Abstract
The study investigates governance challenges in South Africa’s state-owned entities (SOEs) by assessing disclosures provided in SOEs’ annual reports and financial statements regarding fraud, unauthorised expenditure, irregular expenditure and fruitless and wasteful expenditure between 2022 and 2024, in line with section 55 of the Public Finance Management Act (PFMA) No. 1 of 1999. The primary aim of this study is to evaluate how SOEs disclose compliance with selected sections in Section 55 of the PFMA, assess quality, completeness and accountability of financial misconduct disclosures and compare disclosure practices relating to types of financial misconduct across five selected SOEs.
Adopting an interpretivist research philosophy, the study utilises qualitative methods through a content analysis of the annual reports and financial statements of the sampled SOEs. A cross- sectional research design is applied to capture the disclosure practices of SOEs over a three-year period. This approach allows for a detailed understanding of how SOEs interpret and report on their statutory requirements, providing insight into transparency and accountability mechanisms in these SOEs.
The analysis revealed that, although the selected SOEs demonstrated partial compliance with Section 55 of the PFMA, significant governance and reporting shortcomings persist. While most entities maintained records and produced financial statements, none provided evidence of submitting these reports within the required timeframes, and one entity had not produced its 2024 reports by the cut-off date of 10 October 2025. The financial statements frequently lacked a fair and accurate reflection of each SOE’s financial position and performance. Disclosures related to financial misconduct were particularly weak and inconsistent, with irregular, fruitless and wasteful expenditure reported more often than cases of fraud or unauthorised expenditure, which were largely omitted. Moreover, critical information such as the causes of financial misconduct, the amounts involved, recovery processes and disciplinary or corrective measures was seldom disclosed. These shortcomings suggest that compliance among SOEs remains superficial and procedural rather than substantive, undermining accountability, transparency and the overall integrity of financial reporting.
Overall, the study reveals persistent gaps in governance, accountability and compliance across South African SOEs. The findings indicate that despite the Auditor General of South Africa’s (AGSA’s) monitoring and repeated calls for compliance, actual compliance with section 55 remains inconsistent and inadequate. The findings reflect the need for stronger enforcement mechanisms, improved reporting frameworks and enhanced oversight to ensure transparency and accountability in South African SOEs.