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AS IT HAPPENED: SAA wriggles out of answering tough questions on billion rand tender

SAA chairperson Dudu Myeni. (Pic: Gallo Images)
SAA chairperson Dudu Myeni. (Pic: Gallo Images)
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23 Aug 2017

Scopa chair Themba Godi: Those who have stolen money at SAA, we want their names. We want accountability without fear, favour or prejudice.

23 Aug 2017

DA MP Tim Brauteseth: There are major issues at SAA. Do we close it down or try make it profitable, and profitable to what end? Airlines need to be supported. Any form of stealing and looting should be stamped out. You can not afford to have any funny business at an aviation firm. We will not relent that those who stepped over that line face consequences. Are senses are sharpened and will be ready.

23 Aug 2017

The report into the SAAT tender follows a story in City Press reported in July:

The beleaguered SAA – already bleeding and surviving on government bailouts – has paid R4.5bn to overseas contractors in terms of long-term contracts."

Two forensic reports, in the possession of City Press, reveal how SAA Technical (SAAT), which maintains and services the fleets of the national airline as well as several other carriers, flouted procurement regulations and extended contracts several times without going to tender.

In December 2015, SAAT advertised a five-year tender for the supply of components for its Boeing and Airbus fleet. The adjudication committee recommended that Air France be awarded the contract.

However, in May last year, the SAAT board overturned the decision and awarded the contract to a joint venture between US aviation company AAR Corporation and JM Aviation.

Open Water investigators found that JM Aviation, which was registered in 2015 and was supposed to be a Black Economic Empowerment partner of AAR Corporation, had neither expertise nor experience in the aviation sector. The company’s premises were also found to be a residential area in Sandton.


FULL STORY: SAA’s rogue tenders

23 Aug 2017

Buthelezi: We will send the report a week after we receive it.

23 Aug 2017

Myeni: We will be happy to come to the committee after the 29th of September, when the board next meets. I will send the report to Treasury two days after the board meeting.

23 Aug 2017

Zwane: JM Aviation is known to us and the directors are known to us.

23 Aug 2017

Myeni:

I want to assure the committee that we are happy any question. We were looking forward to this session. We are comfortable to ensure everything about the happenings within SAA. Everyone must know what is happening inside the company. I don't know JM Aviation.

The technical team led by the CEO - my legal information is that if you are advertising, you need to know if the company is the right one.

23 Aug 2017

Deputy Finance Minister Sfiso Buthelezi: I have not seen the report. There is nothing that makes this deputy minister uncomfortable.

23 Aug 2017

DA MP Tim Brauteseth: JM Aviation were not a part of the original AAR bid. They were brought in later. No one knows who owns them.

23 Aug 2017

DA MP Tim Brauteseth: I have touched on a nerve here. Suddenly we are allowing them to walk away. There is clearly something going on here. They are uncomfortable now.

23 Aug 2017

Zwane: AR Aviation was selected by AAR. They were brought with them to bid. I am not really sure on who's recommendation, but they came with AAR.

23 Aug 2017

Buthelezi: This matter is receiving the attention of the board of SAAT, SAA and Treasury. Can this committee hold on to this issue. They are valid issues. Can we allow this to reach its finality.

23 Aug 2017

Myeni: I don't know who is JM Aviation is? I won't know SAAT's day-to-day activities.

23 Aug 2017

Myeni: I am not blocking the acting the CEO with this contract. It is in court and is part of the reports that will be approved by the board. It is quite a thorny thing that has his name in it. He was part of that team that went to the America. It is safe that he is not trying to answer questions and seen to be protecting himself. At the time he was CEO of SAAT. Let's bring this report, which will be finalised at the board meeting on 29 September.

23 Aug 2017

DA MP Tim Brauteseth: Who owns JM Aviation? Why did they come in as the BEE partner in this tender?

23 Aug 2017

Acting SAA CEO Musa Zwane: The visit to the US did happen. It did occur two years before the award was granted to AAR. In between, Air France was awarded the same tender for one year.

