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[2021] ZASCA 133
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Auditor-General of SA v MEC for Economic Opportunities, Western Cape and Another (671/2020) [2021] ZASCA 133; 2022 (5) SA 44 (SCA) (4 October 2021)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 671/2020
In
the matter between:
AUDITOR-GENERAL
OF SOUTH AFRICA
APPELLANT
and
MEMBER
OF THE EXECUTIVE COUNCIL FOR
ECONOMIC
OPPORTUNITIES, WESTERN CAPE
FIRST RESPONDENT
NATIONAL
TREASURY
SECOND
RESPONDENT
Neutral
citation:
Auditor-General
of SA v MEC for Economic Opportunities, Western Cape and Another
(Case no 671/2020)
[2021] ZASCA 133
(4 October 2021)
Coram:
NAVSA ADP and SALDULKER, VAN DER MERWE, MOLEMELA
and MOTHLE JJA
Heard
:
3 September 2021
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ legal representatives
by email. It has been published
on the Supreme Court of Appeal website and released to SAFLII. The
date and time for hand-down
is deemed to be 09h45 on 4 October 2021.
Summary:
Accounting – expenditure of
department – Modified Cash Standard applicable in terms of
National Treasury instruction
under
s 76
of the
Public Finance
Management Act 1 of 1999
– no principal-agent relationships
between department and payees – payments correctly classified
in financial statements
as transfers.
Administrative
law –
Promotion of Administrative Justice Act 3 of 2000
–
not applicable to exercise of functions of Auditor-General under the
Constitution and the
Public Audit Act 25 of 2004
.
ORDER
On
appeal from:
Western Cape Division of
the High Court, Cape Town (Vos AJ sitting as court of first
instance): judgment reported
sub nom
Member of the Executive Council for Economic
Opportunities, Western Cape v Auditor General of South Africa and
Another
[2020] 3 All SA 524
(WCC);
2021 (1) SA 455
(WCC)
The
appeal is dismissed with costs, including the costs of two counsel.
JUDGMENT
Van
der Merwe JA (Navsa ADP and Saldulker, Molemela and Mothle JJA
concurring)
[1]
The appellant is the Auditor-General of South Africa. The first
respondent is the
Member of the Executive Council (the MEC)
responsible for the Western Cape Provincial Department of
Agriculture (the Department).
The matter concerns the proper
classification, in its financial statements, of payments that the
Department made to Casidra SOC
Limited (Casidra) and the
Deciduous Fruit Producers Trust. Casidra is a business enterprise
wholly owned by the Western Cape Provincial
Government.
The
Deciduous Fruit
Producers Trust is an entity established by the
deciduous fruit industry for the purpose, inter alia, of
transformation of the
industry. It carried out the activities
relevant to this matter through its Hortgro programme and for
convenience I refer to it
as Hortgro.
Background
[2]
As I shall explain, the Auditor-General is constitutionally and
statutorily obliged
to audit and report on, inter alia, the financial
statements of all provincial departments. The
appeal is about the audits of the Auditor-General of the financial
statements of the Department for the financial year ending on
31
March 2017 (the 2017 financial statements) and the year ending on
31 March 2018 (the 2018 financial statements). The
Auditor-General
determined that the payments that the Department had
made to Casidra and Hortgro during these financial years, were
wrongly classified
as transfers. With reliance on the Modified Cash
Standard, issued by the Accountant General in the National Treasury
on 1 April
2013 (the Standard), the Auditor-General concluded that
the Department’s financial statements should have reflected
these
amounts as payments for goods and services. The reasoning that
underpinned this conclusion was that Casidra and Hortgro had received
the respective payments as agents of the Department.
[3]
The Auditor-General accordingly issued qualified audit reports in
respect of the 2017
and 2018 financial statements. The audit report
in respect of the 2017 financial statements stated that the
Department
did not account for payments to ‘implementing
agents’ in accordance with the Standard, that consequently
transfers
were overstated by R274 340 625 and that a
corresponding amount was thus understated or not disclosed. According
to the
audit report this amount, therefore, constituted irregular
expenditure. The amount of R259 191 000
was, in identical terms, regarded as irregular expenditure in the
audit report in respect of the 2018 financial statements. In
terms of
the Public Finance Management Act 1 of 1999 (the PFMA), irregular
expenditure, in essence, is expenditure incurred in
contravention of
applicable legislation. It follows that the qualification of the
audit reports was not a trifling matter and that
the Department and
the MEC were rightly concerned.
