SAA, Gigaba must explain 'fraudulent' R1bn contract to subsidary

Cape Town – The Democratic Alliance is demanding answers from South African Airways (SAA) and Finance Minister Malusi Gigaba about what it terms an apparently fraudulent contract of R1bn to SAA’s subsidiary SA Airways Technical (SAAT).

The Sunday Independent reported that a foreign-owned company, Bollore Africa Logistics SA, forged its credentials by using fictitious shareholders and black people as fronts, subsequently wining a five-year contract of close to R1bn with SAAT.

The company allegedly secured the contract with the help of senior SAA employees, who rigged the bidding process to ensure the contract went to Bollore.

Alf Lees, DA spokesperson on finance, said in a statement he will write to Gigaba to obtain the full details of the deal and the proposed action to be taken against those who benefited unduly.

Lees pointed out that SAAT has contributed to overall SAA losses, posting losses of about R122m in 2014 and R260m in 2015. “These losses, given the revelation of the R1bn deal, may well have been the result of corruption and not only mismanagement.”

SAA bailout came from disaster fund

The latest allegations follow on an announcement over the weekend that National Treasury granted the national carrier R2.207bn to repay its loan to Standard Chartered Bank. Funds were transferred from the National Revenue Fund – money reserved for unforeseen emergencies, such as natural disasters.

Gigaba, speaking at the launch of the 2017 tax season on Monday morning, said the money transferred to SAA is “fiscally neutral” and will have no impact on the fiscal framework.

READ: SAA bailout if 'fiscally neutral' - Gigaba

Lees however pointed out that SAA is losing R370m monthly, which comes down to R12m per day.

The Cape Chamber of Commerce and Industry also weighed in on SAA’s bailout, calling on government to “pull the plug”.

In a statement issued on Monday Janine Myburgh, president of the chamber, said SAA is not entitled to “regular financial transfusions” from the country’s taxpayers, as it is essentially a commercial operation.

“If SAA stopped operating tomorrow it would not be missed. Other airlines would simply step in to fill the gap and we would no longer have to pay billions of rand every year to keep it going.”

Myburgh said Telkom, which did provide an essential service, has been successfully privatised and is now a taxpayer rather than a drain on state resources.

READ: Telkom raises dividend 56% as carrier enters next growth phase 

“And Kulula.com had proved that it was able to make a profit and pay taxes in the market where SAA was failing. The country would be better off with additional private airlines that provided good services and paid taxes. SAA has been given every possible opportunity to sort itself out, and it has failed every time.”

According to Myburgh, it is unfathomable that SAA received another bailout, given that there was no credible turnaround plan in place to bring the airline back to profitability.

“How can we possibly expect our credit rating to recover from junk status while the government keeps bailing out a bankrupt airline? The message that this sends to the rating agencies is that we have an irrational government.”