Taxpayers are funding a R30,5m investigation into SAA corruption. That’s pocket change in comparison with the scale on which corruption appears to have occurred at the national carrier.
This was revealed at a recent Scopa meeting where the Special Investigation Unit (SIU), which was tasked during 2019 with investigating corruption that took place between 2002 and 2020 at SAA, briefed Parliament on progress made on its investigations. The SIU told Parliament that it had budgeted R30,5m for the investigations, which are expected to be concluded in 2022.
Voicing the concerns on everyone’s minds, DA Scopa member, Alf Lees, commented that very little of what was being said by the investigation unit was new. “This is stuff that we’ve been raising for years and years. Even now, we’re still pouring money into a disintegrating entity. It’s very sad and yet we carry on with it.” Alf added that it was concerning that many of the people who had clearly been involved in the looting were currently being paid massive severance packages. He asked if there was any way the SIU could speed the process up to identify the looters before they were paid out in full from the Business Rescue plan’s budget.
The SIU’s presentation indicates that the unit has already uncovered dozens of examples of corruption, and that it is making progress with initiatives which could recover hundreds of millions of rands for SAA. Furthermore, the SIU is collecting evidence which will enable criminal prosecution of both the corrupt employees and service providers, which will hopefully send a clear message that corruption will not be tolerated.
In her presentation to Scopa, lead investigator and provincial head of Eastern Cape SIU office, Zodwa Xesibe, brought the following matters to the committee’s attention:
- The SIU is looking into the matter of unethical relationships between SAA Technical (SAAT) employees and directors of AAR and JM Aviation that were awarded a R1bn contract to supply aviation components to SAAT. According to Zondo Commission testimony, it was revealed that AAR had not been the preferred bidder recommended by SAAT’s evaluating committee but that the company had still been awarded the tender. Evidence also revealed that SAAT’s former head of procurement at that time had received a R2,5m payment towards her Bedfordview property from AAR. The SIU has referred this matter to Senior Counsel to cancel the contract and to employ civil recovery.
- The Bolloré scandal. Press reports during 2017 indicated that foreign-owned company Bolloré was awarded a five-year contract by SAAT totalling nearly R1bn, despite a conflict of interest existing - a SAAT senior employee on SAA’s source team, whose daughter was employed by Bolloré. Bolloré is also alleged to have falsified its BEE certificates in order to acquire the contract.
- R300m could be recovered, relating to a 2016 agreement with Flyfofa Airways. According to Zodwa, irregular procurement processes were followed in agreements between SAA and Flyfofa, with a dry lease agreement entered into while there was already a wet lease contract in place between the two parties, which continued to be extended irregularly. Evidence was also uncovered indicating that SAA had continued to pay Flyfofa for aircraft services for one aircraft which was grounded for 8 months between 2018 and 2019. SAA paid for another aircraft that did not fly once.
- The SIU also hopes to recover R54,7m relating to an SAA contract for paint where the company paid a service provider more than double the R19,2m budgeted for paint over a period of three years.
- Maladministration relating to travel rebate benefits, payments made to vendors, and the implementation of a 30% BBBEE supplier ‘set aside’ initiative in respect of the supply and delivery of jet fuel are also on the SIU’s radar.
- Another 84 contracts relating to SAA maintenance and technical repair reveal irregularities such as inflated pricing, conflicts of interest, fictitious vendors, fictitious work orders, fictitious bank accounts, overpayments, non-delivery, non-performance, and no value for money. At least another R12m could be recovered through settlement agreements relating to these contracts.
- The SIU is also aiming to recover R241,6m relating to a sale of Ground Power Units that was not executed in terms of SAA’s supply chain management processes, which require the convening of a disposal committee. The SAAT board usurped the functions of such a committee.
- Further allegations that a purchase agreement that SAA, under the leadership of the board’s chair, Dudu Myeni, entered into with Airbus, had resulted in a negative financial impact on SAA, are also being looked into. While these investigations are currently in various stages of completion, Zodwa’s presentation indicated that SAA lost in excess of R356,9m through these transactions.
- Evidence of another R600m of loss during the 2018/19 financial year has been revealed - SAA employees abused the travel rebates policy. “There were allegations that members of SAA were selling the travel benefit for financial gain,” said Zodwa.
- Further allegations indicate that an SAA board member is rendering legal services to SAA through his firm of attorneys. Additionally, more evidence of conflicts of interest have been uncovered, revealing that a senior SAA official’s brother’s law firm, with no aviation law experience, has been receiving a disproportionate amount of work from SAA. The senior official has since been suspended from SAA and is awaiting a disciplinary process.
- Red flags relating to payments between April 1, 2016 and March 31, 2018 indicate suspicious activity including duplicate payments; payments made over a weekend (when staff dealing with payments only work on weekdays); invoices captured over a weekend; various purchase orders dated after invoice date; 99 invoices which exceed the approved purchase order amount; and vendors that have the same bank account number (possible cover quoting).