23 Aug 2017

Internal auditor Siyakhula Vilakazi: We looked at the entire procurement process of AAR. We received comments from all effected employees. We are looking at the findings and comments. Once it is finalised we will be able to answer the questions. It must still go to the audit committee and then to the board. That process is 99% complete. I am just waiting for the forensic auditors with their final recommendations. It does answer some of the questions you just raised.

23 Aug 2017

DA MP Tim Brauteseth: There was a procurement process to supply components to SAAT. The particular bid was advertised four times. The following persons at SAAT and board including Zwane went to visit ARR in America. When was the contract awarded to AAR. When did the visit happen? It is worth R1.4bn. Why was the bid re-advertised four times?

23 Aug 2017

Buthelezi: Shareholders (Treasury) must come and recapitalise the company. We have always allowed SAA to go and borrow, not solving the problem. When we give them guarantees, we tell them to go and borrow. There is a commitment from Treasury.

23 Aug 2017

Deputy Finance Minister Sfiso Buthelezi: SAA is under capitalised. That is a legacy problem. Treasury will assist with this. Treasury will never allow the airline to go under. We are suspicious of a number of things that happened before. We are saying that we don't want to privatise SAA.

23 Aug 2017

SAA CFO Phumeza Nhantsi: Cash flows... yes we still face liquidity challenges with suppliers. We have requested working capital from the shareholder (Treasury).

23 Aug 2017

SAA CFO Phumeza Nhantsi: SAA has got R6.8bn in loans which are due on 30 September. We don't have a confirmed agreement that they will extend the loans. We don't foresee the lenders not extending the loans. We have worked with the lenders, who gave us milestones to work with. Instability in management was one of them. A permanent CEO has been appointed.

Myeni: We are hoping he will start on 1 September.

23 Aug 2017

Myeni: The affidavit was made by the internal auditor Siyakhula Vilakazi, who is here. He can assist you.

Vilakazi: The report on internal audits requires adequate working papers. We are quite happy in the last four years. I don't really want to talk about my affidavit. There was a member of public who was not happy with my conclusions. I responded to the Institution of Internal Auditors. The questions were around my working papers. I did say that in the 2012/13 year, there may been working papers were not adequate. It was ruled that we fixed those working papers.

23 Aug 2017

Lees: There is R6.8bn to pay back in loans due this year. Has National Treasury that the funding will be available for that? Has there been approval of refunding of the R2.2bn paid out in June.

23 Aug 2017

Democratic Alliance Alf Lees to SAA chair Dudu Myeni: How was it possible to say that the internal audit was sound in your report, when the internal auditor found the working papers were inadequate?

23 Aug 2017

Zwane: With people resigning, we lacked skills to get the work done. Then there was an over-reliance on consultants to provide that skill. It was highlighted as a problem. It was then addressed.

23 Aug 2017

Myeni: McKinsey was the consultant this year. SAA has reduced a lot of relying on consultants.

Zwane: We will provide a list of these consultants that were used.

23 Aug 2017

Myeni: We did identify policy gaps where we worked in silos, where we should have been working together. In Hong Kong, we are renting a state-of-the-art building, but we have an embassy there. Perhaps we could work from the embassy and share the resources we have. 

23 Aug 2017

SAA auditor Siyakhula Vilakazi: Management must say what was done on recommendations from the internal audit. We have reports from 2012 when I started. We have more than enough information on the recommendations.

23 Aug 2017

Dudu Myeni: I take the advice. I relied on the information brought to us and we thought we had followed the law.

23 Aug 2017

ANC MP Ezekiel Kekana: Just answer the question. I was excited about this policy but you did not follow certain areas. I am for transformation. For us to achieve what we want to achieve. That is why I always refer you to the law. As legislators are coming up with the laws. As implementors, you need to look at the law. You can come up with brilliant ideas, but if they are outside the law, then it's wrong. The policy is good, it's perfect. But it is unlawful in terms of the law. It is a noble idea. Can we please make sure that whatever we think, when we want to transform. I was shocked. It is clear we need to transform. It is clear it is owned by people outside. To transform it, we need to follow provisions of the law.

