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SAA’s procurement woes exposed

File picture: Simphiwe Mbokazi

File picture: Simphiwe Mbokazi

Published Dec 9, 2015


Johannesburg - A draft forensic report by Ernst & Young has found that weaknesses in more than half of South African Airways’s procurement processes may well be the cause of the airline’s losses.

The accounting firm sampled 48 contracts across SAA, Air Chefs Mango and SAAT, in the first of a number of investigations aimed at finding out why the national carrier remains unprofitable.

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“The 48 contracts represent a significant portion of the largest contracts with SAA. The report shows that 28 of these 48 contracts (60 percent) are improperly negotiated, poorly contracted or weakly managed,” SAA said.

“A logical deduction must be that if these (many of which are the largest contracts awarded) suffer these weaknesses then the bulk of the smaller contracts will be at least if not worse. Potentially 60 percent of SAA’s total procurement could be in one way or another subject to weak business controls.

“This must lend itself to some idea as to why the airline makes such large losses.”

SAA said its board was studying the report and it would inform the drafting of action plans to correct the weaknesses.

“The report and the action plans will also be placed before the minister of finance.”

In a broadside at SAA’s executives - who find themselves in a stand-off with SAA chair Dudu Myeni - the statement added: “The board has asked the question of management (particularly the financial executives) how it takes an external Ernst & Young investigation to identify these whilst management does not.”

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