IDC approved questionable loans to SAA contractor, Zondo hears
A witness at the commission says the cooperation approved the loans to the contractor though it had secured a tender with the airline.
SAA airplane. Image: Supplied
The commission of inquiry into state capture on Friday heard testimony on how a South African Airways (SAA) contractor secured loan facilities from the Independent Development Cooperation (IDC) though it had not been appointed by the airline.
The inquiry, chaired by Deputy Chief Justice Raymond Zondo, was dealing with aviation-related testimony, with chief risk officer of the IDC, Mark Phakamile Mainganya, on the witness stand on Friday.
The commission previously heard that the contractor, EML Energy, had not delivered fuel to SAA by June when testimony was given at the inquiry, despite it being contracted to provide two million litres of jet fuel on a monthly basis to the airline.
EML Energy was contracted, along with other suppliers, to provide fuel on a monthly basis between July 2018 and June 2019.
Mainganya told the commission that on February 2017, the IDC approved three loan facilities for EML Energy.
The one was funding capital of R6 million for a term of 3.5 years at 4% interest, the second was R6.5 million for the upgrade of the plant and equipment at 13% for a five year term and the third was a guarantee facility of R62 million to Total SA and R3 million to Engen Africa relating to the SAA contract.
The working capital loan was approved under the department of trade and industry (DTI) manufacturing competitiveness enhancement programme (MCEP), partly managed by the IDC.
ALSO READ: Zondo commission hears testimony about jet fuel supply agreements
Mainganya said that had this not been the case, the interest on the loan would have been prime plus 3%, with prime at around 10% at the time.
The IDC approved the loan facility on the basis that EML Energy would be awarded the jet fuel supply tender at SAA, though it had not been approved.
Mainganya said the fact that the tender had not been awarded was a risk which was identified.
Mainganya explained that the risk entailed that EML Energy could have been awarded the tender to supply a few litres of fuel which would result in it failing to service the loan facilities.
Another material risk was that had EML Energy been awarded the tender, it would have been for three years which would result in the mismatch in the repayment of the loan facility with a five-year term.
The commission also heard that EML Energy secured the working capital funding under the MCEP though it did not meet the requirements.
The commission continues, watch live courtesy of the SABC:
For more news your way, download The Citizen’s app for iOS and Android.
