Former SA Express executives under investigation

Former executives and directors of South African Express (EXY, Johannesburg O.R. Tambo) will be subpoenaed to appear before a High Court inquiry into reckless trading, misappropriation of funds, corruption, and fraud at the provisionally liquidated state-owned regional airline. This was confirmed on February 3 by its shareholder, the Department of Public Enterprises (DPE), during a virtual report-back briefing to its parliamentary oversight body, the Portfolio Committee on Public Enterprises. As previously reported, this was part of an ongoing inquiry by SA Express’s joint provisional liquidators in terms of Section 417 and Section 418 of South Africa’s Companies Act, which allows the Master of the High Court to investigate the affairs of an insolvent company. Provisional liquidator Aviwe Ndyamara of Tshwane Trust previously told ch-aviation the aim was to recover any lost funds for creditors. The inquiry follows allegations of corruption and mismanagement at SA Express, made before South Africa’s ongoing Zondo Commission of Inquiry into State Capture. It was also prompted by various requests from stakeholders who had made allegations of misappropriation of funds or reckless trading. Former management, board members, and “any persons identified from the report by the liquidators will be subpoenaed” before further sittings of the inquiry, which had commenced on September 25, the DPE told parliamentarians. It said the High Court had appointed Advocate Mawande Seti-Baza as the Commissioner, who would run the inquiry, and who would report to the Master of the High Court. The investigations centred on transactions prior to the airline being placed into provisional liquidation in April 2020, ch-aviation was told. If found that SA Express continued to trade under insolvent circumstances or that the previous board presided over dodgy dealings, the directors could be found guilty of reckless trading under the Companies Act. Meanwhile, the DPE has confirmed that a bid by Fly SAX to buy SA Express for ZAR50 million (USD3.3 million) should be concluded in the next three months. A January 28 return date to court for the airline’s final liquidation was postponed to preserve the validity of the airline’s Air Service Licenses as sought by the bidder, and to allow for the conclusion of the sale of shares. An anchoring investor supporting the Fly SAX bid was to pay close on ZAR26 million (USD1.7 million) in cash or by bank guarantee after ZAR24.7 million (USD1.6 million) was raised by auctioning off the airline’s material assets. “The bank guarantee (has) yet to be concluded and (the) sale of shares agreement has not been finalised,” the DPE revealed. It said remaining assets (which includes two CRJ200ERs) would be auctioned off at a reduced rate. Failure for the balance of the purchase price to be obtained will result in the final liquidation of the airline and the proceeds from the sale of assets being distributed amongst the creditors,” the DPE said. The department confirmed that due to SA Express having seized operations, its Air Operator’s Certificate (AOC), Approved Maintenance Organisation (AMO) certification, and its aviation security training approval had all expired on July 31, 2020. It said engagements, in conjunction with Fly SAX, were ongoing with South Africa’s International Air Services Council (IASC) to reserve the airline’s international route rights. Final liquidation of SA Express will affect 691 employees, whose contracts of service were suspended on April 29, 2020. The employees have since approached the South African Human Rights Commission for mediation as they received no financial support from the government, contrary to their colleagues at South African Airways (SA, Johannesburg O.R. Tambo) who have received a ZAR2.8 billion (USD186.4 million) severance package from the state. The DPE said legal opinion had concluded that the government could not invoke sections of South Africa’s Insolvency Act to pay SA Express employees. Any government contribution had to be directed to the provisional liquidators, it said.