23 Aug 2017

SAA chair Dudu Myeni:

The decision to review procurement was due to a lack of transformation at SAA. Every contract is renewed or extended and not advertised. Therefore, as we were engaging as the old board collectively, if we cannot transform SAA to also ensure participation by previously excluded persons of this country, then there must be a way of dealing with transformation.

Looking at the current policy of SAA that was not allowing any new entrants, we said what can we do internally. There is nothing we can do as the board. We looked at other SOEs ensure those excluded get to benefit.

We engaged with DTI to ensure we were not found wanting. This was done by procurement. We looked at how we could broadly introduce transformation. We did. We employed a transformation manager.

We needed to ensure it was legal and in compliance. We thought as we received feedback and updates, we thought we were correct. What we were being given and the policies - they did it as a committee, including DTI. It was a team work based on Department of Treasury, DTI and SAA. The same people belonged to procurement committees.

23 Aug 2017

ANC MP Ezekiel Kekana: The board took a decision in August on the procurement policy without liaising with National Treasury and the DTI and it was found after you went out for legal opinion that the procurement policy is invalid or against the law. My question to Dudu Myeni: what will happen to the contracts awarded and who will take responsibility?

23 Aug 2017

ANC MP Ezekiel Kekana: Where I am sitting, I don't believe it. Please provide the minutes of those meetings so we can see what you are discussing.

Zwane: We will send this to you.

23 Aug 2017

Zwane: We have Exco meetings twice a month to look at operational and strategic matters.

23 Aug 2017

ANC MP Ezekiel Kekana: You make it sound like there are various businesses. There is only one SAA. We don't operate that way. The legal and finances should be in one SAA, so that when you account to us, you account to everything. It is unacceptable that you tell us that each unit is meant to do various things. These are the issues that should be discussed in your management meetings.

23 Aug 2017

SAA CFO Phumeza Nhantsi: There is a culture of using letters of awards for contracts with service providers. We are working on two things. There was a miscommunication between procurement and the business unit. The business unit knows when the contract expires and should be working with the procurement department. The second thing is that they need to work with the legal department to ensure there is no overlap.

23 Aug 2017

ANC MP Ezekiel Kekana: Are you aware you are losing a lot of money?

23 Aug 2017

Kekane told the SAA board that they have the tools to deal with employees' wrongdoing, but the problem is that the board is not complying.

23 Aug 2017

ANC MP Ezekiel Kekana: We will follow you (Musa Zwane).

The ANC MP was responding after it was suggested Zwane won't be acting CEO for much longer, to answer the hard questions being asked.

23 Aug 2017

Godi: How many evergreen contracts does SAA have? This is a legacy of the apartheid past which you are carrying forward with you.
Zwane: We need to check our database.
Godi: No. You should have this. We want a list of all the evergreen contracts. When they started, how much they have incurred. When you are ending them.

23 Aug 2017

MPs are furious that the acting CEO can't even name the commodity manager in charge of the procurement department.

23 Aug 2017

Scopa chair Themba Godi: We want the names of the individuals, not generalised stuff. (After Zwane was unable to name individuals implicated in a range of issues. Zwane pledges to provide names of the individuals).

23 Aug 2017

Acting SAA CEO Musa Zwane at Parliament on Wednesday:

<p>Acting SAA CEO Musa Zwane at Parliament on Wednesday:</p><p></p>

23 Aug 2017

ANC MP Ezekiel Kekana: You clearly indicated you are complying with the law in your report. On the very first item you are found wanting (to acting CEO Musa Zwane).

23 Aug 2017

After MPs raise a point of order, Zwane apologises for trying to excuse issues by saying he has been in an acting role for a short period.

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