SAA pi­lot­less amid tur­bu­lence

A re­port re­veals that weak fi­nan­cial con­trols are at the cen­tre of the air­line’s woes

Mail & Guardian - - News - Sa­belo Sk­iti

SSAA em­ploy­ees failed to de­clare in­ter­ests in con­tracts worth more than R600-mil­lion in the fi­nan­cial year end­ing March 2017, an in­ter­nal draft re­port by the au­di­tor gen­eral says.

The draft re­port un­cov­ers sev­eral weak fi­nan­cial con­trols that re­sulted in se­ri­ous pro­cure­ment and con­tract man­age­ment lapses. Some of these were later con­firmed in the air­line’s fi­nan­cials that were tabled be­fore Par­lia­ment in March this year.

The fi­nan­cials were pre­sented a year late; au­di­tors re­fused to sign off on them be­cause they had failed sol­vency and liq­uid­ity tests set out in the Com­pa­nies Act.

The new reve­la­tions give an in­side pic­ture be­hind the air­line’s R5.6bil­lion loss, its sixth con­sec­u­tive loss and a qual­i­fied au­dit find­ing. A qual­i­fi­ca­tion means SAA — which has blown mil­lions in salaries and fees for ex­ec­u­tives and con­sul­tants in chief ex­ec­u­tive Vuyani Jarana and chief re­struc­tur­ing of­fi­cer Peter Davies’s of­fices — gave fi­nan­cial state­ments that are fairly pre­sented al­beit with some mis­state­ments.

di­rec­tors or had close as­so­ci­a­tions with di­rec­tors of com­pa­nies that con­cluded R646-mil­lion worth of business with the air­line;

were flagged as non­com­pli­ant; and

were pro­cured from sup­pli­ers with­out valid tax clear­ance cer­tifi­cates from the South African Rev­enue Ser­vice.

Ac­cord­ing to the re­port, some of the em­ploy­ees oc­cupy se­nior po­si­tions and in­clude two se­nior cap­tains, a se­nior first of­fi­cer, an act­ing head of flight op­er­a­tions, a chief pi­lot and the com­pany’s Public Fi­nance Man­age­ment Act (PFMA) com­pli­ance spe­cial­ist. Un­like civil ser­vants, em­ploy­ees at state-owned en­ti­ties are not barred from do­ing business with the state but they, and the com­pa­nies in­volved, are re­quired to de­clare a con­flict of in­ter­est.

“There was a lack of over­sight by the en­tity’s lead­er­ship to pre­vent non­com­pli­ance with the rel­e­vant sup­ply chain man­age­ment laws and reg­u­la­tions,” the re­port stated. “This re­sulted in ma­te­rial non­com­pli­ance con­cern­ing the pro­cure­ment of services bring­ing into ques­tion the tone set at the top.”

The au­di­tor gen­eral also recorded dif­fi­cul­ties with com­pil­ing the re­port be­cause SAA’s of­fi­cials did not main­tain a proper record of fi­nan­cial in­for­ma­tion and as­sets, in­clud­ing prop­erty and air­craft.

Ac­cord­ing to SAA, R533-mil­lion of the R646-mil­lion pro­cure­ment went to a jet fuel sup­plier, while the bal­ance is shared by 12 other en­ti­ties.

“We are cur­rently look­ing at the to­tal sup­ply base and em­ploy­ees of SAA to look at con­flicts of in­ter­est and this forms part of an ex­er­cise that goes be­yond what the au­di­tor gen­eral was look­ing at,” SAA spokesper­son Tlali Tlali said.

He added that the air­line’s com­mit­ment to com­pli­ance and clean gov­er­nance dated back to be­fore the au­dit. “We took steps and ap­pointed a pro­cure­ment spe­cial­ist who will lead SAA in ad­dress­ing the is­sues we had iden­ti­fied,” he said.

“We con­ducted foren­sic in­ves­ti­ga­tions that re­sulted in sus­pen­sion of a num­ber of em­ploy­ees in­clud­ing se­nior of­fi­cials, dis­ci­plinary hear­ings and in some cases, dis­missals. We ap­pointed a board ad hoc com­mit­tee whose man­date is to fo­cus on fraud and cor­rup­tion and have, among other things, fo­cused on re­vis­ing our sup­ply-chain man­age­ment pol­icy to fa­cil­i­tate com­pli­ance with the PFMA.”

Of the 52 awards to­talling R1.6bil­lion to com­pa­nies with­out valid tax cer­tifi­cates, Tlali said: “There were ma­jor com­mod­ity [jet fuel] sup­pli­ers in­volved and one of them had a con­tract value of R1-bil­lion. SAA and the AG [au­di­tor gen­eral] had dis­putes re­gard­ing copies of tax clear­ance cer­tifi­cate or [whether] pre­scribed process of na­tional trea­sury re­gard­ing tax clear­ance cer­tifi­cates [were fol­lowed].”

The re­port also showed that SAA’s deficit, at March 2017, had grown by R3.6-bil­lion from the same pe­riod in 2016 to R4.9-bil­lion.

As a group, SAA recorded fruit­less and waste­ful ex­pen­di­ture to the tune of R46.2-mil­lion, as well as R113.4mil­lion in ir­reg­u­lar ex­pen­di­ture.

In the in­tro­duc­tory pas­sages of the draft re­port, the au­di­tor gen­eral noted a “very weak” con­trol en­vi­ron­ment as a re­sult of va­can­cies in the ex­ec­u­tive com­mit­tee.

At the time, 40% of the air­line’s ex­ec­u­tive po­si­tions were oc­cu­pied by act­ing per­son­nel.

At the en­tity’s an­nual gen­eral meet­ing SAA chair­man JB Mag­waza was re­ported to have said that lack of ca­pac­ity, a short­age of skilled staff and debt were part of key el­e­ments weigh­ing the air­line down.

Over­load: A re­port by au­di­tor gen­eral Kimi Mak­wetu re­veals ‘man­age­ment lapses’ at SAA. Photo: Gallo Images/Beeld/Lisa Hna­tow­icz

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