Unbundling
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The Auditor General (AG) of South Africa has revealed the uncertain future of three state-owned entities namely: PetroSA, Necsa and Pelchem – as to whether they will continue to operate.

The AG was briefing the Portfolio Committee on Energy on the Department of Energy and its entities' audit outcomes for 2017/18.

PetroSA is the national oil company, responsible for the extraction of natural gas from offshore fields, while Necsa is mandated to undertake and promote research and development R&D in the field of nuclear energy and radiation sciences and technology.

Pelchem is tasked with manufacturing and supplying commodity and speciality chemicals.

Arising issues

One key concern identified by the AG within PetroSA is debtor's collection periods, which have increased, putting a strain on cash flows. Another concern is the continued weak crude oil prices during the current year.

Regarding Necsa, the AG said its liabilities exceed its assets and adverse liquidity ratios with cash flows have been forecast for the next financial year.

Meanwhile, Pelchem continues to make losses, has adverse solvency and liquidity ratios, and is significantly dependent on Necsa. Read more: Necsa trio struck from court’s urgent role

The Department of Energy received a qualified audit opinion, as the department did not include all irregular expenditure in the notes of the financial statements.

The committee chairperson, Fikile Majola, said the issues identified by the AG should be addressed before Parliament rises.

"What is evident is that the outcomes of the audit opinion reflect deeper problems in the operations of the entities and in their business models," said Majola.

Members of the committee requested that the AG should provide a summary of key elements the committee should concern itself with relating to the entities.

The committee will meet with the department on 26 February.