The HSF Seeks Clarity over SAA/Airbus Deals  

On Sunday, 13 December 2015, the Helen Suzman Foundation (‘HSF’) wrote to SAA and the Minister of Finance. 

We asked them to confirm or deny allegations, reported over the weekend, that the SAA Board has asked, or intends to ask, the Minister of Finance to reconsider Nhlanhla Nene’s rejection of the proposed amendments to the Airbus Deal. 

The letter was also sent to the Treasury, the Minister of Public Enterprises and the President.

In light of yesterday’s further Cabinet reshuffle, where David Van Rooyen was replaced with Pravin Gordhan, urgent clarity is needed. 

Apart from a question of lawfulness, the economic soundness of what SAA proposed to then Minister Nene is questionable.  More worryingly, according to reports, Airbus will not even agree to the proposals.

Should SAA fail to uphold the swap transaction, Airbus will call on SAA to settle its debts. 

If SAA is not able to effect payment, as is widely expected, it will trigger obligations to immediately repay all its other creditors to the tune of R 11 billion. This will have significant, and potentially irreversible, implications for SAA and the Republic.

The SAA Board and the Government must account for their actions, especially where the financial health of the country is at stake. 

The HSF expects a reply to our questions by 17:00 today. We further expect these parties to deliver, no later than 12h00 tomorrow, 15 December 2015, all relevant documentation pertaining to these deals.

Should the HSF not receive adequate and timeous replies, it will not hesitate to exercise its rights, in the public interest, without delay.

See a copy of the letter on our website here and below.

Text of the letter from Webber Wentzel on behalf of the Helen Suzman Foundation to the SABC Board and others, 13 December 2015

WEBBER WENTZEL

The Board of Directors

South African Airways SOC Ltd

The National Treasury The Minister of  Finance

The Minister of Public Enterprises

The President of the Republic of South  Africa

URGENT

Date: 13 December 2015

Dear Sirs/Mesdames

Acquisition: Airbus Aircraft by South African Airways

1. We act for the Helen Suzman Foundation ("our client"), a public interest organisation  which has as its purpose the promotion of South African democracy and constitutionalism.

2. South African Airways SOC Ltd ("SAA") entered into a transaction with Airbus in 2002 in terms of which it purchased 20 A320 Airbus aircraft.

3. The first 1O of these aircraft have been delivered, the remaining 1O aircraft to be delivered by 2017.

4. Earlier this year, SAA negotiated a swap transaction with Airbus in terms of which the purchase of the remaining 10 aircraft would be cancelled and substituted with a contract in terms of which SAA would enter into operating leases on 5 A330-300 Airbus aircraft ("the swap   transaction").

5. In July 2015, the Minister of Finance approved the swap transaction subject to the provision of certain additional information. Upon receipt of the information, the Minister finalised his approval of the swap transaction in September 2015, in terms of section 54 of the Public Finance Management Act ("PFMA").

6. On 16 November 2015, SAA sought the approval of the Minister in terms of section 54(2) of the PFMA to amend the swap transaction. In terms of the proposed amendment the  five A330-300 aircraft would be purchased by SAA and on-sold to a South African lessor which would lease the aircraft back to SAA ("the proposed amendment"). The lease would be denominated in South African rands, the lease with airbus being denominated in US dollars.

7. The then Minister of Finance and the National Treasury have rejected the proposed amendment on or about 3 December 2015.

8. A new Minister of Finance was appointed by the President of the Republic on 9 December 2015.

9. Our client has learnt from media reports today that the SAA Board has resolved to approach the new Minister of Finance to resubmit the proposed amendment.

10. You will know that the conduct of SAA's business by its Board, the swap transaction and the proposed amendment have substantial, and potentially irreversible,  implications for  the financial governance and integrity of SAA, the fiscus and the Republic. This  is a  matter characterised by extreme urgency.

11. Our client calls on SAA, the Minister of Finance and National Treasury to confirm  in writing, by no later than 17:00 on Monday, 14 December 2015 the following:

11.1 whether SAA has, at any time since 3 December 2015, taken a decision to approach the (former or current) Minister of Finance and/or the National Treasury to  reconsider the rejection of and/or to approve the proposed amendment; and if so, when;

11.2 whether SAA has, in fact, at any time since 3 December 2015, approached the (former or current) Minister of Finance and/or the National Treasury to  reconsider the rejection of and/or to approve the proposed amendment, or intends to do so;  and, if so, when;

11.3 whether, at any time since 3 December 2015, the (former or current) Minister of Finance and/or the National Treasury have reconsidered the rejection of or considered the approval of the proposed amendment, or whether they intend to do so; and, if so, when;

11.4 whether, at any time since 3 December 2015, SAA has taken a decision to approach the (former or current) Minister of Finance and/or the National Treasury to make any amendments to the swap transaction; and if so, when;

11.5 whether SAA has, in fact, at any time since 3 December 2015, approached the (former or current) Minister of Finance and/or the National Treasury to make any amendments to the swap transaction; and, if so, when;