PwC received R69m from 'unlawfully' extended SAA audit contract

16 July 2020 - 17:08 By Nomahlubi Jordaan
The Zondo commission has heard how PwC received more than R60m from a contract that was 'unlawfully' extended from one to five years.
The Zondo commission has heard how PwC received more than R60m from a contract that was 'unlawfully' extended from one to five years.
Image: Alaister Russell

The commission of inquiry into state capture on Thursday heard that PwC received more than R60m from a contract that was “unlawfully” extended from one to five years.

The company was appointed to audit SAA for a year between 2011 and 2012.

However, it emerged on Thursday that the company provided its services beyond the period stipulated in the contract.

PwC auditor Pule Mothibe told the commission that he understood the contract to have been for five years and not a year.

“It is important to note that companies don’t change auditors annually. It is not  economically viable to respond to a tender of this magnitude if it is only for a year.”

Mothibe explained that it would be disruptive for a client to engage new auditors every year.

Commission chairperson deputy chief justice Raymond Zondo told Mothibe that irrespective of whether he found it viable or not for a company to acquire service from an audit firm for a short period, the contract was for one year. Mothibe agreed.

“Why did PwC bid for one year?” asked evidence leader Kate Hofmeyr.

“Our understanding was that it would be for five years,” Mothibe said.

“How would a person form a view that the audit was for five years if the contract stipulates that it would be for a year?” Zondo asked.

“We have not seen where an audit is for one year. An audit company would not respond to audit proposal if it is only for one year,” Mothibe said.

“To say PwC was appointed for five years could not be on the basis of a contract. The letter of appointment is clear,” replied Zondo.

“What I would like to probe is how your team formed this understanding that it was for five years,” Hofmeyr said.

She referred Mothibe to a decision of the bid adjudication committee which recommended a tender of R16m.

“That was my understanding, that we were appointed for a period longer than a year,” Mothibe said.

The commission heard that while the contract PwC signed was for one year, the company continued to do work for five years. The company received R69m for the services it rendered.

“The appointment of PWC for five [years] constituted irregular expenditure,” Hofmeyr said. “The request for proposals said one year. It did not say five years.

“You ought to have paid some attention to whether you were performing these duties under lawful appointment. When you continue to do the work for a longer period, it must be irregular. Your competitors must feel aggrieved.”

Mothibe maintained that in his experience, he had never seen a company put out an audit tender for one year.

“We took comfort in that the office of the AG gave concurrence for the appointment. Our appointment was confirmed at an AGM,” Mothibe said.


X