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DA files urgent court bid to interdict ‘unlawful’ SAA bailout

Opposition party believes Mboweni ‘unlawfully’ used the emergency provisions of the PFMA to release funding for the airline’s rescue.
The DA's proposed date for the hearing is July 21. Image: Waldo Swiegers/Bloomberg

The Democratic Alliance (DA) has filed an urgent application to interdict Finance Minister Tito Mboweni’s authorisation of funds for South African Airways’ (SAA) restructure using his emergency powers under Section 16 of the Public Finance Management Act (PFMA). 

The two-part application was filed at the High Court in Pretoria after Mboweni failed to respond to a legal notice sent to his office by the DA in which they requested confirmation on whether Mboweni had made the “unlawful” use of Section 16  in committing to provide and disburse public money for SAA’s restructuring. 

Mboweni was given until the end of business on Thursday to respond to the notice or face a court challenge. This comes after the Department of Public Enterprises confirmed that the government had met the business rescue practitioner’s July 15 deadline to provide a letter committing to “support and source funding”  for the airline’s restructuring needs.  

Exceptional circumstances 

Section 16 of the PFMA allows the Minister of Finance to bypass normal budgetary  appropriation processes in emergency situations to provide money for items of an “exceptional nature which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future parliamentary appropriation of funds.” 

Proceeding under the assumption that Mboweni has invoked this section DA finance spokesperson Geordin Hill-Lewis has asked the court for an interim interdict to stop the minister’s emergency authorisation to use public funds to fully or partly fund the rescue plan pending a review of the decision. 

Read the letter here.

In the event that the money has already been released to SAA, Hill-Lewis has asked the court to interdict the airline and its rescue practitioners Les Matuson and Siviwe Dongwana from using the money in any way. 

“The failure on the part of the responsible decision-makers and heads of the relevant executive to be transparent and open in respect of the process and timing simply emphasises the lack of accountability and the use of section 16 of the PFMA for an unlawful and improper purpose,” Lewis-Hill said in court documents. 

The DA argues that it has a “clear, alternatively prima facie, right to an interdict” because the use of Section 16 is “clearly unlawful” as the requirements laid out in the section do not apply to SAA’s case. 

Not an emergency 

Lewis-Hill said there was no emergency that warranted the “extraordinary shortcutting of usual appropriation processes” as the company had been in financial decline for over a decade. Further, there was “nothing exceptional” about the required funding and postponing the funding would not prejudice the public interest. 

“The public interest favours accountability and transparency. Using emergency measures like Section 16 of the PFMA is anathema to those constitutional values, which should be the guiding lights for the management of public funds,” he said. 

“Even if there is some benefit to having a national airline (which the applicants deny), there is no pressing need to return SAA to business (if at all), especially not during the Covid-19 lockdown with its associated restrictions.” 

Read: DA: We’ll legally challenge SAA getting emergency funding

Hill-Lewis said there was no case for not appropriating the money needed for the airline through the ordinary process and if necessary an adjustment budgetary process or a special appropriation. 

He noted that the government had “ample” opportunities to appropriate this money through normal processes in the February budget and when the supplementary budget was presented in June after the final rescue plan had been published.

The second part of the application looks to have Mboweni’s alleged decision to authorise funding for SAA using Section 16 of the PFMA reviewed and declared invalid. 

While the business rescue plan has outlined expenditure of R10.3 billion for the airline’s working capital, retrenchment packages and the settlement of creditors’ claims the statement welcoming the National Treasury’s concurrence said R10.1 billion will be needed to fund the rescue plan, and to clean up and stabilise the balance sheet of SAA. 

Irreparable harm 

Hill-Lewis argued that the court should also provide the interim interdict because if the application to have the emergency authorisation reviewed succeeds but the funds have been spent by SAA “then the country and the public purse will be irreparably harmed” as this money may not be retrieved. 

Whereas, providing the interim interdict to block the authorisation, release and use of funding would not cause any harm to SAA or the government as a provision for delays are built into the rescue plan. 

“There would also be irreparable harm to the rule of law and the separation of powers. A constitutional wrong would go without remedy and the National Assembly would be robbed of its constitutional role when it comes to the tabling and passing of budgets and the scrutiny of executing of spending.”