[4]
The MEC approached the Western Cape Division of the High Court for
the review and
setting aside of the relevant findings in both the
abovementioned audit reports (the findings). In addition to the
Auditor-General,
he cited the National Treasury as a respondent in
the application. The National Treasury was established in terms of s
5 of the
PFMA. The MEC brought the review under the Promotion of
Administrative Justice Act 3 of 2000 (PAJA),
alternatively,
the principle of legality. The MEC’s case rested
on two main grounds. The first was that the Standard was not legally
binding.
Secondly, he contended that, in any event, the Department
had complied with the Standard. The
foundation of the second contention was that the legal relationship
between the Department and Casidra and Hortgro respectively,
were not
principal-agent relationships within the meaning of the Standard.
[5]
Despite the fact that the Standard had emanated from the National
Treasury, it did
not participate in the proceedings. As will become
apparent shortly, this was unfortunate and not in keeping with the
duty of an
organ of state that is a party to legal proceedings, to
assist the court by providing it with material information at its
disposal.
In the event, the High Court (Vos AJ) found for the
MEC on both grounds and granted the relief sought.
[1]
Despite its considered decision not to participate in the
proceedings, the National Treasury applied for leave to appeal, as
did
the Auditor-General. The court a quo refused the application of
the National Treasury but granted leave to the Auditor-General to
appeal to this Court.
Standard
binding
[6]
Section 216(1) of the Constitution of the Republic of South Africa,
1996 provides:
‘
National
legislation must establish a national treasury and prescribe measures
to ensure both transparency and expenditure control
in each sphere of
government, by introducing—
(a)
generally recognised accounting
practice;
(b)
uniform expenditure
classifications; and
(c)
uniform treasury norms and
standards.’
The
national legislation envisaged by s 216(1) is the PFMA.
[7]
In terms of s 87 of the PFMA, the Minister of Finance established a
juristic person
known as the Accounting Standards Board (the ASB).
Section 89(1) of the PFMA provides that the ASB must set standards of
generally
recognised accounting practice, as required by s 216(1)
(a)
of the Constitution, for the annual financial statements of
organs of state. In terms of s 91(1)
(b)
of
the PFMA, the Minister of Finance may, after consulting the
Auditor-General, make regulations
prescribing the standards set by the ASB under s 89(1). It is common
cause that, despite a lengthy passage of time encompassing
several
audit periods, the ASB has not yet set standards of generally
recognised accounting practice which are applicable to the
issues in
this case. However, in terms of s 76 of the PFMA, the National
Treasury may make regulations or issue instructions
applicable to
departments or to all institutions to which the PFMA applies. On what
was presented to it, the court a quo held that
the Standard had not
been afforded legally binding status under s 76.
[8]
Subsequent to the judgment of the court a quo, however, the
Auditor-General discovered
that the National Treasury had indeed
issued an instruction under s 76 of the PFMA that rendered the
Standard legally binding
on all departments and any other entity that
is required by the National Treasury or the law to comply with the
Standard. This
took place on 26 March 2015, when a
duly authorised official of the National Treasury issued National
Treasury Instruction No 6
of 2014/2015. The Auditor-General applied
for leave to adduce further evidence on appeal by, in essence,
placing the instruction
before the court. The MEC, properly in the
circumstances, did not oppose the application and it was duly granted
at the commencement
of the hearing of the appeal. In consequence,
the MEC accepted before us that the Department had at all
relevant times been
bound in law to comply with the Standard in the
compilation of its financial statements.
[9]
The Standard is a comprehensive document. The chapter ‘Expenditure’
sets
out the categories of expenditure of a department. These are:
current payments, comprising compensation of employees, goods and
services and interest and rent on land; transfers and subsidies;
payments for capital assets; and payments for financial assets.
