SAA’s R85m aircraft deal cancelled and Flyfofa to repay profits
JOHANNESBURG — South African Airways’ R85.3 million aircraft leasing agreement with Flyfofa Airways has been declared unlawful and set aside, with the Special Investigating Unit now entitled to recover profits made from the deal and the former SAA board facing scrutiny over how the contract was approved.
The Special Tribunal found that SAA extended the Flyfofa agreement for 36 months from July 2019 without a competitive procurement process or National Treasury approval for a deviation. The agreement covered the provision of a Boeing 737-300 freighter and cost SAA R85,340,863.
The Tribunal found that the extension did not comply with the constitutional requirement for public procurement to be fair, equitable, transparent, competitive and cost-effective. It also found that the decision was not supported by a properly recorded and approved deviation under Treasury regulations.
Flyfofa has been ordered to provide a detailed account of all money received from SAA and the costs it incurred in performing the agreement. The accounting must include the period during which aircraft ZS-TGG was grounded and any substitute services provided during that time.
Any amount subsequently found to constitute profit or unjustified enrichment must be repaid, together with interest of 11% per year from the date of the order. The ruling follows an SIU investigation into SAA’s freighter operations and its relationship with Flyfofa.
According to the investigation, SAA initially approved a deviation from its normal aircraft procurement process in 2015 as a risk mitigation measure. Flyfofa was among companies invited to make presentations the following year.
SAA’s own assessment at the time classified Flyfofa’s financial position as “high risk”, citing the absence of audited financial statements, a solvency ratio of 0.1 and losses during the previous two financial years.
Despite those concerns, SAA entered into several short-term wet-lease arrangements with Flyfofa in 2016 before signing a three-year dry-lease agreement for two Boeing 737-300F aircraft in November that year.
When that agreement approached expiry in 2019, SAA entered into the further 36-month arrangement that has now been set aside. Evidence before the Tribunal indicated that the deal was concluded while the Flyfofa aircraft was grounded and that SAA continued making payments during the grounding period.
Judge Fortuin criticised the conduct of the SAA board, saying its decisions carried a cost beyond the airline itself. “This conduct has a cost, and it is not only to the SAA alone. This is a cost to the public,” the judge said.
The Tribunal ordered that the judgment be sent to the minister responsible for SAA, the airline’s directors and its board chairperson for consideration of possible action against those involved in approving the 2019 extension.
Possible measures identified in the judgment include financial misconduct proceedings under the Public Finance Management Act, action under the Companies Act, further civil recovery proceedings and referrals to the National Prosecuting Authority or Hawks where evidence may justify criminal investigation. The minister must report back to the Tribunal within 90 days on whether any steps have been taken and their outcome.
The SIU investigation into SAA was authorised by President Cyril Ramaphosa under a 2020 proclamation covering allegations of wrongdoing in procurement and contracting at the state-owned airline.
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