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'Exorbitant' amount of jet fuel signed off in SA Express contract, inquiry hears

Jun 24 2019 21:46
Carin Smith

The procurement process for the supply of jet fuel at the Pilanesberg airport, which serves Sun City, in 2017, were probed by the Zondo Commission into state capture on Monday.
 
According to testimony by Estelle Loock, airports co-ordinator of SA Express, an "exorbitant" amount of jet fuel appears to had been signed off in a motivation for deviation from procurement processes – without any indication of the expenses SA Express would incur.

The motivation was written by her superior, Loock testified, Dave Allanby, the then general manager of operations. He has since retired.

On Monday, the commission was aiming to establish whether proper procurement processes were followed when SA Express made contractual agreements with empowerment company EML Engineers and Construction (trading as EML Energy) to supply jet fuel at Pilanesberg; and whether there was any fraud at play.

The SA Express procurement policy made provision for deviations from procedures in an emergency and with proof that the proposed action would be in the best interest of the airline.

Contaminated fuel

Loock said an operational emergency arose at the Pilanesberg airport when an audit found the jet fuel provided by the then supplier to be contaminated.

"Dave Allanby told me to look for a solution. He indicated that, because of the urgency of the situation, I should contact our technical department which, he said, was already busy reviewing EML for fuelling and de-fuelling of aircraft (at the technical department) at O.R. Tambo Airport," she said.
 
Loock said her understanding was that the idea was for SA Express to "dovetail" with whatever agreement SA Express Technical already had with EML. She did not follow up whether SA Express Technical were indeed already busy with such a procurement process with EML or not.

According to Loock, she sent an email to EML to find out if the company would be able to supply jet fuel to Pilanesberg by driving it in a truck from Johannesburg twice a week.

She fell out of the loop regarding the matter after she supplied feedback on the quantities of fuel that would be needed, she told the inquiry. The process was then taken over by Dr Samuel Vilakazi, chief procurement officer at SA Express at the time.

Approval by WhatsApp

"The sourcing should have been done by a procurement process. I never saw a copy of a quotation by EML," said Loock.

The commission obtained WhatsApp messages indicating a round-robin by the SA Express bid adjudication committee was used to approve the appointment of EML.

The approval, which was signed off by the then SA Express CEO Victor Xaba, was made in July 2017 and Loock only became aware of it in October 2017, when Allanby casually mentioned it to her, she said.

Loock told the commission that, at the time, it was only at the Pilanesberg airport that a sudden operational need to obtain jet fuel urgently from a different supplier had arisen.

She further testified that, although she normally drew up the motivations for deviations from procurement processes - usually for cases of emergency - this time the motivation to deviate was drawn up by Allanby.

No indication of cost

The Zondo Commission investigators supplied Loock with the motivation drawn up by Allanby, as well as subsequent letters of appointment to EML and a proposal from EML.

When looking at the motivation to deviate drawn up by Allanby, Loock said there was no indication of the expenses that SA Express would incur – it just said, "as per the negotiated contract". In Loock's view, this is not sufficient.

"If I had drawn up the motivation for the need for a deviation, I would have put in a financial summary setting out the expenses SA Express could incur," said Loock.

"A proposal has to be fully authorised, and only then can our legal department start negotiating a contract. In my understanding that appears not to have been the case here," she explained.

Concerns

When the commission showed Loock a subsequent letter of appointment of EML, she listed her concerns, including the duration of the appointment of EML, the number of litres of jet fuel to be provided, and that it is not specified that the supply would only be for Pilanesberg.

A response from EML states that it confirms its appointment as BEE partner to supply jet fuel to SA Express in terms of the airline's procurement policy. An initial 25 million litres of jet fuel at O.R. Tambo Airport and 8 million litres annually at Pilanesberg are mentioned.

"The amount of litres to be supplied is a bit exorbitant in my view - 8 million litres per annum instead of the 442 000 need we estimated. This is also a letter talking about a different scope than fuel to be driven from O.R Tambo to Pilanesberg twice a week," said Loock.

Loock said she is not in a position to comment on the 25 million litres mentioned for O.R. Tambo Airport.

Loock's testimony will continue on Tuesday.


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