MORE than half of SAA’s
total procurement
could be subject to
weak business controls and
could potentially be the cause
of the massive losses the
national carrier has incurred.
This is according to an Ernst &
Young report that was tabled
with the SAA board this week
in respect of the procurement
investigation at SAA. The
report is the first of a number
of investigations that will
examine the reasons behind
SAA’s unprofitable trading.
Ernst & Young selected a
total of 48 contracts across
SAA, Air Chefs, Mango
and SAAT. Of these, which
represent a significant portion
of the largest contracts
with SAA, 28 were found to
be improperly negotiated,
poorly contracted or weakly
managed.
“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 as weak if not
worse,” the airline said in a
statement.
The airline said the report
was currently being studied
by the board. “The report and
the action plans will also be
placed before the Minister of
Finance, Nhlanhla Nene.”
Airbus deal
The Finance Minister
recently rejected a proposal
spearheaded by SAA
chairwoman, Dudu Myeni, to
restructure a contract with
Airbus, which would see the
airline purchasing five A330s
and selling these to a thirdparty
financier, from which SAA
would lease the fleet.
In March SAA renegotiated
the 2002 contract with Airbus
to swap the purchase of 10
A320 narrow-body aircraft for a
lease for the five A330s. This
was approved by the minister
in September and saved the
airline R1,6bn. In November,
SAA sought permission from
the minister to change the
lease to an outright purchase
and leaseback of the aircraft.
However, in a statement
released earlier this month,
Treasury said: “SAA had
not demonstrated that
there was certainty that the
proposed amendment to the
transaction structure would
leave the airline in a better
financial position than it
would otherwise have been
had the airline implemented
the original swap transaction
structure. In fact, the
information indicated that the
proposed transaction structure
would actually leave SAA in a
materially worse off financial
position where it is unable to
meet its commitments as they
fall due.”
The minister instructed SAA
to implement the transaction
structure in line with the
approval that had already
been granted. “Should
SAA conclude a significant
transaction with Airbus or
any other party for which
the airline has not received
approval in terms of Section
54, this would constitute an
act of financial misconduct
which could be grounds for
sanctions against the Board
in line with Section 83(4) of
the PFMA,” the statement
concluded.
