Gigaba’s SAA bail-out may be unlawful, Parliament told
Finance Minister Malusi Gigaba’s use of “emergency” provisions in the Public Finance Management Act to bail out South African Airways (SAA) at the end of September is not justifiable and could be unlawful, says an opinion drafted by Parliament’s senior legal adviser, Frank Jenkins.
Jenkins submitted the opinion on Monday at the request of the portfolio committee on finance, which will discuss the matter on Wednesday.
“It appears that section 16 [of the act] is intended for use where good financial planning and management could not avert the need for unusual expenditure. In my respectful view it appears that the expenditure was foreseeable and as such, not unusual or atypical,” Jenkins said.
Since it was a requirement that the section 16 report be referred to the auditor-general within 14 days of being made, it was up to the auditor-general’s office to make a finding whether the allocation was in compliance with section 16 of the act, Jenkins said.
Gigaba’s use of section 16 to dip into the National Revenue Fund to bail out SAA at the end of June and again at the end of September has raised eyebrows at the Treasury and among observers, as it is seen as evidence that financial prudence is slipping. It was the first time since 1994 that the provision had been utilised.
The provision allowed the finance minister to authorise the use of the fund “to defray expenditure of an exceptional nature, which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future appropriation of funds”.
DA MP Alf Lees, who had asked the finance committee to seek the opinion, said that it confirmed his party’s view that Gigaba’s tapping of the fund at the end of September to access R3bn for SAA, was unlawful.
The R3bn was used to settle SAA’s R1.761bn debt obligation to Citibank and to provide SAA with working capital of R1.2bn.
The Treasury had been aware at least since June that Citibank would no longer extend its loan to SAA beyond September 30.
“The legal opinion states that the expenditure was foreseeable and, indeed, foreseen as clearly stated in the cabinet memo dated the 22nd of August 2017,” Lees said.
The Treasury said on Tuesday that it was unable to comment as it was still studying the opinion. The Treasury also declined to comment on what it would mean for the appropriation required for SAA, or domestic lenders who had made it a condition of further loan extensions that Parliament approved the process.
The matter will also need to be dealt with by Parliament’s appropriations committee, which has to process the report from Gigaba on the section 16 authorisation, as well as the Appropriations Bill, to be tabled with the mediumterm budget policy statement next Wednesday.