'SA Express contract with NW transport was irregular'

SA Express' general manager for commercial Arson Phiri testified on Thursday.

He said the contract was to make the routes profitable in a period of five years, which was unusual as it would only require at least two years for the route to make money.

Phiri said the two agreed that SA Express would get subsidies for each of the five years: R14.6 million for the first year, R4.8 million for the second year, R4.5 million for each of the third, fourth and fifth year.

"Ordinarily in the aviation industry, one year should be enough to develop a route to a profitable situation. I do believe that extending it for five years is an outlier, its uncommon in the industry and secondly the quantum in the first year one just looks a bit excessive to develop a route.”

He said it gets more unusual as the contract reflected duplicates for more subsidies.

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Advocate Veruschka September: "The last category of costs is termed operation costs and for each of the two routes an amount is allocated at R11 million for each of year one to five.”

Phiri: "Chair, this is where I got confused because the way core subsidies are broken down and concessions does not tie in with the way the agreement was structured and it appeared to me there was a duplication. It seems to me there was some sort of indulgence and repetition which is worrying." 

On Wednesday, SA Express's former general manager for security, Timothy Ngwenya, testified that he was given voice recordings by the owner of Koreneka Trading and Projects, a company which was part of the agreement, Babadi Tlatsana, which implicate former Minister of Public Enterprises, Lynne Brown, former Transport Minister Dipou Peters and former North West Premier, Supra Mahumapelo, among others from benefitting from the proceeds of the contract.

Tlatsana is expected to testify before the commission on Friday.