Finance committee asks about legality of bail-out

Parliament’s finance committee is probing the legality of the Treasury’s use of section 16 of the Public Finance Management Act to dip into the National Revenue Fund for the R3bn bailout for SAA.

The use of the section is restricted by the act for expenditure of an exceptional nature, which cannot be postponed for a future appropriation of funds by Parliament “without serious prejudice to the public interest”.

Committee chairman Yunus Carrim has referred the question of legality of the use of the section to Parliament’s legal advisers for advice, following a request by DA deputy finance spokesman Alf Lees. The legal advice will be presented to the committee on Thursday in the presence of legal advisers from the Treasury.

EFF chief whip Floyd Shivambu said using the section for the bail-out was illegal.

Lees pointed out that the need for a bail-out for SAA was foreseen for months before it was made and so it could easily have been provided for by way of a normal appropriation of funds by Parliament.

In the current circumstances, Parliament will have to approve the bail-out after the fact. Treasury director-general Dondo Mogajane defended the use of the section during a committee meeting on Tuesday.

He said the section had been used for the R2.2bn payment to SAA so it could repay Standard Chartered Bank for its loan. The two payments would be regularised in the medium-term budget policy statement.

Mogajane conceded that the process was not ideal, but this route was taken to prevent a default by SAA, which would have led to its guarantees of R16.9bn to SAA being called up.

This would have been “catastrophic” for the country as it could have led to a call-up of all other state guarantees.