It
provides that the Department shall recognise expenditure in its
financial statements on the date of payment. It proceeds to
stipulate
the particulars that a department shall disclose with regards to each
category of expenditure.
Principal-agent
relationships?
[10]
As I have said, the issue is whether the Department properly
categorised the payments to Casidra and
Hortgro as transfers, rather
than as payments for goods and services, as contended for by the
Auditor-General. On the facts of
this case, the contention of the
Auditor-General is wholly dependent on the existence of
principal-agent relationships between
the Department and Casidra and
Hortgro respectively, within the meaning of the Standard. The
Standard deals with this subject in
the chapter ‘Accounting by
Principals and Agents’.
[11]
The term ‘agency’ has a variety of meanings, depending on
the context in which it is used.
It may, for instance, be used to
denote a contract of mandate. There a person (the principal)
contracts with another (the
agent) to perform some task, such as to
find a buyer for the principal’s property or to represent the
principal in legal
proceedings. A
mandate is
a contract by which the principal and the agent create
rights and obligations only between them. It does not involve legal
relationships
with third parties. See 1
Lawsa
3 ed para
125.
[12]
The expression is particularly used in respect of the phenomenon of
representation. In such a case,
a person (the agent) is authorised by
another (the principal) to create, alter or discharge legal
relationships between the principal
and third parties. The essential
characteristic of agency in the form of representation is that
authority is conferred on the agent
to bind the principal to third
parties. See J M Silke
De Villiers and Macintosh
,
The
Law of Agency in South Africa,
3 ed (1981) at 38-39.
[13]
Counsel for the Auditor-General conceded that the Standard’s
chapter ‘Accounting by
Principals and Agents’
envisages principal-agent relationships in the form of
representation. That this contention was correct,
is amply borne out
by the provisions of this chapter of the Standard. I content myself
with reference to the following:
‘
Definitions
.06
The following terms are used in this Chapter with the meanings
specified:
An
agent
is an entity that has been directed by another entity (a
principal), through a binding arrangement, to undertake transactions
with
third parties on behalf of the principal and for the benefit of
the principal.
A
principal
is an entity that directs another entity (an agent),
through a binding arrangement, to undertake transactions with third
parties
on its behalf and for its own benefit.
A
principal-agent arrangement
results from a binding arrangement
in which one entity (an agent), undertakes transactions with third
parties on behalf, and for
the benefit of, another entity (the
principal).’
.
. . .
.10
When a department directs another entity to undertake an activity on
its behalf, it must
consider whether it is a party to a
principal-agent arrangement. The definition of a principal-agent
arrangement refers to an entity
acting on behalf of another entity in
relation to transaction with third parties. In the absence of
transactions with third parties,
the arrangement is not a
principal-agent arrangement, and the entity then acts in another
capacity rather than as an agent. . .
.
…
.11
“
Transactions with third parties”
in the context
of this Chapter includes the execution of a specific transaction with
a third party, e.g. a sale or purchase transaction,
but it also
includes interactions with third parties, e.g. when an agent is able
to negotiate with third parties on the principal’s
behalf. The
nature of the transactions with third parties is linked to the type
of activities carried out by the agent in accordance
with the binding
arrangement. These activities could include the agent transacting
with third parties for the procurement or disposal
of resources, or
the receipt of resources from a third party on behalf of the
principal.’
[14]
The Department made the payments in question in terms of five written
contracts. They are: (a) the
contract in respect of the Vegetable
Industry Project (the Vegetable Project), entered into
between the Department and
Casidra on 9 May 2016, for payment of the
amount of R10 million; (b) the contract in respect of
23 LandCare Projects
(the LandCare Projects), entered into
between the Department and Casidra on 30 June 2016 for payment of the
amount of R4 106 000;
(c) the contract in respect of the
Flood Relief Project 2013-2014 (the Flood Relief Project), entered
into between the Department
and Casidra on 30 May 2016 for payment of
the amount of R40 852 000; (d) the contract in respect of
the Drought Relief
Scheme 2015/16 (the Drought Relief Scheme),
entered into between the Department and Casidra on 29 March 2017
for payment
of the amount of R31 689 000; and (e) the
contract in respect of the Fruit Industry Project (the Fruit
Project), entered
into between the Department and Hortgro on 9 May
2016 for payment of the amount of R19 020 000.
