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Parliament to get legal opinion on legitimacy of SAA bailout
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Parliament is set to obtain a legal opinion about the legality of National Treasury’s recent decision to invoke section 16 of the Public Finance Management Act PFMA to give another lifeline to cash-strapped South African Airways (SAA).

Alf Lees, Democratic Alliance spokesperson on finance, requested in a letter that the standing committee on finance get legal advice on whether Finance Minister Malusi Gigaba’s decision was legitimate or not.

On Friday, Gigaba announced that SAA would grant another bailout – this time for R3bn – to prevent the airline from defaulting on a loan from Citibank.

In June this year, National Treasury also invoked section 16 to help SAA repay its R2.2bn loan to Standard Chartered Bank which had refused to extend its loan to the national carrier.

In his letter, Lees argued that Gigaba and the executive should have foreseen as early as August 24 that SAA would have to get a cash payment and he could have tabled a special Appropriations Bill and for Parliament to consider such a Bill.

“This would have allowed a full month for the Minister to consider such a Bill,” Lees said.

Gigaba and the entire executive were aware of the need for a cash bailout but failed to act, Lees said, in reference to a confidential Cabinet memo in which Gigaba brought the matter of a special Appropriations Bill to the attention of Cabinet.

Legal opinion

Yunus Carrim, chairperson of the standing committee on finance requested that parliamentary legal advisor Frank Jenkins obtain a legal opinion on whether National Treasury acted lawfully in terms of invoking section 16.

National Treasury Director General Mogajane Dondo told members of Parliament in response to the matter that the consequences would have been catastrophic had National Treasury not invoked section 16.

“We had to use what was available to us at the time. We chose this route and a default on SAA’s side would have had a domino effect. Had SAA defaulted, R16.9bn of state guarantees would have kicked in,” Dondo said.

He said this could also mean that other state-owned enterprises (SOEs) would have to be forced to pay back various lenders and this, in turn, could have meant that R250bn-plus of state guarantees could have been triggered.

“We can bring down the country if that happens,” Dondo said.

He stressed that SAA is not receiving money from the government without any conditions. According to Dondo, SAA’s other lenders agreed to extend the loan terms but are uncomfortable with SAA chairperson Dudu Myeni at the helm.

“A commitment has been made that the issue (of Myeni’s chairpersonship) will be addressed at our earliest convenience. In our conversations with lenders – who all extended apart from Citibank – we undertook to deal with their conditions,” Dondo said.

Source: Fin24
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