SAA financials MIA as 51% share sale details remain out of reach - Scopa

4 May 2022

While Eskom and its bouts of rolling power outages are an easy target, SAA’s lack of financial accountability has flown under the radar since 2018. This raises serious questions about oversight, and the nuts and bolts transparency needed to nix malfeasance in state-owned enterprises central to State Capture.

SAA still owes legislators at least four years of audited annual financial statements, and these would have to be presented for public oversight and scrutiny regardless of SAA’s 51% sale deal, Parliament’s public spending watchdog, the Standing Committee on Public Accounts (Scopa) heard on Wednesday.

SAA’s 2017/18 financial year audit was delayed over board-approved financial statements and then suspended at the request of the board, given the precarious finances of the national airliner, which in December 2019 was put into business rescue.

When SAA was out of business rescue from 30 April 2021, the Office of the Auditor-General got in touch to audit the financials. In February 2022, the 2017/18 audit was concluded with a qualified audit opinion – including uncertainty whether SAA was still a going concern and a disclaimer for Mango Airlines.

Then, nothing more.

“We are busy engaging SAA as well as other stakeholders to start the remaining audits for the financial years 2018/19, 2019/20, 2020/21 and 2021/22,” according to the Office of the Auditor-General’s presentation to Scopa.

SAA remains a public asset until control is transferred in terms of the sales agreement for 51% of the national airliner to the Takatso Consortium, which Public Enterprises Minister Pravin Gordhan announced as the strategic equity partner in June 2021, with the sales agreement finally approved by Cabinet on 23 February 2022.

Or as the Office of the Auditor-General’s national audit executive, Fhumulani Rabonda, put it: “For the period that SAA was … a public entity they still need to account for those funds and assets of government. For all the financial years up to the date when there will be legal transfer of control … they need to do financial statements … and Parliament will have a role to play.”

How oversight is done after majority control is transferred would depend on the agreement between the Department of Public Enterprises, which represented the government’s 49% stake in SAA, and the new shareholders of the national airliner.

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But that’s still a point of discussion and engagement – as is having sight of the sales agreement. The Office of the Auditor-General remains in the dark about this sales agreement, as do legislators.

“We hope in due time we will get that. There is no reason why we should not get the agreement. It’s part of ongoing engagements,” said the Office of the Auditor-General’s business unit leader, Zolisa Zwakala, on Wednesday.

DA MP Alf Lees had unsuccessfully filed a request for that agreement earlier in 2022 under the Promotion of Access to Information Act. The request for the SAA sales agreement was rejected.

On Tuesday, Scopa had scheduled a briefing on SAA. Its previous early March 2022 meeting caused a flurry of letters, signalling tensions in the government, as Public Enterprises Minister Pravin Gordhan appeared at odds with National Treasury director-general Dondo Mogajane’s statement that Treasury had “no role in the selection process of the strategic equity partner…”

However, from Gordhan’s letter dated 7 April 2022, it appears the sales agreement is subject to conditions such as approval from regulatory authorities and “government providing the balance of the R14-billion, i.e. R3.5-billion for SAA to complete the business rescue plan implementation”.

It’s been on public record since the deal was announced in 2021 that the Takatso Consortium has pledged to provide R3-billion for the national airline.

Speculation has been rife that money was the reason for the delay in finalising the deal since its initial announcement in June 2021.

The evidence proves a scheme by the Guptas to capture Eskom, procure the suspension of the four executives under the guise of an inquiry into the affairs of Eskom, install the Guptas’ selected officials in positions of influence within Eskom in the places of the four suspended executives and then divert Eskom’s assets to the Guptas’ financial advantage.

The 2020 Medium-Term Budget Policy Statement (MTBPS) made available R10.5-billion – as requested by the business rescue practitioners, but less than the R14-billion requested by the Department of Public Enterprises to also include SAA subsidiaries. It subsequently turned messy over whether a R2.7-billion allocation for SAA subsidiaries in 2021 was new money or came from the R10.5-billion allocation.

The reference to R3.5-billion in Gordhan’s letter to Scopa seems to be a reference to the 2020 MTBPS allocation falling short when SAA got R10.5-billion of the R14-billion that the Department of Public Enterprises had asked for.

That 2020 MTBPS was the last SAA bailout, or as the government prefers, equity injection for SAA. It stands in contrast to 2017 when between June and September R5.2-billion was taken from the national purse so SAA could repay loans that became due and could not be renegotiated by the national airliner, whose board at the time was chaired by Dudu Myeni.

An arrest warrant was issued for Myeni on Wednesday but held over after her lawyers cited “a medical condition” for her failure to appear in court on charges of defeating or obstructing the administration of justice, according to the National Prosecuting Authority. These charges related to her naming a protected witness while on the stand at the State Capture Commission.

In January 2022 the commission report found: “[Myeni] proceeded, through a mixture of negligence, incompetence and deliberate corrupt intent, to dismantle governance procedures at SAA, create a climate of fear and intimidation and make a series of operational choices at SAA that saw it decline into a shambolic state.”

SAA is caught in the ideological fractures of the governing ANC, possibly as a vanity project. In January 2020, the ANC’s National Executive Committee decided: “SAA should be retained as a national airline, which will require substantial restructuring.”

As the stretched public purse could not support a national airliner that between then and 2017 had received R15.7-billion in bailouts, the compromise was to sell off 51% of SAA, a move that had been stalled for years.

While SAA remains enmeshed in obliqueness on a host of issues, not least of which is funding, Eskom is making much of steps out of State Capture, such as getting back money paid irregularly to consultants like Trillian and internal processes that, regardless of how slow, have ended up in some criminal prosecutions.

But, as rotational power cuts hit everyone, it’s Eskom that’s under the spotlight in Parliament – in Thursday’s discussion and in Wednesday’s Q&A session with economic ministers.

Gordhan dismissed DA MP Ghaleb Cachalia’s question on whether a National State of Disaster would be declared around Eskom’s rotational power outages, saying State Capture had contributed to Eskom’s poor performance – and what was needed was an additional 4,000MW to 6,000MW to the grid.

“The evidence proves a scheme by the Guptas to capture Eskom, procure the suspension of the four executives under the guise of an inquiry into the affairs of Eskom, install the Guptas’ selected officials in positions of influence within Eskom in the places of the four suspended executives and then divert Eskom’s assets to the Guptas’ financial advantage,” Gordhan quoted from the State Capture Commission report.

What that response smartly sidestepped is the tension with Gordhan’s Cabinet colleague, Mineral Resources and Energy Minister Gwede Mantashe, whose portfolio deals with the independent power producers that could bring online much-needed power through wind, solar and other projects.

Regardless of tensions within Cabinet and the executive, oversight of state-owned enterprises is crucial for a government that proclaims its commitment to fight and end corruption. It’s not something the executive can be left alone to do – as the State Capture Commission report shows.

And with the commission’s next and final instalment, which will also deal with parliamentary oversight, it would seem appropriate for Parliament to step up. Instead, the ANC benches are telling others not to howl.

That SAA was not on the agenda for the economic ministerial Q&A on Wednesday is astonishing. That, to date, the audited financial statements for four years and counting have not been tabled in Parliament as is statutorily required is astonishing. That the Auditor-General must “engage” with SAA and “other stakeholders” for it to be able to start the statutory and constitutional audits is astonishing.

These are signs that the patterns and trends set in the State Capture years are lingering. DM

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