Dear Honourable Comrade Godi
I write to you as a follow-up to a letter I wrote to you on June 5 in which I requested that the Standing Committee on Public Accounts (SCOPA), which you chair, should invite South African Airways (SAA) to account for the rot taking place there. My request at the time was prompted by the grilling to which your colleagues subjected Eskom representatives regarding a KPMG report that sheds light into how, among several contracts, the Gupta Tegeta deal was structured.
A lot has happened since then; Brian Molefe and Ben Ngubane have since left their positions as chief executive officer (ceo) and chairperson, respectively. Minister of Public Enterprises Lynne Brown has roped in the Special Investigation Unit (SIU) to further probe Eskom. I see in media reports of two days ago that the Portfolio Committee on Public Enterprises will be holding another inquiry into Eskom next month.
These are welcome developments because ultimately, the majority of South African citizens want to know that the public purse is being utilised for what it is meant for and not to benefit a few. It is however imperative that these probes are not selective. All State Owned Entities (SOEs) with questionable procurement practices must be brought to the various institutions established to oversee the proper functioning of these entities.
In my first letter I had said of the R24bn SAA spend only 2% goes to Black companies. A Soros-funded agency called AfricaCheck has since checked and discovered it is actually 1.7%.
At the time, a snapshot of the corruption happening at SAA was based on an Ernst & Young report which discovered that 60% of the contracts – and it had chosen the longest-running and biggest in value – were corruptly procured. Another forensic audit by Open Water Advanced Risk Solutions has since been undertaken and it too exposes damning corruption in the manner SAA and its subsidiaries operate.
The forensic reports found that:
- In procuring goods, SAA & subsidiaries did not always test the market to obtain the best deal amongst suppliers
- The tender process is prolonged resulting in financial losses. In some instances the tender process took more than 24 months (2 years) from closing date to the award date during which time third party contracts were awarded at higher rates
- Tender processes were not always followed
- Management of documents was of grave concern. Invoices couldn’t be verified and validity and correctness was always a problem
An audit into South African Airways Technical shows that:
- none of the tenders were advertised in the Government Tender Bulletin as per Treasury Regulations
- Bidders didn’t abide to the closing date
- Members of the procurement division continually communicated with bidders after closing date
- Bidders were allowed to amend prices after bids closed
- A Mr Leon Robbertse is cited in the forensic audit report as having manipulated pricing which favoured specific bidders. He’s said to have misled the board by omitting some prices submitted by Air France and misrepresenting the price submitted to the board by R85.6m. It is no surprise to discover that its contract was extended for over 3 years.
- SAAT relies on one person to evaluate tenders – Robbertse.
- Companies whose contracts have long lapsed and are extended and act on a Month to Month Memorandum of Understanding (MOU). These figures are as at 31 August 2015
- Vuzzini Motors. Contract lapsed in August 2012. Extended thereafter to June 2015
- First Garment. Laundry & Lease of uniforms. Contract ended March 2013 & extended to June 2015 on a month-to-month basis. Contract spend R45,304,385.
- BP. Fuel. Contract ended 2015. constant short-term extensions. Contract amount R1.5bn.
- Shell. Fuel. Contract ended 2015. Contract extension 6 months. Contract amount R612m.
- Bidvest. Aircraft interior cleaning. Month to Month. Contract amount R260m.
- Swissport. Ground handling. 2009 – 2014. Contract amount. R847m. Month to Month.
- First Catering. OnBoard catering. 2007 – 2013. Month to Month. Contract spend R62.450m.
- Wings. On Board catering. Evergreen. Ongoing. Contract spend R11,985m
- KWE. Logistics. Contract started in January 2001 and its ongoing. Contract spend R393,120,041, R545,206,513 & R264,941,102
- Air France contract was continuously extended for more than three years – from May 2013 to July 2016
2. Air France Contract for the component repair and pool support
SAAT is a Maintenance Repair Organisation which is contractually obliged to maintain SAA’s aircrafts and that of other airlines like Comair, Rwanda and Air Namibia. The forensic audit says SAAT doesn’t have sufficient spares and had to get into an agreement with another organisation to fulfil this mandate.
The details of how Air France and later the US Aviation AAR Corporation/JM Aviation got this deal read like a mafia story but it wasn’t the first. SAAT had extended a contract for tyres for over 15 years.
- bidders did not comply with timelines and closing date was extended for 25 days
- bidders submitted incomplete bids
- tender process continued for more than a year
- Robbertse omitted Air France pricing figures and misrepresented the pricing by R85.46m
- After the Bid evaluation, rigged as it was, the tender was awarded to Air France for Airbus Fleet, and Israel Aerospace Industries (IAI) for the Boeing fleet. Despite the decision to award the tender jointly, the Decision Record was amended in pen to reflect the successful Boeing fleet to be Air France
- The tender was reopened and this time around, Lufthansa scored the highest score but the SAAT procurement department recommended Air France
- Robbertse had prepared three submissions which showed Lufthansa to have been the successful bidder but Robertse reflected Air France as the successful bidder
- On 6 May 2016, the Board by means of a Round Robin Decision resolved to award the Component Support Services on both the Airbus and Boeing Fleets to Air France
- Three days later at a special board meeting of 9 May 2016 the Board decided to overturn the decision and award the contract to US aviation company AAR Company in a joint venture with JM Aviation, which was hurriedly registered in 2015.
- The decision to award AAR followed a visit to AAR in the US by some senior SAAT executives
- According to the contract with AAR/JM, SAAT had to pay an advanced deposit contrary to Treasury Regulations
Comrade Themba, the details of the corruption at SAA is captured in over 400 pages of the Ernst&Young and Open Water reports. I again implore you to invite the Board of SAA and its executives to explain why people like Robbertse are not in jail, for example. They must explain why they will not deal with the management implicated in this wrong-doing.
In a presentation to the Standing Committee on Finance, SAA’s Chairperson acknowledged that the airline made losses as a result of the corruption in the procurement processes. Each year the citizens of this country are outraged by the billions of taxpayers’ money being poured into SAA and yet the authorities mandated to hold these entities to account, are seemingly not interested in this one. My question to you Comrade Chair is why!