An independent corruption watchdog is investigating possible reckless trading by the executives and boards of Mango Airlines (MNO, Johannesburg O.R. Tambo) and SAA Technical.

The South African Airways subsidiaries need urgent recapitalisation. Still, they have continued to trade for the past year or so while their parent went into bankruptcy protection until the end of April 2021, after receiving a ZAR10.5 billion (USD743 million) state bail-out.

“One must ask if the boards of Mango and SAA Technical contemplated their respective organisations’ solvency and acted in the best interests of these companies, whilst they were making losses prior to and during the pandemic induced economic meltdown,” said Organisation Undoing Tax Abuse (OUTA), a South African non-profit organisation tackling government corruption and misappropriation of public funds.

OUTA wants to stop the Government from recapitalising Mango and fellow subsidiaries SAA Technical and Air Chefs by diverting ZAR2.7 billion (USD191 million) originally earmarked for the business rescue of SAA. It wants the money to be withheld from the subsidiaries until all submissions have been heard, considered, and decided on in Parliament.

The ZAR2.7 million - diverted from the ZAR10.5 billion set aside by the Government for the restructuring of SAA - is to be allocated to the subsidiaries through a proposed 2021 Special Appropriations Bill.

OUTA says it has raised its concerns and has made a formal request to SAA’s shareholder representative Public Enterprises Minister Pravin Gordhan, the National Treasury, SAA’s interim board, and SAA's Receivers. It will submit its objection to Parliament’s Standing Committee on Appropriations (SCOA) this week.

“The matter of recapitalising these three subsidiaries was not contemplated as part of the allocation of the R10.5 billion allocation to SAA in the business rescue plan,” explains OUTA Chief Executive Officer Wayne Duvenage. “The Special Appropriations Bill purports to re-channel funds earmarked for SAA directly to the subsidiaries or via SAA, without the subsidiaries following due process as required under the Public Finance Management Act, No 1 of 1999,” he said.

OUTA called on the state to stop wasting its limited resources in the bailout of non-core state-owned enterprises (SOEs). “The country has much bigger issues to deal with, such as the fight against corruption. It is extremely frustrating for society to hear that budgets and funding for such important institutions as the National Prosecuting Authority (NPA) and the Special Investigations Unit (SIU) are being reduced, whilst failed non-essential SOEs are being allocated billions of rand to prop them up. This is simply not acceptable.”

As previously reported, the SIU, NPA, and Hawks special police investigating unit are currently investigating 84 SAA contracts and 44 of its aircraft leases involving millions of dollars.

In addition, directors of provisionally liquidated South African Express (EXY, Johannesburg O.R. Tambo) have been subpoenaed in connection with an insolvency enquiry into financial and operational impropriety at the state-owned airline.

Corruption, irregular procurement, and wasteful expenditure at the state airlines is nothing new. Previous criminal charges and civil cases laid against senior managers at SAA a decade ago seemingly disappeared, according to testimony in 2018 by former SAA board chairperson Cheryl Carolus before South Africa’s Zondo state capture commission. Amongst those charged was former SAA chief executive Kaya Ngqula over ZAR252 million (USD18 million) worth of breaches of the Public Finance Management Act.