CEO reassures project funders
TCTA is a sound business that remains able to meet its financial obligations despite a qualified audit opinion that the Auditor-General (A-G) issued with respect to its 2018/19 financial statements, says CEO Percy Sechemane.
“TCTA remains to be a capable, well-supported water-sector institution, with a vital capability to raise funding,” he said, speaking at breakfast with project funders at a recent breakfast in Sandton on 13 March. The event was organised to brief them on the state of TCTA. Mr Sechemane highlighted that this was the first qualified audit that TCTA had received since its inception in 1986. Further, it was the first time that the office of the A-G performed a full audit on the organisation. Previously, private audit firms did the job.
There are two principal issues that influenced the negative audit outcome. These include the discrepancies between TCTA’s financials and the audit evidence in respect of Acid Mine Drainage receivables and capital commitments that were rectified too late in the assessment process.
The other issue was the absence of timeous, sufficient and appropriate audit evidence to substantiate the provision for compensating impacted persons the Lesotho Highlands Development Authority made in Lesotho. The compensation allocation is reflected in TCTA’s financials.
Mr Sechemane reassured the funders that TCTA remained a soundly run stateowned entity (SOE). “After the release of the audited (financial statements, ratings agency) Moody’s published a note affirming our credit ratings, thus indicated no material impact on TCTA’s ability to meet its obligations as a result of the audit,” he said.
Further, it is important to note that the A-G made no finding of corruption or misappropriation of funds. TCTA has drawn lessons from the qualified audit. It will, therefore, roll out measures that will enable it to avert the recurrence o f the mishap.
Mr Sechemane said TCTA would engage the A-G to discuss required actions to avoid a repeat finding on how TCTA accounts for Lesotho Highlands Water Project-related expenditure by third-party entities in Lesotho. “(In addition, we will strengthen) our internal control environment, as well as the institutional arrangements with the Department of Water and Sanitation.”
Another challenge TCTA encountered in the financial year related to revenues. “Our tariff receivables peaked in April 2018 at R2.6bn on the back of financial difficulties at DWS (Department of Water and Sanitation),” said Mr Sechemane. “DWS was persuaded to reprioritise TCTA payments, and the receivables were brought up to date during 2019.”
However, amid the challenges that the 2018/19 financial year wrought, there were several noteworthy highlights. “Despite a challenging economic climate, and much negativity around SOE’s, we secured R6.5bn in loans from commercial banks and started the process to close on a further R4.5bn with (development funding institutions),” said Mr Sechemane.
“We had called for R11bn and received bids totalling about R27bn – a testimony of the faith the markets still have in TCTA.”