SAA suing former CE for R30.8 million


South African Airways (SAA) is demanding that former CE Khaya Ngqula repay it more than R30 million allegedly misspent during his tenure from August 2004 to March 2009. SAA chair Cheryl Carolus says the move – highly unusual in a South African state owned enterprise – follows a forensic audit by KPMG.

“Our attorneys have requested an interview with Mr Ngqula to seek his response to matters raised in KPMG’s reports, but he stipulated conditions for the interview that were unacceptable to the SAA board, so no interview took place,” Carolus told a media briefing in Johannesburg earlier today. “We then proceeded on the basis of the evidence.”

She said the airline would take steps to recover about R27-million in respect of monies that Ngqula allegedly caused to be expended on sign-on retention bonuses to employees of the company in excess of the authority given to him. “This R27-million was in excess of the maximum financial limit and such excesses were not authorised by the board.”

The board would also seek to recover R3,3-million in respect of the hiring of hospitality suites in various sports stadiums by Ngqula, the South African Press Association reported. “Against advice given to him both internally and externally, he signed these leases for suites that were seldom utilised,” Carolus said. Furthermore, the board would institute action for at least R500 000 for “free junkets” Ngqula allegedly granted to personal friends. “He organised overseas trips for friends and associates to the 2006 Fifa World Cup, the Rugby World Cup in 2007 and an ATP tennis tournament in 2008,” Carolus avered.

The law required the board to take “every reasonable step” to recover the money, Carolus added.

Summons was in the process of being served on Ngqula in respect of the retention bonus claim, and it was anticipated that a second summons dealing with the remaining matters would be served on him soon. Carolus said while the KPMG forensic audit had been prompted by allegations largely against Ngqula, the outcome had shown that there were various weaknesses in SAA’s internal controls and procurement processes. “As a consequence of this, SAA has already introduced measures to improve financial and risk management in its business,” Carolus added.

The state BuaNews agency called the KPMG report “explosive” and said the much-awaited report followed a year-long investigation ordered by former Public Enterprise Minister Alec Erwin. BuaNews also said a “case has also been lodged with the Commercial Crimes Unit [of the national police] for possible criminal action against Ngqula and several SAA employees.

Carolus said the claim against the former SAA high-flyer does not include the recovery of the bonuses received by Ngqula as this was recouped from him upon his departure from SAA in accordance with the retention bonus scheme.

The investigation further found that Ngqula had concluded a number of sports sponsorships agreements, the values of which were substantially in excess of his delegated authority of R1 million. Ngqula approved a sponsorship deal valued at R21 million to an Argentinian golfer Angel Cabrena over a period of three years, with additional performance bonuses provided for. He also awarded a R120 million contract sponsoring the Association of Tennis Professional from 2006 to 2009. Carolus said the board had referred the matter of the sponsorships to back to its attorneys for further considerations as to whether SAA had any claims against any of its employees or former employees involved in the conclusion of such contracts.
“The board wishes to emphasise that the investigation revealed no impropriety on the part of ATP and Mr Cabrera in relation to the conclusion of these contracts.”

KPMG also investigated the awarding of jet fuel contracts during Ngqula’s tenure and found that of the three tenders that were issued by SAA, a supplier in which Ngqula held a significant indirect interest, was awarded a portion of the contracts, BuaNews reported. “In respect to two of the tenders, … Ngqula failed to disclose his indirect interest in the supplier in accordance with the requirements of the Companies Act and the Public Finance Management Act,” said Carolus.

Further to this, the report revealed that the internal processes followed in respect of the evaluation of one of the tenders fell short of the requirements of SAA’s procurement and supply chain manual. But despite this, the report did not reveal any financial loss to SAA as a result.

Ngqula was placed on special leave in February last year “to facilitate an investigation into issues around retention premiums, conflict of interest and procurement,” MoneyWeb reported at the time. He was sacked the next month.