Read: Government commits to funding a restructured SAA

To support his application, Hill-Lewis refers to a legal opinion by Advocate Frank Jenkins provided to parliament in 2017 who found that former Finance Minister Malusi Gigaba’s use of the emergency provisions of the PFMA to capitalise SAA to the tune of R3 billion may have been unlawful. 

Should the application be unsuccessful Hill-Lewis said he and the DA would be entitled to “Biowatch protection” which shields parties from adverse cost orders when fighting for their rights against the state.

Hill-Lewis first made the threat to take legal action against Mboweni’s potential use of the emergency provisions of the PFMA in Wednesday’s National Assembly debate and vote on the Division of Revenue Amendment Bill where he told the minister to “draw a line in the sand” and not fund the airline.

 Hill-Lewis was sharply chastised by the minister.

Mboweni has in the past voiced his disapproval of government bailing out SAA saying it should close. The funding demands for the carrier come as government has made a commitment to accelerate structural reforms, reduce unsustainable spending and debt payment costs and focus on growth-enhancing activities.

“I think it is incorrect to use this house to try and present yourself as of superior mind [with a] superiority complex which seeks to undermine the efforts of those of us who work day and night to make a success of this country,” Mboweni said. 

“I do not take kindly to anybody who comes and displays some kind of racial superiority here. I hate it. I don’t like it. I desist from that. We know what we are doing and we will continue doing what we are doing.”

The DA’s proposed date for the hearing is July 21.

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At least somebody is doing something to stop this madness.

Nothing racial about calling this ” Frankenstein SAA Resurrection Plan ”
an unworkable lunacy and trying to stop it. Should the DA succeed ( very unlikely )they will also save the black taxpayers money. I really have thought that Mr Mboweni is one of the few in the ANC gang that has the style and intellect not to call the race card for assistance.

So Mboweni showed his true ANC colours by playing the race card. He is just part of the same brainless cabal.

Yes, I also thought he was above sinking that low.

Mr Mboweni, I truly thought you were above making a racist remark. Because a White man opposes what you are doing (after you saying you wouldn’t do it), you need to respond on the basis of his proposal. To pull the race card like you did reveals something terribly dire in your character. Shame on you, sir.

I think DA is being tjatjarag in running to Mboweni instead of PG. Tito has in many occassions indicated the dodo airline must fold. He has not committed any new funding to SAA. Currently, he is negotiating behind the scenes with a compromised cabinet and ANC that SAA won’t be able to fly again…and cannot afford to be seen to be pandering to ‘white’ interests as espoused by DA. There is a delicate balance that one needs to show in politics, as well as in business.

Perfect timing…! Where is the emergency? Unless you consider it an emergency that ANC Ministers now may be forced to suffer the indignity of driving to (online) conferences in mere luxury vehicles as opposed to flying…

Airlines around the world are kaput, in rescue or scaling back. Who in their right mind would invest in the industry. We can only hope for no loans from the borrowers.
The state capture and other blatant theft by ANC members who maintain high office is a continuing malice for SA.
The ANC has lost the plot. The disgraceful way they are now dealing with CV 19 and their dictatorial manner of government plus now SAA really shows they have lost the mandate to govern. They are public enemy no 1.

The moment someone pulls the race card, it’s indicative of their inability to hold the responsibility trusted with them.

Playing of the race card in such a grotesque manner by the finance minister is jaw-dropping; the issue is about the use of section 16 of PMFA – what does that have to do with race? Shame on you, Mr Mboweni! Rather tell parliament honestly if you’re using section 16, yes or no
And WHEN is one of the private airlines in SA going to get off their backsides and approach a court or competition Commission about DPE creating such an uneven playing field whereby even Mango, which is not in business rescue, gets money from the state? Especially with airlines being decimated by Covid19!
This surely can’t be tolerated?
Most disconcerting about the approved SAA rescue plan are the bonanza retrenchment packages to staff – far beyond what is required by legislation at a time when SA can least afford to throw money around. The problem with the size of these retrenchment packages is that it’s a forerunner for future retrenchments at all failed SOEs. This is now setting a precedent for all SOE staff and the country cannot afford it!
Excellent DA! Gordhan, who has been standing with chequebook in hand for years irrespective of any performance standards at SOEs, has wrecked havoc with our economy and seeks only to “buy” votes.

