Corruption and mismanagement at SAA under the spotlight

A total of 84 South African Airways (SA, Johannesburg O.R. Tambo) contracts and 44 of its aircraft leases involving millions of dollars are being investigated by South Africa’s Special Investigating Unit (SIU) which probes corruption, fraud, and maladministration in state institutions. The anti-corruption watchdog is also assisting with civil litigation on eight other cases being investigated by the country’s National Prosecution Authority (NPA) and Hawks directorate, an independent unit within the South African Police Service (SAPS) that investigates serious organised crime and corruption. This was revealed on May 14, 2021, during an online briefing by SAA and its shareholder representative, the Department of Public Enterprises (DPE), to Parliament’s Standing Committee on Appropriations. A senior counsel has been appointed to deal with these matters. The SIU investigations have unearthed contractual irregularities such as inflated pricing; fronting; conflicts of interest on the part of SAA staff; fictitious vendors, work orders, and bank accounts; over-payments; non-delivery; and non-performance. Amongst 12 high-priority cases under the spotlight is the procurement of Airbus aircraft, for which more evidence is being collected at this stage. The SIU in March told Parliament its investigations focused on allegations that SAA had entered into an agreement with Airbus for the purchase of 15 airframes for which payments had been delayed. Further new A320 narrowbodies were leased. However, due to the conduct of key officials involved, the delivery was delayed by four months and this had had a negative financial impact on the airline. In 2015, former SAA chairperson Dudu Myeni – since declared a delinquent director – tried to introduce a third-party African leasing company in a Treasury-sanctioned deal between SAA and Airbus, to swop ten A320-200s, ordered in 2002, with five leased A330-300s. When then Finance Minister Nhlanhla Nene intervened, it famously led to his sacking by then-president Jacob Zuma in what became known as “Nene Gate”, events also since probed by South Africa’s Zondo Commission into state capture. Another investigation involves the repayment of ZAR10 million rands (USD707,405) in fees plus interest by consultancy firm McKinsey & Company relating to a 2014 Working Capital Optimisation project it did for SAA with Regiments Capital, a firm owned by the Gupta family that was intricately involved in state capture. The case has also featured at the state capture hearings. Other cases being investigated by the SIU include the recovery of ZAR78 million (USD5.5 million) relating to irregular processes in appointing service providers for the implementation of SAA’s turnaround plan; investigations into payments made to SAA vendors between 2016 and March 2018 (a total of 99 invoices exceeded the approved purchase order amount); the abuse of travel rebate benefits totaling ZAR600 million (USD42.4 million) in 2018/19; irregular aircraft tyre and paint contracts; the dodgy sale of ground power units; the suspension of a senior legal official following investigations over procurement processes for legal services; and the implementation of a 30% black empowerment supplier initiative for the supply and delivery of jet fuel.