[15]
The Vegetable Project was aimed at increasing the production of
vegetables, particularly by small-scale
farmers. The purpose of the
LandCare Projects included the clearing of alien vegetation, fencing
and river protection, as well
as awareness projects. The payment to
Casidra in respect of the Flood Relief Project was for purposes of
providing relief to farmers
who had been the victims of floods in the
Western Cape. Similarly, the Department allocated funds to Casidra to
provide relief
to farmers affected by drought within the province
under the Drought Relief Scheme. The purpose of the Fruit Project was
to enhance
the capacity and production of small-scale fruit farmers.
[16]
The project that each contract related to, was delineated in a
business plan, including a budget. The
business plans were attached
to the contracts and each contract expressly incorporated the
relevant business plan attached thereto.
Thus, the question is
whether on a proper interpretation of the contracts (incorporating
the business plans) the Department authorised
Casidra and Hortgro to
create legal relationships between the Department and third parties.
[17]
The preamble of each contract recorded that the parties thereto had
reached an agreement in terms of
which the Department would allocate
a specified amount (the funds) to ‘the Beneficiary’
(either Casidra or Hortgro)
towards the relevant project. Apart from
these particulars, the terms of the five contracts were virtually
identical. For convenience,
I set out the material operative terms of
the Vegetable Project contract with Casidra.
[18]
Clause 3 of the contract provided that the Department would pay the
funds to Casidra in four instalments
on specified dates. Apart from
the first instalment, the further payments would be subject to
progress reports by Casidra (in terms
of clause 5) to the
satisfaction of the Department. Clause 4 circumscribed Casidra’s
obligations. In essence, they related
to the utilisation of the
funds, the keeping of proper records and reporting to the Department.
Clause 4.5 obliged Casidra to utilise
the funds only for the purpose
for which they had been approved as detailed in the business plan. In
terms of clause 4.6, Casidra
was obliged to allocate the fund only in
accordance with the business plan. Casidra was obliged by clause
4.10 to ‘maintain
complete documentary evidence of all and any
payments’ from the funds. Clause 4.11 obliged Casidra to
furnish the Department
with a certified income and expenditure
statement indicating the total allocation and total expenditure in
respect of the project,
within two months of the completion thereof.
And in terms of clause 4.12 Casidra was obliged to adhere to the
provisions of clause
5.
[19]
Clause 5 was headed ‘Reporting, Monitoring and Evaluation’.
It provided the Department
with rights of access to Casidra’s
records. In terms of this clause Casidra had to submit quarterly
progress reports as well
as a final progress report to the
Department. The final progress report had to be accompanied by a
report by senior management
in respect of, inter alia:
‘
.
. .
5.5.1
The extent to which the Beneficiary achieved its objectives for the
financial year concerned;
5.5.2
Appropriate performance information regarding the economical,
effective and appropriate utilisation of the
Funds. . . .’
[20]
All the projects and business plans were aimed at achieving the
objects of the Department in terms
of its approved programmes.
Because the Department paid public funds to Casidra and Hortgro for
these purposes, it was, of course,
obliged to have proper oversight
over the implementation of the business plans. But in terms of the
contracts, Casidra and Hortgro,
respectively, undertook the
obligations to execute the business plans, by providing goods and
services to the beneficiaries of
the projects, that is the selected
or qualifying farmers. Beneficiaries were selected by the relevant
Commodity Project Allocation
Committee (CPAC). The CPAC terms of
reference provided that the Department and Casidra or Hortgro would
each have two representatives
on it, but without a vote.
