SAA remains a going concern but faces material uncertainties about its ability to continue operating over the next 12 months, according to findings presented by the Auditor-General of South Africa (AGSA) to Parliament.
Thato Kunene, Senior Audit Manager for the AGSA, outlined the audit outcome during a briefing to the Portfolio Committee on Transport on April 21, following the AGSA’s disclaimer audit opinion on SAA’s 2024/25 financial results.
Lack of qualified audit resources
“When we look at SAA’s implementation of its audit action plan, there has been little progress. In SAA, there is a culture of naming resolutions but the implementation of those recommendations from the Board, Minister and even the AGSA has been poor,” said Kunene.
“We have noted incapacity in terms of personnel who have the experience and skills to implement these recommendations. This has remained a primary driver for the AGSA’s identified qualification areas.”
Kunene explained that internal auditing capacity was limited because auditors were addressing a significant backlog of audit work.
Among the shortcomings identified by the AGSA were material misstatements in SAA’s consolidated financial statements, including issues relating to revenue, maintenance costs, operating costs, intangible assets, trades and other receivables. The AGSA also identified instances of irregular expenditure, among other findings.
Reliance on once-off gains
“In 2024/25, SAA’s total income increased significantly but so did its total operating costs, resulting in a net operating loss of R472 million for the year,” said Kunene.
The AGSA also raised concerns about the airline’s reliance on non-recurring gains to support reported profits over the past three financial years.
“If you look at the year in question, 2024/25, the reported profit was a result of the sale of balance sheet assets, such as SAA’s London Heathrow slots. In the previous year, 2023/24, there was a gain as a result of the expiration of debt accumulated, pre-business rescue, from unflown tickets,” explained Kunene.
The AGSA said the airline’s reliance on once-off items is not sustainable in the long-term and does not reflect the entity’s true underlying operating performance.
Will SAA recover?
The AGSA found that SAA remains a going concern but with material uncertainties, meaning the airline could face liquidity or solvency challenges within the next 12 months if conditions do not improve.
“We assess the ability of a company to operate within the foreseeable future, referred to as ‘going concern’, and the standard measurement is 12 months. The AGSA made an assessment and SAA is a going concern with material uncertainties. This means there are significant doubts about the airline’s financial position due to specific events and conditions. In the assessment, this means that the entity may close within the next 12 months, becoming insolvent or illiquid,” said Kunene.
The AGSA highlighted several conditions contributing to the assessment:
- Operating loss for the 2025 financial year
- Negative operating cash flow, particularly impacted by leases meant to contribute to operating cash flow but instead listed as investments
- Adverse liquidity ratio indicators
SAA seeks funding
SAA’s Interim CEO Matshela Seshibe told News24 that the airline is suffering from surging operational costs and a significant liquidity squeeze.
External pressures, including blocked funds and high jet fuel prices driven by geopolitical tensions, have forced the airline to consider scaling back frequencies on its Gaborone and Dar es Salaam routes.
Seshibe indicated that SAA is actively seeking bank funding to bolster its working capital and will approach its shareholder for support should its applications fail.
During the committee meeting, Kunene warned that the AGSA’s negative audit outcome findings for the entity over the past seven consecutive financial years may make it more difficult for the airline to secure funding from lenders to support its cash flow requirements.
SAA in ‘state capture era’
During the committee meeting, Minister of Transport Barbara Creecy stated that the airline’s audit findings relate to its “state capture era” and that criminal investigations linked to that period remain underway.
Creecy explained that, while the airline’s management must be held accountable for the finding of irregular and fruitless and wasteful expenditure, the Department of Transport is prioritising the stabilisation of SAA.
