Today’s announcement that SAA has been bailed out from the National Revenue Fund to pay Standard Chartered Bank the loan amount of R 2,207 billion is a blow to the credibility of both the SAA board and to National Treasury.
Only three days ago when I asked National Treasury whether they were ready to meet the guarantee obligations both SAA and National Treasury reassured the parliamentary Standing Committee on Finance that the plans were in place to meet the R 9,0 billion SAA loan payments by 30 June 2017. This was clearly not the case.
It is deeply ironic that it has been necessary to announce a R2,3 billion bailout for the national airline in the middle of the ANC’s National Policy Conference 2017 which is heavily focused on economic policy, including stabilising zombie state-owned enterprises such as South African Airways.
Standard Chartered Bank evidently has no faith in the leadership, management and strategy of South African Airways.
The payment to Standard Chartered has been made in terms of section 16 of the PFMA which makes provision for the use of funds in an emergency situation as follows:
“[T]he use of funds from the National Revenue 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 parliamentary appropriation of funds.”
The PFMA requires that such a payment must be reported to Parliament within 14 days and must be included in an adjustments budget within 120 days of the Minister authorising the expenditure.
This emergency funding for SAA indicates the serious crisis that SAA has been mismanaged into.
This taxpayer bailout makes no difference to the cash crisis at SAA. SAA is losing in the region of R370 million every month and is apparently scratching for cash to pay salaries.
We look forward to the Minister’s report to Parliament within 14 days. This report must give details of why this expenditure was authorised as being an emergency situation.
The meeting of the Finance Committee today was a complete shambles which revealed that SAA losses for the past two months totalled R734 million. This follows losses of R4.8 billion in the 2016/17 financial year.
However even more shocking was the fact that:
- Neither SAA nor National Treasury had a plan in place to meet the 30th of June 2017 deadline to deal with R9.0 billion worth of maturing loans.
- SAA has been in discussions with the Public Investment Corporation (PIC) about funding the national airline.
We will not sit back and allow SAA to raid funds under management by the PIC.
The only logical solution to ensure the sustainability of SAA and its thousands of employees is to file for business rescue and to stabilise the airline before taking it to the market to find private equity investors.
It is also in the public interest that the terms and conditions relating to these maturing loans be made public.
That is why I will write to the Minister of Finance, Malusi Gigaba, to request that he disclose the full terms and conditions relating to renewed or new agreements with lenders to replace the maturing loans.
Reports today that Standard Chartered Bank has declined to renew their loan facilities to SAA and that repayment of these loans has been demanded, may only be the tip of the iceberg.
According to a repayment schedule, SAA has listed R 8,887 billion repayable in 2017/18, yet some of the maturity dates have in fact past.
Key dates that have already past include:
- R0.3 billion due to STANDARD BANK on 30 December 2016;
- R1 billion to STANDARD BANK on 30 December 2016;
- R1 billion owed to STANDARD CHARTERED on 27 January 2017;
- R1 billion owed to ABSA on 8 December 2016;
- R1 billion owed to STANDARD CHARTERED on 22 December 2016;
- R2.25 billion owed to VARIOUS PHOENIX on 28 April 2017; and
- R0.8 billion owed to VARIOUS GBF on 28 April 2017.
I will write to Finance Minister, Malusi Gigaba, to request that he urgently answer two vital questions.
The first is whether or not the other loans already overdue have been repaid and/or rolled over?
The second is how close is SAA to default resulting in lenders calling in government guarantees?
All of SAA’s loans are backed by government guarantees that in total now amount to R 19,1 billion.
If SAA has failed to repay some of these loans, it could force other creditors to recall their loans, which would then necessitate the government to step in and pay. This money would ultimately be taken from the public purse and could have dire consequences for the sovereign rating status of South Africa.
The fact is that the only way out of this mess is for SAA to apply for business rescue where robust cost reductions can be implemented.
A successful business rescue and the prevention of the government guarantees being called in would be have to lead to a full, or at very least a majority privatisation, of SAA in order to for SAA to survive in the long-term and importantly to release the South African taxpayer from ever having to meet the R 19,1 billion government guarantees.
The DA will request the Water and Sanitation Portfolio Committee to formally summon Water and Sanitation Minister, Nomvula Mokonyane, and the Water and Sanitation Director General (DG), Dan Mashitisho, after a committee meeting was cancelled because they failed to show up.
The Committee Chairperson, Mlungisi Johnson, can formally issue the summons on behalf of the Committee, with the committee’s backing.
Should the Minister and DG ignore the summons, they will be “liable to a fine or to imprisonment for a period not exceeding 12 months or to both the fine and the imprisonment” in accordance with the Powers, Privileges and Immunities of Parliament and Provincial Legislatures Act.