[21]
In some instances the business plans provided that Casidra or Hortgro
would appoint service providers
to supply goods and services to the
farmers. In respect of the LandCare Projects, for instance, Casidra
would enter into contracts
for the removal of alien vegetation and
the erection of fences. The Flood Relief Project business plan
provided that Casidra was
responsible for the appointment of
professional service providers, such as engineers, for the various
project components. The bulk
thereof was engineering works. It
also provided that once both Casidra and the Department were
satisfied with
the specifications for infrastructure projects,
‘approval will be granted and Casidra will award the tender to
the successful
bidder to commence work’. In terms of the
business plan, the Drought Relief Scheme would be operated as
follows. Casidra
would issue vouchers to qualifying farmers, which
would enable them to purchase fodder from service providers appointed
by Casidra.
In all these instances Casidra would make payment to the
service provider but only after the Department had verified the
relevant
documentation or invoices and approved payment in terms
thereof by the Department.
[22]
In answering the question that I have posed, substance must prevail
over form and proper regard must
be had to context. Labels used by
the parties are not decisive. Therefore, nothing turns on the fact:
that each contract was entitled
‘Transfer Payment Agreement’;
that the LandCare Projects and Fruit Project business plans referred
to Casidra and Hortgro
respectively as ‘implementing agents’
(the Flood Relief Project and Drought Relief Scheme business plans
classified
Casidra as ‘external stakeholder’); or that
the Vegetable Project business plan stated:
‘
.
. . (CASIDRA) will provide project management function and the
delivery of approved projects across the Province . . . In addition,
CASIDRA will provide the following services to the Vegetable CPAC:
.
. .
b)
Management procurement on behalf of the Department in line of
the PFMA.’ (Whatever this may mean.)
[23]
It is clear from what I have said that the terms of the contracts in
no way authorised Casidra or Hortgro
to bind the Department to third
parties. On the contrary, they appeared to have been carefully framed
to avoid saddling the Department
with liabilities to third parties.
The same applies to the business plan provisions. They also envisaged
that Casidra and
Hortgro would contract with beneficiaries and
service providers in their own names and not as the authorised
representatives of
the Departments. The Department’s approval
of payments to service providers, formed part of its oversight
function and did
not involve it as a party to a contract with a
service provider.
[24]
Thus, Casidra and Hortgro were not authorised to and did not create
legal relationships between the
Department and the beneficiaries or
service providers involved in the projects. Neither the beneficiaries
nor the service providers
had the right to sue the Department. It
follows that the findings were based on a material error of law. The
error of law would
vitiate the findings under the principle of
legality and the provisions of PAJA, if the latter were applicable.
In the result,
it is unnecessary to deal with the other review
grounds relied upon by the MEC. It follows that the appeal must fail,
irrespective
of whether PAJA was applicable or not.
PAJA
applicable?
[25]
However, as the court a quo expressed the considered view that the
findings had constituted administrative
action under PAJA, I deem it
necessary to address this issue. Also, the question is of some
importance to the Auditor-General who
argued that PAJA was not
applicable. For the reasons that follow, I agree with this
submission.
[26]
In
Minister of Home Affairs and Another v Public Protector
[2018]
ZASCA 15
;
[2018] 2 All SA 311
(SCA);
2018 (3) SA 380
(SCA) para 37,
this Court was confronted with the question whether a decision of the
Public Protector was administrative action
under PAJA. It had regard
to the relevant provisions of the Constitution, the
Public Protector
Act 23 of 1994
and PAJA and concluded:
‘
First,
the Office of the Public Protector is a unique institution designed
to strengthen constitutional democracy. It does not fit
into the
institutions of public administration but stands apart from them.
Secondly, it is a purpose-built watch-dog that is independent
and
answerable not to the executive branch of government but to the
National Assembly. Thirdly, although the
State Liability Act 20 of
1957
applies to the Office of the Public Protector to enable it to
sue and be sued, it is not a department of state and is functionally
separate from the state administration: it is only an organ of state
because it exercises constitutional powers and other statutory
powers
of a public nature. Fourthly, its function is not to administer but
to investigate, report on and remedy maladministration.
