Armscor grounds indebted defence department

State-owned arms procurement agency Armscor has halted all travel services to the Department of Defence over R310-million in unpaid invoices dating as far back as 2021.

The company’s withdrawal of services, including the mana­gement of two travel offices as well as integrated travel solutions, comes as its board collectively facepalmed and decided they had enough.

Armscor’s AB Travel, a division of AB Logistics, manages flights, car rentals, bus bookings, shuttle services and accommodation for the department’s personnel.

In terms of the service level agreement, the department is responsible for all travel costs and charges, including, without limitation, prepaid ticket charges, rush ticket deliveries, invoice or ticket reprints, penalties, waivers, cancellation charges, airline service fees, void processing fees and penalty fares incurred.

“Despite the numerous requests by Armscor to the DOD since 2021 and the continuous demands for payment of the outstanding amounts, the non-payment of overdue amounts due to Armscor has remained unresolved, and we have unfortunately not been successful in getting the invoices paid or even reduced substantially,” said Armscor CEO advocate Solomzi Mbada.

Mbada said in a letter dated May 30 to the acting secretary of defence that a workable solution had not been reached and the DOD failed to provide funding for the cost of the travel services. “Armscor has run out of options to mitigate the matter and is not in a position to carry the cost of the travel services.”

He said Armscor had also now received correspondence from the office of the chief of the South African Army disputing the outstanding amount,  despite the provision of detailed supporting documentation to its account manager.

But Mbada was not backing down, saying that “the continuation of travel services to the DOD without the recovery of the cost of such services is creating a substantial risk to the management of the business of Armscor, and it would be irresponsible and reckless to proceed with such services on this basis”.

He added: “The board of directors of Armscor and the executive committee have a duty to act in the best interest of the organisation and must exercise due care and diligence in carrying out their duties. Accordingly, it was decided not to continue with the funding of the travel expenses of the DOD.”

He said Armscor would therefore have no other option but to suspend the offering of travel services to all Arms of the Service with overdue invoices that date prior to April 1, 2024, in the event that an urgent payment arrangement cannot be agreed upon with the department.

Said Mbada: “To date, the outstanding account has escalated to an amount of R310 261 863. In the interim, Armscor shall only continue to provide the travel service to the DOD where the necessary cost in respect of each request accompanies such a request.”

He said the recovery of the outstanding amount was of the utmost importance to Armscor, and any further delay would jeopardise  Armscor’s ability to execute its statutory mandate.

“Your urgent intervention and assistance are, therefore, requested to resolve the current impasse.”

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