Standing Committee on Finance on the legality of SAA bailout 

18 October 2017

The Standing Committee on Finance considered a legal opinion from Parliament’s Legal Services Unit on the use by the Minister of Finance, Mr Malusi Gigaba, of Section 16 of the Public Finance Management Act for the recent R3bn bailout of the South African Airways (SAA).

The legal opinion noted that Section 16 is intended to be used in circumstances where good financial planning and management could not avert the need for exceptional or unusual expenditure. The use of this provision by the Minister of Finance for the reasons set out in the Report to Parliament and the Auditor-General does not appear to be exceptional or unusual as the expenditure was foreseeable and has been made in the past.

Clearly there was a need to authorise the expenditure as a default on the debt obligations of SAA would have serious prejudice to public interest. However, this should have been done by way of a special appropriation Bill. Whether the use of Section 16 was irregular or unlawful in this instance must be considered by the Auditor-General.    

“Contrary to what is being claimed by the Democratic Alliance (DA), the legal opinion does not conclude that the Minister’s decision was definitely unlawful. It says it may be so, but it is for the Auditor-General’s Office to decide on this. We will now refer to the legal opinion to the Appropriations Committee to process further,” said Mr Yunus Carrim, Finance Committee Chairperson.

“The majority in the Committee believes that the allocation to SAA could have been foreseen and should have been done through an Appropriation Bill, but accept that it was necessary to rescue SAA, otherwise there would have been a call on the total R16.4bn guarantee exposure,” Mr Carrim said.

Issued by Mava Lukani, Parliamentary Communication Services, 18 October 2017