South African airline ordered to pay back the money on unlawful R85 million contract

The Special Investigating Unit (SIU) has secured a judgment to set aside South African Airways’ (SAA’s) decision to extend an agreement with another local aviation company, Flyfofa Airways.

The SIU formally announced that it obtained a judgment from the Special Tribunal that declared SAA’s extension of a dry-lease agreement with Flyfofa for a Boeing 737-300 freighter unlawful.

As a result, the SUI is now set to recover the profits Flyfofo made from the agreement, which was valued at just over R85 million.

According to the Tribunal, it found that SAA’s board decision to extend the lease without any procurement process or approval from the National Treasury for deviation was not taken in accordance with constitutional provisions.

The extension was set for a period of 36 months from 1 July 2019 at a total cost of R85,340,863. The Tribunal said this was not done in a fair, equitable, transparent, competitive and cost-effective manner, as required by Section 217(1) of the Constitution.

Consequently, the Tribunal has ordered Flyfofa to provide the SIU’s attorneys with a full account with supporting documents of all amounts received from SAA within 30 days of 11 September 2026.

Furthermore, Flyfofa has been ordered to pay the SIU within 14 days for any amount that is considered profit or unjustified enrichment.

This money must be paid back with interest, calculated at 11% per annum, from the date of the order.

This matter traces back more than a decade to 2015, when SAA circumvented standard procurement protocols to assign its domestic cargo operations to Flyfofa.

The state air carrier did this despite internal checks flagging Flyfofa as a high-risk option due to financial losses over the last two years and a solvency ratio of 0.1.

A year later, in November 2016, SAA signed a three-year agreement to dry-lease two Boeing cargo planes from Flyfofa, which would expire in 2019.

When the contract expired in July 2019, SAA extended the lease by another 36 months for one cargo plane.

However, the aircraft in question was grounded at the time. Despite this, SAA continued to pay Flyfofa for the plane even though it was not in use for part of the contract period.

In its decision, the Tribunal said that the extension was not authorised by any properly recorded, approved, and reported deviation in accordance with Treasury Regulation 16.A.6 and the National Treasury Instruction Note 3 of 2016/17.

It therefore ruled that the extension was unlawful and was set aside on the grounds of legality.

Flyfofa was then ordered to report on all revenue it received while the aircraft was grounded, including whether any substitute aircraft or alternative service was provided.

Taxpayers bear the cost of misconduct

Judge Chantal Fortuin said that the SAA Board’s conduct in the matter warranted criticism.

“This conduct has a cost, and it is not only to the SAA alone. This is a cost to the public,” she said.

The Tribunal also ordered the Registrar to send the judgment to the Minister responsible for SAA, as well as SAA’s directors and board chairperson, for consideration of whether appropriate steps should be taken against those who served on the board when the extension was granted in 2019.

It referred the airline to various legal avenues through which individual actors or officials involved in the extension may be held personally accountable.

This includes launching financial misconduct proceedings under the Public Finance Management Act, applications to declare directors delinquent, or place them on probation under the Companies Act.

The SIU may also conduct further investigations or civil recovery proceedings. Those involved could also be referred to the National Prosecuting Authority or the Directorate for Priority Crime Investigations if their conduct constitutes corruption.

The SIU’s probe was authorised by President Cyril Ramaphosa under Proclamation R2 of 2020 to investigate procurement and governance irregularities at SAA.