More than half of SAA’s contracts are improperly negotiated and weakly managed – report


A forensics report undertaken for SAA by Ernst and Young shows more than half the contracts investigated are improperly negotiated, poorly contracted or weakly managed.

A statement issued by the beleaguered national carrier said the report is the first of a number of investigations examining specific areas of SAA’s business “that will identify reasons for the company’s unprofitable trading”.

The report will be followed by what spokesman Tlali Tlali called “specific action plans to address identified weaknesses”. Both the report and the action plans will be submitted to Finance Minister Nhlanhla Nene.
“Ernst and Young selected a total of 48 contracts across SAA, Air Chefs, Mango and SAAT (SAA Technical). The purpose was to identify and if applicable quantify the losses caused by failings in either the procurement/contracting phase or implementation phase of the identified contracts.
“The 48 contracts represent a significant portion of the largest contracts with SAA. The report shows 28 of these 48 contracts (60%) are improperly negotiated, poorly contracted or weakly managed. 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% of SAA’s total procurement could in one way or another be subject to weak business controls. This must lend itself to some idea as to why the airline makes such large losses.
“The Board has asked the question of management, particularly the financial executives, how it takes an external Ernst and Young investigation to identify these while management does not,” the statement said.