An investigation by the Special Investigating Unit (SIU) into the affairs of state-owned airline SAA has recovered R14m and identified a further R3.4bn that needs to be recouped from companies and individuals who were irregularly awarded contracts.
The investigating body will also be making recommendations for delinquency referrals of the previous board in an effort to clean up the rot that paralysed SAA’s governance systems and liquidated its financial controls.
“We will be making recommendations for delinquency referrals of the previous board members,” the SIU said in a presentation to the standing committee on public accounts (Scopa) in parliament on Tuesday
SAA is among the state-owned enterprises hollowed out during state capture. In January 2020, President Cyril Ramaphosa published a proclamation authorising the SIU to probe the affairs of the embattled airline dating as far back as January 2002.
The national carrier exited business rescue about two years ago, but remained under care and maintenance until September 2021 when it resumed operations. It now flies to a limited number of destinations.
Public enterprises minister Pravin Gordhan has said the government has poured R40bn into SAA over nearly a decade before it went into business rescue in December 2019.
In its update on the SAA probe, the SIU said supply chain management processes were flouted and there were tender irregularities in a number of contracts issued.
Regarding a tyre tender valued at R218m to R375m, the SIU said one former board member had their membership withdrawn and a fine imposed by the SA Institute of Chartered Accountants (Saica) and a criminal referral is possible.
There was a criminal referral of a paint tender worth R19.2m pertaining to allegations of corruption including entities, individuals and former officials.
The SIU said about 10 people could face criminal charges for fraud, corruption and facilitation of corrupt payments over a component support services contract valued at R1.2bn to R1.8bn.
Other investigations were of the procurement of security services (R953m), catering services (R85m), original equipment manufacturer-approved avionic parts (R5m) and the provision of technical spares and components in which SAA paid the supplier “R17m for a part that they previously bought for R8m from a UK-based company”.
In the presentation, the SIU said due to state capture some members of the accounting authority, including ex officio members, “failed in their fiduciary duties to properly manage the financial affairs of the institution”.
“The SIU found that some of the board members benefited from the corrupt payments facilitated by at least two legal firms. These payments are linked to a number of tenders awarded by SAA/SAAT [SA Airways Technical]. All these contributed to the collapse of governance within SAA/SAAT,” the SIU said in the presentation. It is busy drafting an interim presidential report to be submitted to Ramaphosa.
SIU CEO Andy Mothibi said the focus of maladministration and corruption at SAA had been on procurement. “We are looking for more matters to be enrolled as investigations are finalised. We will identify employees who left, so that there is no risk of re-employment ... The possibility of re-employment should not arise because they have caused so much harm. We will be making recommendations for delinquency referrals of the previous board members,” said Mothibi.
SAA CEO Malesela John Lamola said the airline last posted positive financial statements in 2012. “Since then, SAA has had a series of disqualified audits. That speaks to how SAA dwindled to business rescue on December 5 2019,” Lamola said.
He said there were three versions of SAA: the past one (during the state capture era), the current version after business rescue, and the ideal future SAA, which is financially stable and not dependent on the fiscus anymore.
SAA’s version three would be well capitalised and “strong enough to retain market share it lost when it went to business rescue in 2019”, said Lamola, stressing the airline is an organisation in a workshop: “It’s being fixed and rebuilt.”
One of the challenges facing the airline is attracting skilled personnel in finance. “Institutionally, the organisation, in recent times, has become stronger. We have a new board that is more capacitated ... [we also have a] governance and risk committee which is functioning fiercely and efficiently. We report quarterly to the shareholder,” Lamola said.
The new SAA must be able to stand on its own and keep the pride of SA as a national carrier, he said. However, its performance has been affected by the “constrained domestic economy in SA and structural changes to the airline industry” in the country.
SAA now flies 13 aircraft to 12 destinations in regional (African) markets where yields are higher than the domestic market. The company also launched an intercontinental route to Brazil from the Cape Town International Airport. The aim, said Lamola, is to fly to 20 destinations: “We are very careful as to which route we choose. Unless a route is profitable, we don’t initiate it.”
On staff, he said the airline used to have about 4,000 employees. It now has just more than 1,000. Lamola said 37 new pilots were successfully recruited in the past few weeks.
Business Day previously reported that in terms of its approved business rescue plan, only 88 pilots were retained for the “new SAA”. Many of the retrenched pilots have found work locally or abroad.
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