Fifthly, the
Public Protector is given broad discretionary powers as to what
complaints to accept, what allegations of maladministration
to
investigate, how to investigate them and what remedial action to
order – as close as one can get to a free hand to fulfil
the
mandate of the Constitution. These factors point away from decisions
of the Public Protector being of an administrative nature,
and hence
constituting administrative action. That being so, the PAJA does not
apply to the review of exercises of power by the
Public Protector in
terms of s 182 of the Constitution and
s 6
of the
Public Protector
Act. That
means that the principle of legality applies to the review
of the decisions in issue in this case.’
[27]
The court a quo attempted to distinguish the decisions of the Public
Protector from that of the Auditor-General.
It said:
‘
I
think that the AGSA differs from the Public Protector, because the
AGSA fits squarely into the institutions of public administration.
The AGSA’s function is indeed to administer, by auditing the
accounts and financial statements of the relevant organs of
state.
The AGSA does not have broad discretionary powers as to what work he
undertakes. He is obliged to audit and report on the
accounts,
financial statements and financial management of the departments and
entities listed in section 108(1) of the Constitution.’
[28]
I do not think that the distinction is valid. The office of the
Auditor-General is one of the institutions
established under Chapter
9 of the Constitution to ‘strengthen constitutional democracy
in the Republic’. Section 181(2)
of the Constitution provides:
‘
These
institutions are independent, and subject only to the Constitution
and the law, and they must be impartial and must exercise
their
powers and perform their functions without fear, favour or
prejudice.’
In
terms of s 181(3) other organs of state are obliged to assist and
protect the Chapter 9 institutions to ensure their independence,
impartiality, dignity and effectiveness. Section 181(4)
prohibits any interference with the functioning of these
institutions.
They are, in terms of s 181(5), accountable only to the
National Assembly.
[29]
Section 188 of the Constitution deals specifically with the
Auditor-General. It
provides:
‘
(1)
The Auditor-General must audit and report on the accounts, financial
statements and financial
management of—
(a)
all national and provincial
state departments and administrations;
(b)
all municipalities; and
(c)
any other institution or
accounting entity required by national or provincial legislation to
be audited by the Auditor-General.
(2)
In addition to the duties prescribed in subsection (1), and subject
to any legislation, the Auditor-General
may audit and report on the
accounts, financial statements and financial management of—
(a)
any institution funded from the
National Revenue Fund or a Provincial Revenue Fund or by a
municipality; or
(b)
any institution that is
authorised in terms of any law to receive money for a public purpose.
(3)
The Auditor-General must submit audit reports to any legislature that
has a direct interest in the audit,
and to any other authority
prescribed by national legislation. All reports must be made public.
(4)
The Auditor-General has the additional powers and functions
prescribed by national legislation.’
[30]
The national legislation envisaged by s 188(4) is the
Public Audit
Act 25 of 2004
.
Section 3
thereof provides:
‘
Constitutional
and legal status
.—The
AuditorGeneral—
(a)
is the supreme audit institution
of the Republic;
(b)
has full legal capacity, is
independent and is subject only to the Constitution and the law,
including this Act;
(c)
must be impartial and must
exercise the powers and perform the functions of office without fear,
favour
or prejudice; and
(d)
is accountable to the National
Assembly.’
The
independence of the Auditor-General could hardly have been expressed
in clearer terms.
[31]
In terms of
s 4(1)
of the
Public Audit Act, the
Auditor-General must
audit and report on the accounts, financial statements and financial
management of the organs of state listed
therein and any other
institution or accounting entity required by legislation to be
audited by the Auditor-General.
Section 4(2)
provides that the
Auditor-General must audit and report on certain consolidated
financial statements of the national government,
provincial
governments and municipalities. For these purposes the provisions of
ss 15
and
16
afford the Auditor-General extensive powers to obtain
access to the documents and assets of an auditee.
Section 20(2)
of
the
Public Audit Act deals
with the content of audit reports. It
provides that an audit report must reflect at least an opinion or
conclusion on:
‘
(a)
the financial statements of the auditee in accordance with the
applicable financial reporting
framework
and legislation;
(b)
compliance with any applicable
legislation relating to financial matters, financial management and
other related matters; and
(c)
reported performance of the
auditee against its predetermined objectives.’
