i d th a t a n d t h e r e a s o n f o r t h a t , i f y o u l o o k a t th e b a l a n c e s h e e t o f S A A i t ’s n o t a h e a lt h y b a la n c e s h e e t . Th e B o a r d a n d M a n a g e m e n t , w h a t t h e y w e r e b u s y w i t h w a s t o e n s u r e t h e n t h a t t h e y e n g a g e th e l e n d e r s o n a r e g u l a r b a s is w i th t h e v i e w t o e n s u r e t h e n t h a t th e y n e g o ti a t e , i t ’s e i t h e r e x t e n s i o n o f t h e ir l o a n s o r g e t m a y b e n e w f u n d i n g a n d i n th e g r o u n d Page 116 of 121 21 FEBRUARY 2020 – DAY 217 t h e n , th in g s t h e n s u ff e r e d i n t h e g r o u n d . Yo u k n o w i n th e s e n s e t h a t t h e y d i d n ’ t h a v e a n a p p r e c ia t io n t h e n o f w h a t is r e a ll y h a p p e n in g i n t h e ground. CHAIRPERSON: I t h i n k t h a t t a k e s u s b a c k t o w h a t I s a id e a r l ie r o n , d o e s n ’t i t , w h e n I s a i d , h o w c a n y o u h o p e to s o l v e a p r o b l e m if y o u d o n ’t w a n t t o s e e t h e f u l l e x t e n t o f th e p r o b l e m . MR SOKOMBELA: CHAIRPERSON: C h a ir, y e s . Ye s s o in t h e g r o u n d m a t te r s w e r e n e g l e c t e d . MR SOKOMBELA: 10 Ja you know that was our assessment because now b e c a u s e t h e C h ie f F i n a n c ia l O ff ic e r – th e C E O t h e m e m b e r s o f t h e B o a r d , it ’s a c r i s is m o d e e v e r y d a y y o u k n o w, i t ’s a c r is is , p e o p le a r e in a c r i s is m o d e e v e r y d a y, th e y a r e m e e ti n g t h e l e n d e r s th e y ’r e m e e t in g t h e o t h e r s t a k e h o l d e r a n d i n a s m u c h a s S A A is a n a ir l in e i t c a n ’ t w o r k on autopilot. CHAIRPERSON: B u t i t ’s g o t to b e c r is is m o d e a ll t h e ti m e i f y o u d o n ’ t t a k e t i m e to g o a n d s e e th e fu ll d e p t h o f th e p r o b le m b e c a u s e i f y o u t a k e t i m e to g o a n d l o o k a t th e f u ll e x t e n t o f t h e p r o b l e m t h e n y o u ’ ll b e a b l e t o t h e n s a y, w h a t i s th e l o n g - te r m s o l u ti o n a n d d e a l w i t h i t b u t i f y o u d o n ’ t d o t h a t , y o u ju s t w a n t t o a d d r e s s w h a t ’s o n t h e s u r f a c e th a t ’s 20 w h a t ’s g o in g t o h a p p e n . MR SOKOMBELA: A b s o l u te ly C h a ir a n d I m u s t s t a t e th a t t h e in s t a b i li ty a s w e ll p la y e d a v e r y, v e r y h u g e r o l e b e c a u s e i f a n e w p e r s o n c o m e s a n d t h e n g o e s a n o th e r p e r s o n c o m e s a n d t h e n g o e s , y o u k n o w, t h e n it b e c o m e s a v i c i o u s c y c le , y o u k n o w, t h e n u n c o n s c i o u s l y t h i n g s t h e n g e t s n e g l e c t e d , y o u k n o w a n d th in g s t h e n th e y d o n ’ t w o r k Page 117 of 121 21 FEBRUARY 2020 – DAY 217 a n d th a t ’s w h y y o u ’ ll s e e in o u r in s i g h t s t h a t w e ’v e e le v a t e d t h e is s u e o f in s t a b i li ty a t S A A e s p e c ia ll y a t t h e B o a r d le v e l a s w e ll a s t h e E x e c u t iv e M a n a g e m e n t t e a m b e c a u s e y o u ’v e g o t t o h a v e c e r t a i n ty i n t e r m s o f th e p e o p le th a t a r e t h e r e s o t h a t t h e y c a n h a v e a n