SMD

Annual Report 2023/2024

The observation of the Committee regarding Seda’s unqualified audit outcome with material findings on performance information is correct given that Seda has not obtained a clean audit on performance information. Seda is, however, on a journey to improve this outcome. Through various interventions, the 2022/23 financial year outcome of the performance information audit showed an improvement from adverse (2021/22) to a qualified opinion. Seda is currently rolling out a Client Information and Operations system, as well as a reporting system to resolve the challenges that led to the performance information audit findings. The system went live on the third quarter of 2023/24 financial year and the expectation is that Seda will not have negative performance information related findings by the end of 2024/25 financial year as the performance management system will be fully operational. In 2022/23 financial year, the sefa received an unqualified audit outcome on both the financial statements and the performance audit. In 2022/23, sefa had a non-compliance matter that was raised due to sefa not having a special resolution (adopted by the

Matters raised by the Portfolio Committee Department’s response

shareholders within the previous two years as required by section 45(3)(a)(ii) of the Companies Act 71 of 2008) for loans that were provided to related companies. A non-compliance matter was also raised due to audit corrections that were posted after the draft financial statements were issued to the external auditors. Section 55(1) (b) of the PFMA (1999) requires that draft annual financial statements are issued to the external auditors within two months after the financial year end. These corrections were necessary to bring in the correct amounts on the Expected Credit Loss provision. sefa incurred a loss before tax in both 2022/23 financial years. The loss before tax was R223 million in 2023 and R171 million in 2022.

The Portfolio Committee’s acknowledgement of the Department’s improvement in audit outcomes is received with appreciation. It should however be noted that the Department was receiving its second unqualified audit opinion with no material findings and that the first clean audit opinion on performance information was obtained as an outcome of the 2020/21 financial year. Implementation of the audit action plan that is monitored on a quarterly basis enabled the team to curtail repeat findings. The Department continues to diligently work towards maintaining its audit outcome, including improving on the non-material findings.

The Committee further notes agencies performance in this regard particularly sefa that has regressed from

Industrial Development Corporation (IDC) announced that sefa is one of its loss-making subsidiaries, having lost R120 million in the financial year under review.

Matters Raised by the Portfolio Committee and How has the Department Addressed these Matters: Department in attaining two consecutive clean audit opinions. The Department received its first unqualified audit opinion with no significant findings, also known as a clean audit opinion, indicating that both the submitted Annual Financial Statements (AFS) and performance information were free of substantial misstatements. This audit opinion is an improvement over the audit opinion for the 2021/22 auditing period, when the Department received a clean audit opinion only on performance information, while the AFS were unqualified with findings. This is a notable achievement. a clean audit to an unqualified audit outcome with findings on compliance, as well as Seda outcomes that remained stagnant as it achieved an unqualified audit outcome with material findings on performance information. Agencies ascribe this performance to the uncertainty caused by the prospective merger. Meanwhile, the The Committee acknowledges and applauds the Portfolio’s overall performance, particularly the

According to IDC, the loss is a 222 percent fall from a net profit of R98 million in 2021/22 due to large impairments, which have resulted in a decrease in lending activity.

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Department of Small Business Development • GOVERNANCE • Part C