BEE clause in SAA funding notice raises red flag

Cape Town - Questions have been raised about the legality of part of SAA's funding request for R16bn in the open market.

In a notice published in a Sunday newspaper, cash-strapped SAA has turned to banking and non-banking financial institutions to raise R16bn to meet its working and capital expenditure requirement as well as to consolidate its current debt portfolio.

In the notice SAA indicated that preference will be given to bidding entities "which are 51% or more black owned and 30% or more black women owned; youth owned; companies owned by disabled persons; military veterans and located in rural areas".

A former employee of SAA with inside knowledge - but who preferred to remain anonymous - told Fin24 that there are concerns about the legality of this clause in the SAA notice.

According to this source, Treasury and another government department have already in the past pointed out to SAA that such a requirement is not legal. He also added that, in his view, SAA can forget about obtaining the R16bn funding it asks for in the notice without government guarantees.

READ: SAA asks lenders for R16bn

The Preferential Procurement Policy Framework Act allows for only a maximum 10% weighting for black empowerment and does not permit non-price criteria other than empowerment to be used in scoring tenders, Business Day reported earlier this year.

At that time SAA had indicated that, for tender purposes, military veterans, rural dwellers, disabled people and black women were to be given preference alongside black-owned companies to supply SAA with jet fuel, uniforms and stationery.

In July 2015 it also came to light that an approach was made by an SAA director requesting that Bidvest transfers 30% of its aircraft-toilet-cleaning subsidiary business to an SAA-nominated black-owned small business. This was declined by Bidvest, City Press reported at the time.

In June this year Treasury did indeed publish new draft preferential procurement guidelines that will see 30% of all large government-issued contracts set aside for small and black-owned companies through subcontracts. This was after President Jacob Zuma made a similar proposal in his 2015 State of the Nation Address.

When asked about the legality of the stipulation in the funding notice that preference will be given to bidding entities "which are 51% or more black owned and 30% or more black women owned; youth owned; companies owned by disabled persons; military veterans and located in rural areas", SAA spokesperson Tlali Tlali referred Fin24 to Treasury to clear it up.

In response to the same question, Treasury told Fin24 the amended preferential procurement regulations have not been promulgated yet.

"Therefore, they are not yet applicable until promulgated," Treasury said.

READ: SAA on why it went to market for R16bn

Testing the market

Tlali told Fin24 on Monday that the aim of the SAA notice regarding funding was to test the appetite of the market in an attempt to consolidate its debt - hopefully at a better interest rate.

SAA has applied for a R4.7bn government guarantee to enable the company to finalise its 2014/2015 annual financial statements, while the Request for Proposal (RFP) advertised for is in relation to debt consolidation.

Finance Minister Pravin Gordhan has had to request extensions of the deadline for tabling SAA's annual report for 2014/2015 on 15 February, 15 March, 29 April and yet again on 7 July. The new proposed date is 15 September 2016.

SAA has received a number of government bailouts worth at least R14.4bn as part of its turnaround strategy, but Gordhan warned already in January the carrier cannot become a liability on the fiscus.

Alf Lees, the DA's shadow deputy minister of finance, told Fin24, that, because SAA has failed to publish financial statements for two years one cannot ascertain the liquidity of the company.

ALSO: WATCH: Under-fire Gordhan reveals SAA deadlock will soon end

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