Today’s Committee meeting was vitally important as the very serious governance issues at the Mhlathuze Water Board were to be discussed.
In November 2016, the Pietermaritzburg High Court ruled Minister Mokonyane’s decision to extend the Board’s term beyond 28 February 2015 was unlawful, invalid and set it aside.
Yet while the Minister complied with the ruling and dissolved the board in 2016, according to the Board’s annual report, the Board was paid a lucrative R3 million in 2015 and over R3 million in 2016 despite being unlawful.
It is no coincidence that Ms Dudu Myeni – of SAA infamy – chaired this Board, whose term was extended unlawfully.
This is a flagrant abuse of public money and the DA believes that the former board members should pay back every cent because, as per the Court ruling, their role at the time was invalid in law.
Moreover, the Court also held that the Board’s decision to pursue disciplinary action against Sibusiso Makhanya, the suspended Board CEO, was invalid and set it aside.
It is shocking that while the water authority is still in the process of constituting a new board, the acting CEO is the accounting authority while the water authority does not currently have a Board. The acting CEO effectively has carte blanche, unsupervised.
It is absolutely imperative that the new Board swiftly deal with the issue of the suspended CEO and that they ensure that Dudu Myeni does not feature in the process.
Mokonyane clearly has no respect for Parliament’s oversight role and must now be forced to do her job and account to the Committee for the failures at the Mhlathuze Water Board.
For six months the DA has been pursuing all possible avenues to ensure that a raft of forensic investigation reports into SAA are tabled in Parliament. Today’s Sunday Independent story detailing how senior SAA executives ignored a tender scandal report makes the continued refusal to reveal these reports even more suspicious.
Last week, the Deputy Finance Minister, Sfiso Buthelezi, committed to provide copies to the Portfolio Committee on Finance and the DA will hold him to his commitment.
These reports were promised to the finance committee by the previous Deputy Finance Minister, Mcebisi Jonas, more than 6 months ago, but despite reminders and PAIA applications, and stalling for time, none have been delivered.
It is crucial for the credibility of the new board that the skeletons of the past are exposed and dealt with. One being the Airbus deal debacle that cost the previous Minister of Finance, Nhlanhla Nene, his job when he refused to fall in line with Dudu Myeni’s wishes.
The initial refusal to make the reports available still raises suspicions and was a direct reneging on a firm commitment given by the Deputy Minister of Finance to Parliament. This also left a distinct impression that it was an attempt to cover up information.
The thought is appalling, especially considering SAA’s tainted record of dubious deals and wasteful management of public money, ultimately the money of South African people, with the most recent being SAA’s projected loss of R 4.5 billion for 2016.
Whilst the DA looks forward to receiving unabridged copies of all investigation reports without further delay, I will write to the Deputy Finance Minister to obtain his formal commitment to a date to provide the committee with the reports. Considering that some of these reports date back to as far as 2010, there is no reason that the reports should not be provided to the committee by the end of the week.
At a recent meeting of the Standing Committee on Finance (SCOF), I managed to persuade National Treasury to announce that Ms Phumeza Nhantsi had been appointed as the Chief Financial Officer (CFO) of South African Airways (SAA), after having served as the interim CFO since November 2015.
Her appointment as CFO has been made despite the enormous current projected losses of R4,6 billion for the 2016/17 year.
Furthermore, during her time as interim CFO, SAA was involved in a number of controversial financial debacles including the infamous Airbus debacle that resulted in Jacob Zuma firing Nhlanhla Nene as the Minister of Finance in December 2015, rocking South Africa’s economy.
The most egregious financial crisis arose in July 2016 when SAA, apparently without following due process, appointed BnP Capital to raise debt funding for SAA at a fee cost to SAA of R256 million, a cost far exceeding what the market would have determined. When this outrageous contract was exposed by the DA and others, SAA were forced to cancel this contract but even so the cancelation fee was reported to amount to almost R50 million without any value at all received by SAA.
The BnP debacle was clearly pursued with the goal of enriching the principals of BnP at the expense of SAA and taxpayers. The same taxpayers who have had to continually bail out SAA, and will likely very soon have to bail SAA out yet again. The appointment of BnP was a financial contract and therefore would have required the approval of Ms Phumeza Nhantsi, the newly appointed CFO. Indeed the BnP contract may well have been initiated and negotiated by Ms Nhantsi.
SAA will be appearing before the SCOF on Wednesday the 17th of May 2017. At this meeting, I will ensure that the newly appointed SAA CFO is questioned about her performance as the interim CFO as well as her culpability with regard to the financial debacles at SAA during her time as the interim CFO.
The latest information provided to the Standing Committee on Finance (SCOF) by the South African Airways (SAA) board reveals a staggering loss of R4.5 billion for 2016/17.
This new figure of R4.5 billion is significantly higher than the R3.5 billion revealed ten days ago and the R1.7 billion estimated in September 2016.
