Black-owned firms to lose out on lucrative work
Black-owned accounting firms SekelaXabiso and Entsika will soon have to do without the lucrative Transnet internal audit contract after the parastatal decided to insource the function.
A source with intimate knowledge of government’s procurement processes said the move by Transnet effectively means the two companies will lose millions in revenue when their current contracts lapse in less than three years.
“Should this happen, these two firms will have their cash flow heavily impacted and might be forced to retrench highly skilled seasoned black CAs and other professionals,” the source said.
“To compound their problems, these black-owned firms are virtually excluded from getting any access to business from many large private sector corporations in South Africa.” A search of SekelaXabiso and Entsika’s websites shows that the firms are heavily reliant on the public sector for work.
Following a review of the then Transnet group audit services in the early 2000s, Transnet decided to disband its in-house internal audit department and outsource the function.
One of the reasons advanced at the time was that the move would provide local black firms with the opportunity to partner with one of the big four firms and gain expertise and knowledge on the latest internal audit frameworks and methodologies in order to secure contracts with Transnet.
Transnet spokesperson Ayanda Shezi said the company’s internal audit sourcing strategy was “revised” in 2019 after being fully outsourced since 2004 and the new strategy was approved by Transnet’s audit committee.
“The decision to revise the strategy was informed by a consideration of the pros and cons of outsourcing the service. It also came in the wake of revelations presented before the ongoing Zondo commission of inquiry into state capture, which called for improved governance and controls as well as reduced reliance on third parties,” Shezi said.
The source said: “To use the ongoing Zondo commission as one of the pretexts to shut out black firms is another assault on the competence and integrity of black professionals.” Entsika could not be drawn into details of the Transnet’s decision.
“All clients, including the government, are extremely important to Entsika. Entsika continues to provide internal auditing services to Transnet. As a seasoned provider of professional services, Entsika encourages all third-party client-related issues to be directed to the client, in this case Transnet,” the company said.
SekelaXabiso will be hit particularly hard by Transnet’s decision as the firm has been part of the Transnet internal audit since 2005 as subcontractors to EY Africa.
The company could not be reached for comment.