[32]
These provisions demonstrate that, not unlike the judiciary, the
Auditor-General is subject only to the Constitution
and the law. Its
function is not to administer or to implement the policies of the
executive, but to independently audit and report
on the use of
public funds. The Auditor-General acts, so to speak, as the
public accounts watchdog. This function
does not involve
actions of an administrative nature. Unlike the Public Protector, the
Auditor-General does not have a wide discretion
to decide whether to
audit and report or not. But that does not detract from her
independence and does not, in this context, materially
distinguish
her from the Public Protector. In my view the exercise of the
functions of the Auditor-General in terms of the
Constitution and the
Public Audit Act does
not constitute administrative action in terms
of PAJA, but is subject to review under the principles that stem from
the rule of
law.
Conclusion
[33]
To sum up, the findings fall to be reviewed and set aside on the
basis that they were founded on a material error
of law. On this
basis, the order of the court a quo was correct and the appeal must
fail.
[34]
Finally there are two aspects that I am constrained to mention.
First, it appeared from the evidence that Casidra
and Hortgro did not
charge fees in the normal sense for the implementation of the
projects. However, they included the costs of
administration of the
projects in the business plan budgets. We do not know from the
evidence how exactly this was done or what
amounts were involved. To
pay the cost of administration of a project to Casidra and Hortgro,
may possibly amount to payment for
services. As this was not
addressed in the affidavits, I do no more than raise a caveat for
future consideration. Secondly, it
emerged during argument that the
Auditor-General is concerned about procurement procedures down the
line, as it were. This was
not alluded to in the papers and any
legitimate concern in this regard may be addressed by appropriate
measures under the relevant
legislation.
[35]
The appeal is dismissed with costs, including the costs of two
counsel.
C H G VAN DER MERWE
JUDGE OF APPEAL
Appearances:
For
appellant:
M A
Chohan SC (with him L Kutumela)
Instructed
by:
Fairbridges
Wertheim Becker Attorneys, Johannesburg
Phatshoane
Henney Inc., Bloemfontein
For
1
st
respondent:
G
M Budlender SC (with him C Tabata)
Instructed
by:
State
Attorney, Cape Town
State
Attorney, Bloemfontein
[1]
‘
IT
IS ORDERED:
1.
That the following findings of the First Respondent in his audit
report on the financial statements of the Western Cape
Department of Agriculture (“the Department”) for the
year ending 31 March 2017 are reviewed and set aside:
1.1
The qualification of his opinion that the financial statements
present fairly, in all material respects, the financial position
of
the Department as at 31 March 2017 and its financial performance and
cashflows for the year so ended;
1.2
The finding that the Department did not account for payments made to
implementing agents in accordance with the requirements
of the
Modified Cash Standard;
1.3
The finding that the Department incorrectly budgeted and accounted
for these payments as transfers and subsidies instead of
either
expenditure for capital assets or goods and services;
1.4
The finding that the Department irregularly entered into contracts
with implementing agents without applying Treasury Regulations.
2.
That the following findings of the first respondent in his audit
report on the financial statements of the Department for the
year
ended 31 March 2018 are reviewed and set aside:
2.1.
The qualification of his opinion that the financial statements
present fairly, in all material respects, the financial position
of
the Department as at 31 March 2018 and its financial performance and
cashflows for the year so ended;
2.2The
finding that the Department did not account for payments made to
implementing agents in accordance with the requirements
of the
Modified Cash Standard;
2.3
The finding that the Department incorrectly budgeted and accounted
for these payments as transfers and subsidies instead of
either
expenditure for capital assets or goods and services;
2.4
The finding that principal-agent relationships were not disclosed;
2.5
The finding that the Department irregularly entered into contracts
with implementing agents without applying Treasury Regulations.
3.
That the Applicant shall pay the wasted costs of 6 February 2020,
which shall include the costs of senior counsel.
4.
That, save for the aforegoing, the first respondent is directed to
pay the costs of this application which shall include the
costs of
senior counsel.’