South African Airways (SAA) has been plagued by corruption over the past decade, including a R375 million tender for tyres and R85 million for airport lounge catering.
There were also corrupt payments between SAA’s subsidiaries, employees, and the board worth R1.8 billion.
The head of the SIU, advocate Andy Mothibi, revealed this in a presentation to Parliament’s Standing Committee on Public Accounts (Scopa).
Mothibi outlined the SIU’s current investigations into corruption at SAA and the progress made in recovering assets worth around R3.4 billion.
As of 21 November, only R14 million has been recovered, and six referrals have been made to the relevant prosecuting authorities.
The SIU’s investigations at SAA are yet to be completed and will likely continue for some time as it received fresh allegations regarding corruption at the airline.
Mothibi outlined 24 allegations of corruption at SAA that the SIU was investigating, including maladministration allegations.
He stressed that it has been very difficult for the SIU to investigate these allegations as many SAA staff members were retrenched and did not hand over critical documents, making it difficult to obtain contact information from the airline.
Below is a breakdown of some of the allegations the SIU is investigating and their progress.
Tyre tender – R375 million
SAA issued a tender to purchase tyres for a value between R218 million and R375 million, which did not comply with the Public Finance Management Act (PFMA) and relevant procedures.
The investigation is still ongoing and is estimated to be completed by the end of March 2024.
There are possible criminal referrals, the contract may be set aside, and one former board member has been fined and their membership of the South African Institute of Chartered Accountants withdrawn.
Component Support Services Contract – R1.8 billion
The SIU has identified multiple irregularities and corrupt relationships between third parties, SAA employees, and board members relating to a Component Support Contract worth between R1.2 billion and R1.8 billion.
Investigators have subpoenaed bank statements to trace the irregular payments between SAA employees, board members, and third parties.
The investigation is set to be completed at the end of this month, with possible criminal referrals on fraud and corruption charges for around ten entities.
Over R1 billion is set to be recovered following litigation.
Security Services – R953 million
A security contract was irregularly awarded and repeatedly extended eight times until the present financial year.
This resulted in irregular expenditure worth R953 million for the period from February 2008 to January 2020.
The SIU investigation is set to be completed by the end of the year, and the recovery of funds as well as criminal referrals will be made after it receives two outstanding affidavits.
Swap transaction with Airbus – R824 million
SAA entered into a purchase agreement with Airbus to acquire 20 A320 aircraft. The first ten were delivered, but the acquisition price exceeded the current market value, resulting in impairment losses.
To rectify this, SAA negotiated a swap transaction where the remaining ten A320s would be cancelled in exchange for leases on five A330-300s.
This would allow SAA to phase out its A340-600 fleet, saving costs. SAA would also receive a cash flow benefit from Airbus and avoid future pre-delivery payments (PDPs).
However, the SIU has found no proof of the PDP reimbursement to SAA, in full or in part, with a total value of R824 million.
Again, investigators flagged numerous tender irregularities and non-compliance regarding the agreement with Airbus.
The investigation is ongoing and is set to be completed by the end of April 2024. The SIU is considering criminal referrals for one SAA employee and a board member.
Cargo aircraft lease – R185 million
Additions to the contract for the lease of cargo aircraft were found to be irregular as no approval was obtained for the changes.
The contract is valued at R185.5 million, and a senior counsel has been appointed to set aside the contract at the Special Tribunal and recover the money lost by SAA.
Catering services – R85 million
In 2015, a tender for the provision of catering services at SAA’s OR Tambo lounge was awarded for the value of R85 million for the next three years.
However, when the board was advised about the tender, the Chairperson instructed that it be cancelled, and the services reinstituted with the previous supplier.
A board resolution was taken, and the tender was awarded to an SAA subsidiary without it going through a tender process.
The SIU will complete the investigation at the end of this month and will try to recover the R85 million and criminal refer entities and individuals.
Other contracts under investigation
The other contracts and tenders under investigation by the SIU are in the table below, alongside their value.
However, many of SAA’s staff were retrenched, and critical documents were not handed over to the SIU, making it difficult to obtain contract information from SAA.
Thus, the value of some of the contracts under investigation could not be quantified at this stage.
|Contract or Tender
|Value of contract
|Ground Power Units
|OEM-Approved Avionic Parts
|Aircraft Battery Cells Contract
|Transport Services (2)
|Supplier Development Contracts
|Working Capital Optimisation Contract
|Provision of Legal Services
|Ground Handling Tender
|Cleaning Services Contract
|Aircraft Brakes and Tyres
|Fleet Maintenance on SAA vehicles
|Provision of Technical Spares and Components