a p p r e c ia t io n o f t h i n g s y o u k n o w. S o my a n s w e r C h a ir t o t h e e n g a g e m e n ts , w e h a d e n g a g e m e n t s , v e r y r o b u s t e n g a g e m e n ts w i t h t h e Audit Committee, members of the Audit Committee, we had I think…[intervenes]. CHAIRPERSON: 10 D i d t h a t i n c lu d e M s K w i n a n a , w a s s h e n o t i n t h e A u d i t C o m m i t t e e o r m a y b e t h a t w a s n o t th e y e a r ? MR SOKOMBELA: CHAIRPERSON: MR SOKOMBELA: T h a t w a s n o t th e y e a r C h a ir. O k a y. J a w e h a d e n g a g e m e n ts w it h t h e A u d i t C o m m i t t e e , t h e C h a i r p e r s o n o f t h e A u d i t C o m m i t t e e , t h e E x e c u tiv e M a n a g e m e n t t e a m , t h e t h e n C F O , t h e t h e n A c ti n g C E O , t h e n e w C E O t h e n th e – t h e n e w C E O a t t h e t i m e , I t h in k Mr J a r a n a j o i n e d , I th i n k , 1 s t o f N o v e m b e r 2 0 1 7 , w e e n g a g e d w i t h h i m b e f o r e w e s i g n e d t h e r e p o r t o n a r e g u la r b a s is . W e e n g a g e d w i t h M s My e n i a s w e l l, I t h i n k w e h a d s o m e – I t h i n k tw o fo r m a l e n g a g e m e n ts w i t h h e r a n d in a l l t h o s e e n g a g e m e n ts 20 there were no push-backs even – they were even making commitments b u t u n f o r t u n a t e ly t h o s e c o m m i t m e n t s w e r e n o t h o n o u r e d y o u k n o w. S o I t h i n k th a t is w h a t , o n o u r s i d e , a s a n a u d i t o ff ic e w e w e r e q u i te d is a p p o in t e d w i th y o u k n o w b e c a u s e w e d i d r a is e s o m e is s u e s w e t h o u g h t th e n s o m e a c t i o n – a t l e a s t i n t h e fo ll o w i n g y e a r y o u k n o w. In a s m u c h a s I w a s n o t i n v o lv e d i n t h e f o l l o w i n g y e a r b u t m y c o ll e a g u e s Page 118 of 121 21 FEBRUARY 2020 – DAY 217 t h a t g o t i n v o l v e d i n th e fo ll o w i n g y e a r a u d i t a ls o , t h e y t o ld m e t h a t t h o s e c o m m i t m e n ts t h a t w e r e m a d e w e r e n o t h o n o u r e d . CHAIRPERSON: W e l l w h a t I w a n t e d to a s k y o u e a r li e r o n w a s , w h e n I lis t e n t o h o w – w h a t y o u f o u n d w h e n y o u w e r e a u d i ti n g S A A , t h e c h a l le n g e is , y o u f o u n d d i ffic u lt i e s i n g e t ti n g d o c u m e n t s a n d d i ff ic u l t ie s in b e i n g s h o w n p r o o f t h a t c e r ta i n p a r ts o f a ir c r a f t s e x is t e d th e r e . I g e t t h e i m p r e s s io n th a t , r e a ll y, S A A w a s i n d is a r r a y, i s t h a t a fa ir c o m m e n t ? MR SOKOMBELA: I t w o u l d b e a f a ir c o m m e n t C h a ir b e c a u s e I t h i n k t h i n g s w e r e n o t l o o k i n g g o o d a t a ll . 10 CHAIRPERSON: Ye s . A D V M I C H A E L M B I K I WA : Management report that Thank you. were in e a r li e r M r S o k o m b e l a th e included a range of r e c o m m e n d a ti o n s a s t o w h a t M a n a g e m e n t o u g h t t o d o , d o y o u h a v e a s e n s e o f t h e e x t e n t t o w h ic h t h o s e r e c o m m e n d a ti o n s w e r e fo ll o w e d , c o m p li e d w it h , a c ti o n e d ? MR SOKOMBELA: C h a ir a s I s a i d , i n it i a l ly, a f te r t h e a u d i t