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

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.