Defiant SAA board failed to act in interest of the airline

A South African Airways aircraft on the apron of Frankfurt Airport in 2018.
A South African Airways aircraft on the apron of Frankfurt Airport in 2018.
Silas Stein/picture alliance via Getty Images

The former board of SAA failed to act in the interests of the failed airline when it approved a R1.8 billion multi-year contract with Swissport SA for ground handling services, the Commission into State Capture heard of Friday.

The revelation was part of evidence relating to the auditing of financial statements of the airline which is now in business rescue after years of financial mismanagement of poor governance.

Swissport started rendering services to SAA eight years ago with no contract ever being signed, according to earlier evidence by the witnesses. The partnership was later extended to run from March 2016 to March 2021, in a process that had been found to be in violation of the Public Finance Management Act.

When asked about the board's conduct, PwC auditor Pule Mothibe who signed off an SAA audit opinion on 30 September 2016 conceded that it did not act in the best interest of the company when approving the Swissport contract.

PwC audited SAA's books for five years between 2012 and 2017, at times in conjunction with Nkonki Inc. A report on the Swissport contract had flagged that it had not been concluded through competitive bidding and failed to comply with regulations.  

Evidence leader Kate Hofmeyr wanted Mothibe to explain if the board's defiance of the instruction by the government was not in breach trust or their fiduciary duty to act in the best interest of SAA.

"That is defiance... I am not sure if it is necessarily a breach of trust, but defiance," he said.

Dudu Myeni was chairperson of the SAA board at the time, a position she held between December 2012 and October 2017.  Myeni has since been declared a delinquent director after a legal battle mounted by Organisation Undoing Tax Abuse (OUTA).

The organisation claimed SAA under Myeni’s tenure as chairperson raked up losses amounting to R16.8 billion.

Hofmeyr emphasised that the board of directors of state-owned entities were expected to act in the best interest of the companies and not betray the trust bestowed on them, prompting Mothibe to agree that by not heeding the instructions of National Treasury and the dti, they failed to act in the best interest of SAA.

Hofmeyer also pointed at the Auditor General's 2017 report had identified 80 out of 96 SAA contracts as not compliant with with regulations and 62 of them constituted irregular expenditure.

SAA was placed into business rescue in December 2019 after years of losses and state bailouts. Its creditors have voted to proceed with a business rescue plan to cut staff and provide billions more in funding and a new airline is expected to be formed to replace the embattled entity.

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