r e p o r t – a ft e r t h e s i g n in g o f t h e a u d i t r e p o r t in 2 0 1 7 I w a s n o t i n v o l v e d a n y m o r e b u t I d i d s e e k i n p u t s fr o m m y c o l l e a g u e s t h a t w e r e i n v o lv e d w h e r e th e n t h e y m e n ti o n e d t o m e t h a t th e c o m m i t m e n ts t h a t w e r e m a d e w e r e n o t 20 h o n o u r e d , y o u k n o w, w h ic h i s a d is a p p o i n t m e n t , y o u k n o w w h e r e I ’ m s i tt i n g . A D V M I C H A E L M B I K I WA : C h a i r t h a t c o n c l u d e s m y q u e s ti o n s f o r Mr Sokombela. CHAIRPERSON: T h a n k y o u v e r y m u c h M r S o k o m b e l a f o r c o m i n g to g iv e y o u r e v i d e n c e w e a p p r e c i a t e i t. S h o u ld w e n e e d y o u t o c o m e b a c k Page 119 of 121 21 FEBRUARY 2020 – DAY 217 w e ’l l a s k y o u t o c o m e b a c k b u t t h a n k y o u v e r y m u c h a n d y o u a r e excused. MR SOKOMBELA: CHAIRPERSON: T h a n k y o u v e r y m u c h C h a ir. Thank you. A D V M I C H A E L M B I K I WA : CHAIRPERSON: C h a ir I w il l h a n d o v e r t o Ms H o f m e y r. T h a n k y o u a n d I g u e s s th e fir s t t h i n g s h e w il l d o i s g iv e m e a n a s s e s s m e n t . A D V K AT E H O F M E Y R : u n r e li a b l e . 10 Ye s , w h ic h w i ll , i n a ll l ik e l ih o o d b e e n tir e ly C h a ir w e h a v e d is c u s s e d w it h o u r le a r n e d f r i e n d s w h o represent Mr Motibi. O u r g e n e r a s e n s e is t h a t I w i ll n o t b e a b le to m a k e v e r y m u c h p r o g r e s s i f w e s t a r t t h i s a f te r n o o n , t h e r e ’s a d a y ’s w o r t h o f e v i d e n c e r e q u ir e d i n r e l a t i o n to M r M o ti b i a n d I d o n ’t s e e g r e a t a d v a n t a g e in p r o c e e d in g f o r th e b e t t e r p a r t o f a n h o u r. S o i t w a s g o in g t o b e o u r r e c o m m e n d a t io n th a t w e r a t h e r d o a d jo u r n n o w, w e fi n d a n o t h e r d a y a n d w e e n s u r e t h a t w e c a n b e g in a n d c o m p l e t e t h e e v i d e n c e i n t h a t d a y. CHAIRPERSON: O k a y, n o I t h i n k th a t ’s fi n e , I th i n k th a t ’s f i n e . Yo u w i ll l o o k a t a n o t h e r d a y s o o n . A D V K AT E H O F M E Y R : 20 W e w il l , w e s e e m t o h a v e a f e w c r e e p i n g w i t n e s s e s w h o n e e d t o b e a l lo c a t e d i n to t h e ti m e t a b l e , I m e a n th a t i n n o n e g a tiv e s e n s e , I j u s t m e a n th a t w e h a v e l o s t t h e t i m e b u t w e w il l c e r t a i n l y c o m e b a c k t o y o u w it h a p r o p o s a l s h o r tly. CHAIRPERSON: J a i f a t a l l p o s s ib l e , j a i f a t a l l p o s s ib l e th e t i m e la p s e s h o u ld n ’ t b e m u c h . A D V K AT E H O F M E Y R : S h o u l d n ’ t b e g r e a t , a b s o l u t e ly C h a ir. Page 120 of 121 21 FEBRUARY 2020 – DAY 217 CHAIRPERSON: a d j o u r n n o w. J a o k a y n o t h a t’s a lr ig h t th e n w e ’l l d o t h a t, s o w e ’l l T h e r e w o n ’ t b e a s i t ti n g o n M o n d a y b u t o n Tu e s d a y w e w i ll h a v e a s it t in g a n d th e r e s t o f n e x t w e e k . W e a d jo u r n . REGISTRAR: A ll r is e . I N Q U I R Y A D J O U R N S TO 2 5 F E B R U A R Y 2 0 2 0 Page 121 of 121