This is an increase of R1 billion in the space of ten days and an increase of R2.8 billion in the space of 6 months.
With a full month of figures left to be reported on, this figure of R 4.5 billion could experience yet another significant increase.
The DA will interrogate these volatile numbers fully when SAA appears before the SCOF on Wednesday, 29 March 2017, as it is simply inconceivable that SAA losses have increased by a staggering R1 billion in a matter of weeks.
Replies to questions by members of the Standing Committee on Finance from South African Airways (SAA) have revealed that the projected losses for the 2016/17 year amount to a massive R 3,5 billion. This represents a staggering R 2 billion increase compared with the R 1,5 billion loss declared in the 2015/16 year.
There is no doubt that these massive losses will mean that SAA will once again run out of cash and will have to pull out the begging bowl to get another government guarantee hand-out.
The DA will write to the Finance Minister, Pravin Gordhan, to urge him to refuse any further financial assistance to SAA which is set on a path to self-destruction.
It is greatly concerning that this is R 1,8 billion more than the R 1,7 billion loss that was projected a mere four months ago. This will represent a real cash loss as it will not contain the R 1,9 billion Airbus deal impairments that contributed to the R 4,9 billion loss in the 2014/15 year.
It must be asked whether the 2015/16 loss was massaged down to make the old SAA board and Chairperson, Ms Dudu Myeni, in particular, look like they were making good progress.
The new board of SAA has clearly not been able to turn SAA around or even just stem the massive losses. The board is hamstrung by the apparently poor and incompetent leadership of its chair Dudu Myeni.
This once again reinforces the DA’s view that the reappointment of Ms Myeni as the Chair of the SAA board was irrational.
SAA can only be saved if put under immediate business rescue and action taken to achieve a private equity deal that would result in capital revenue for the shareholder and thus the taxpayer.
The DA has asked that SAA produces a cash flow analysis for the 12 months of the current 2017/18 financial year. This will enable the full extent of the bankruptcy of SAA to be seen.
The DA is even more convinced that the only way to stop the monumental losses is to put the airline into business rescue and we will therefore make every effort to ensure that the Minister of Finance takes action to achieve this.
A reply to a DA parliamentary question has revealed that South African Airways spent R 21 million on 16 investigations, all of which centred on allegations of fraud and corruption within SAA, but do not seem to have taken any action against those identified by the investigations.
All these investigations took place during the tenure of Ms Dudu Myeni as Chair of the SAA board, a position that she retained when a new board was appointed in September 2016.
The DA’s view that the reappointment of Ms Myeni as Chair of the SAA board was irrational has been vindicated.
Ms Myeni presided over all these immensely expensive investigations but there is no information that any person employed by or associated with SAA has, as a result of the investigations, been criminally charged or even disciplined within SAA and fired.
On the 2nd of February 2017, I submitted a PAIA application to the National Treasury to request copies of all these investigations.
On the 1st of March 2017, National Treasury requested that I grant them a further 30 days to allow them to consider my application.
I have granted their request despite my concerns that the reason given for the delay was:
“To facilitate this request, consultations among divisions of the National Treasury were necessary to decide upon the request and this could not be completed within the prescribed timeframe due to the unavailability of the concerned divisions…”.
We trust that these full reports, without any deletions, will be made available without further delay.
There can be no question that they must be made available before SAA appears before the Standing Committee on Finance on the 29th of March 2017.
The DA has been informed that SAA board chair Dudu Myeni spent a night in the presidential suite of the luxury Oyster Box Hotel in the up-market Umhlanga Rocks beach resort on Saturday the 25th of February 2017.
We believe that Dudu Myeni apparently attended the ANC fundraiser at the five-star Oyster Box Hotel on Saturday the 25th of February and then apparently spent the night in the presidential suite which we understand costs R 50 000 for a one night stay.
This is extreme extravagance from a person who has single-handedly managed to drive SAA into debt of R17.9 billion that is secured by way of a South African Government (taxpayer) guarantee of R 19.1 billion. We should not be surprised that such excess comes from the same person who apparently made 23 holiday trips around the world at the expense of the Mhlathuze Water Board.
Also at the Oyster Box the same night as Ms Myeni was President Zuma who addressed an ANC fundraiser event that cost attendees up to R 750 000,00 for a “package”. The cost presumably varied depending on how close to President Zuma you sat. The proximity that allowed for holding hands was no doubt the most expensive.
I will submit a written question to the Minister of Finance to establish whether SAA or any other public entity paid for accommodation at the Oyster Box hotel for SAA Board Chair Dudu Myeni.
In addition I will ask whether SAA or any other public entity sponsored the ANC event or paid for any persons to attend the ANC fundraiser held at the Oyster Box Hotel on the same night.