South African Airways’ (SAA) board of directors has received legal opinion indicating the board’s decision to award 30% of procurement spend at the financially bankrupt national carrier to SMMEs will expose it to legal action by suppliers.
SAA was recently granted a R2.5-billion government guarantee by National Treasury, a decision critics and opposition parties charged as a means to coddle looters of state coffers.
The Business Day reportedly received a response from spokesperson Tlali Tlali, who confirmed the legal opinion.
“The opinion is privileged advice for the benefit of the board. We are not in a position to comment on it. It was not meant for the consumption external parties,” Tlali told the publication.
The Citizen earlier reported on #SAAEmails, which exposed a thread of correspondence between chairperson Dudu Myeni and her fellow board members, airline management as well as potential suppliers and how the issue caused ructions at SAA.
The emails revealed how after the board made the controversial decision in 2015, airline executives, including, but not limited to, the former chief procurement officer (CPO) and the former CFO, locked horns with Myeni and Yakhe Kwinana, who was at the time the chairperson of the audit and risk committee.
The source of their conflict was the jet fuel procurement process, in which Myeni and Kwinana personally directed the company’s supply-chain management managers to invite a list of potential service providers to a tender briefing.
The information also exposed how Kwinana intended to register a shelf company with the sole purpose of signing on behalf of all small and medium local jet fuel suppliers, a decision vehemently challenged by the then CPO.
In one email, Kwinana pulled rank on the official, telling him that failure to implement board’s decisions amounted to insubordination. The CFO, the CPO and Kwinana subsequently resigned from SAA.
The protracted matter resulted in the intervention of the central procurement office at the National Treasury and the B-BBEE Commission – both disagreed with the decision, pointing out that it flagrantly violated Treasury regulations and the BEE Act provisions.
SAA was ordered to withdraw all tenders in which the 30% policy was applied, as it was unlawful. It was also requested to confirm in writing within 30 days that it would not proceed with this illegal procurement policy.
“The regulation was unlawful and invalid in the light of the fact that the regulatory framework up to March 31 2017 did not cater for the 30% procurement spend by an organ of state on small, medium and micro enterprises.
“SAA should, in accordance with its [memorandum of incorporation] and [supply chain management] policies, at all times follow and adhere to guidelines and directives issued by National Treasury pertaining to the 30% requirements,” the legal opinion was quoted in part.
The legal opinion further recommended that while it was not necessary to rescind the 2015 board resolution, pending tenders where the airline had imposed the 30% obligation should be withdrawn or be renegotiated to reflect the correct legal position.
According to the Business Day, Tlali declined to respond to whether SAA had started implementing the recommendations of the legal opinion. A board member speaking to the Citizen anonymously previously stated: “The matter of 30% was never going to be pursued, the new board is pushing hard against corruption of any kind.”