The board of South African Airways (SAA) will institute action against its former, CEO Khaya Ngqula, who left the company in March 2009.
At a media briefing on Tuesday, chairperson of the airline’s board Cheryl Carolus said this followed a forensic audit by KPMG following allegations made largely against Ngqula.
“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 added.
“We then proceeded on the basis of the evidence.”
She said the board would take steps to recover 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.”
Hiring of hospitality suites
The board would also seek to recover R3,3-million in respect of the hiring of hospitality suites in various sports stadiums by Ngqula.
“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.”
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.
Sports sponsorship agreements
The KPMG audit had also found that Ngqula had concluded a number of sports sponsorship agreements, the values of which were allegedly in excess of the limit of his delegated authority.
“The limit was R1-million until November 26 2006, and R2-million after that,” Carolus said.
However, Ngqula had concluded a contract sponsoring Argentinian golfer Angel Cabrera over a three-year period to a minimum value of R21-million, and a contract sponsoring the ATP from 2006 to 2009 for an amount of R120-million.
“The board has referred this matter to its attorneys for further consideration as to whether SAA has any claims against any SAA employees or former employees involved in the conclusion of these contracts to recover the amounts expended by the company.”
Carolus emphasised that there had been no impropriety on the part of Cabrera or the ATP.
“SAA considers itself as bound by the contract with Mr Cabrera, and the ATP contract has already run its term and cannot be revisited.”
Carolus also said the KPMG report had revealed that companies in which Ngqula and his wife had an interest obtained rights to a Sunshine Tour golf event, which became known as the Africa Open.
“Mr Ngqula was involved in securing sponsorships for the event from a competing airline while still employed by SAA at a time when he was in the process of terminating SAA’s sponsorship of the SA Open golf tournament.”
The board, however, had assessed the costs and benefits of pursuing any claims in this regard and was of the view that there would not be a material benefit to the company to do so.
Turning to a catering contract in respect of regional and domestic flights, the report had shown that the process followed in respect of the tender evaluation had breached SAA’s procurement policy.
While the catering consortium’s foreign partner withdrew from the tender process, the local member of the consortium had objected to the termination of negotiations.
“SAA has responded through its attorneys disputing the validity of the contentions and it is unclear whether any litigation will arise but should this happen, SAA will defend it.”
Carolus confirmed that the KPMG forensic audit — comprising six volumes — had been handed to the Commercial Crimes Unit as well as the Auditor General.
“We will shortly be addressing Parliament regarding the report,” Carolus added.
She 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.
She said she hoped that closure had now been achieved. — Sapa