By Pinky Khoabane
Not so long ago, the South African Airways (SAA), was projected as a company riddled with corruption and maladministration. It was said to be financially unsustainable. Every appearance at Parliament’s Committee on public enterprises is met with headlines of corruption, grilling, and so forth.
It came as a real surprise and shock to read that “good work” was being done at the airline giving impetus to providing “substantial” equity to the carrier http://www.iol.co.za/business-report/companies/saa-will-get-cash-injection-this-year-says-treasury-dg-9030324. This is according to treasury’s outgoing Director General Lungisa Fuzile who gave his last presentation to Parliament’s standing committee on finance before his departure from treasury next week.
Well, in the face of the scathing Ernst & Young forensic report on the weak procurement controls at SAA, which had caused the bulk of its losses, I set out to establish what it is that the director general was talking about in terms of the “good work”.
The rot in SAA’s procurement processes is beyond shocking. The E&Y forensic report found that corruption, described as “weaknesses in the procurement processes”, was rife. More than half of the 48 sampled contracts at SAA and its subsidiaries were “improperly negotiated, poorly contracted or poorly managed,” according to a statement by SAA at the time the draft report was released in 2015.
“A logical deduction must be that if these (many of which are the largest contracts awarded) suffer these weaknesses then the bulk of the smaller contracts will be at least if not worse. Potentially 60 percent of SAA’s total procurement could be in one way or another subject to weak business controls.
“This must lend itself to some idea as to why the airline makes such large losses,” the statement continued.
SAA said its board was studying the report and it would inform the drafting of action plans to correct the weaknesses.
The report was tabled in Parliament and the former and present ministers of finance are aware of these failed procurement processes.
What are the action plans that have turned-around the situation at SAA? If we are to believe commercial media and opposition parties, the airline remains fraught with corruption. If you listen to the Chairperson Dudu Myeni speak, you get a sense that the fraudulent conduct of those in charge of SAA’s procurement persists. Just two days ago media reports said SAA was expected to report financial losses of R5bn.
The newly appointed chief financial officer has been implicated in the national carrier’s cancelled debt restructuring deal with unlicensed BnP Capital. The CFO was allegedly involved in a fraudulent transaction which saw a tender for transaction services being extended to include the sourcing of R15bn funding at a fee of R256million.
The extension of contracts without due process is in fact widespread. A whistleblower who spoke to UnCensored on condition of anonymity said many of the longest and largest contracts had long lapsed and were now open ended and operated on memoranda of understanding (MOUs). The whistleblower cited Bidvest, Kinetsu World Express (KWE), Alpine Butchery as some of the companies whose contracts had expired but remained as suppliers. SAA spokesperson Tlali Tlali said the airline could not disclose details of these contracts including their value as they were confidential.
UnCensored has learnt however that some of these contracts expired as far back as 2001. Bidvest for example, is said to offer laundry services, frozen foods, ground handling, meat supply, and cleaning inside the aircrafts and toilets. Some of these contracts are said to have expired in 2001/2002. The Bidvest Foods contract, which provides frozen foods, expired in 2015, it is alleged.
The KWE contract has allegedly expired and although a new company was appointed, the KWE contract was extended. KWE did not respond to questions by UnCensored. A mobile number on one of its previous press releases was answered by a person who said they no longer consulted for the company.
Only 2% of SAA’s R24bn Procurement Spend goes to Black-Owned Companies
Now, if as the E&Y report says, 60% of the procurement spend is fraudulent and only 2% of the R24bn goes to Black suppliers, it stands to reason that the bulk of this corruption happens among white-owned companies. Could it be why there’s reluctance from everyone – SAA Board, Treasury, Parliament – to do anything about this fraud? Worse, the outgoing treasury DG says “good work” has been done! Where, I ask!