It’s disgusting why couldn’t they rather save SA express which made profit and SAA still owes SA express monies since they were colluding and inflating their prices cancelling out competition. Why not raise funds for SA express but instead the actual and proper managed SA express has taken the fall no salaries no pay since March and now the 10.2 billion is inclusive of the pilots severance packages and all the non core staff severance packages that gets paid by my and the rest of us tax paying citizens. Still DPE remains the sole shareholder so the actual interest or debt to equity swap never happened because after they voted in favour of this rescue plan that cancelled out all interest from other bidders. Look at TFG that acquired Jet Stores from Edcon group strategic smart and saving jobs in the entire value chain. Why couldn’t SAA do a D – E swap and then keep skilled workers train new staff with more enthusiasm and demand better standards. Stop freebies for public servants cut expenses and evergreen contracts change PFMA law in supply chain and then become profitable. Simple business process that can generate billions with zero union influence of political meddling

While tens of millions of people are unemployed and heading towards starvation, R10 billion and more of TAXPAYERS’MONEY will be thrown down this black hole of self-interest and corruption?

One has to wonder if the average ANC voter in the townships and country areas is aware of this and if they care.

Don’t think the “average” voter knows about it; not pertinent to their daily lives

Probably, but it would be if they were better informed. Sadly either they are bamboozled by the ANC voting machine, just too busy trying to survive or unable to comprehend the basics of an economy.

Dear beachcomber,

Contrary to popular belief, people in the townships DO NOT vote the ANC! This may come as a surprise to you and many others, but the voting patterns in the townships are as follows:

* 70% do not take part in the elections (rightly or wrongly, that’s not the argument here)
* 20% vote EFF
* 10% vote DA and others

The only people that vote the ANC in the townships are those that have some sort of affinity (real or imaginary) to it, tenderpreneurs and those looking to get on the gravy train.

Look at the results of the 2016 municipal elections, this continues ’til today.

The rural areas are a different cattle of fish (or rather voting fodder), and that will continue for a while unfortunately.

Perhaps the “do not take part in elections” is the problem. Why? Have they lost faith in the concept of democracy and have simply reverted to the “tribal chief” idea of society? In which case although they did not tick a ballot slip, they still “voted” in this case for the status quo with the thought “why should I vote, I like the way things are” mentality.

So where does that leave the actual taxpaying voter (not just the VAT payer)? The readers here who seem to be the former and in a definite minority in SA? We will never, unless we breed prolifically, outgrow the traditional Black voting mass, from your statistics, the DA has failed against a disruptive and radical EFF.

How will the 5% politically aware ever have any input in the economy of the country? Will we just be hangers-on until the Zimbabwe scenario becomes reality?

I cannot help you with your false racial stereotypes unfortunately. Just like Tito, pulling the race card does not and will not solve the issues at hand. Myths such as “only Whites pay tax” is not a topic I want to get into. But briefly, as a Black person I’ve been paying tax since I started working just like ALL Saffers that are employed and fall into the different tax brackets as per the SARS tax tables.
As for why the people aren’t voting, it’s pretty obvious, and is a topic for another day.
Your racial undertone of “presenting yourself as of superior mind [with a] superiority complex” by referring to “tribal chiefs” is sickening.
And BTW, ALL races read Moneyweb, not just those of your ilk.

I didn’t say only whites pay tax – I said: “The readers here who seem to be the former and in a definite minority in SA?” Which includes you and speaks to your own racial stereotype.

Hmmm ….

The way the banks enabled the disgrace of SAA over the years must come to an end; banks like Thyme Bank, African Bank and Capitec were not involved, but the rest – Absa, FNB, Nedbank, Standard – bankrolled the SAA project knowing full-well it’s immoral. It’s time bank clients also voted with their feet…

Hear hear – a spendthrift approach is easy with your client’s, investor’s and shareholder’s money …it keep them in favour with their marxist masters!

Try getting a home loan or vehicle finance deal with a track record the same as the anc’s!

Being labeled a racist today is much like being labeled a witch in the middle ages. No evidence is required. It is simply a weapon used to defeat people you don’t like

Absolute disgrace………

End of comments.

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