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Myeni 'profoundly misleading' on Airbus deal – commission

Jun 19 2017 18:35
Lameez Omarjee, Fin24

*Update: The article includes comment from Fedusa on the Companies Tribunal hearing on Dudu Myeni's fitness to hold office.

Pretoria – South African Airways (SAA) board chairperson Dudu Myeni misled the public enterprise ministry and shareholders about the Airbus deal, a tribunal heard on Monday.

According to Robin Pearse, lawyer for the Companies and Intellectual Properties Commission (CIPC), the notice of compliance it issued to Myeni in November 2016 was valid. Pearse was speaking at the Companies Tribunal at the Department of Trade and Industry on Monday.

Myeni’s counsel, represented by Francois van Zyl, had argued that the notice issued to her was invalid. He said that his client had mistakenly thought that a resolution had been reach for two aircraft and not 10.

READ: SAA Airbus deal: 'Myeni made a simple mistake'

But after lunch, the panel reconvened and Pearse unpacked the reasons why Myeni’s conduct was wrongful, and why there had not been any confusion as suggested by her counsel.

Pearse explained that the Airbus procurement dated as far back as 2002, when SAA could no longer meet its financial commitments; a reformulated contract was constructed in 2012. 

Pembroke stepped in as a financier for SAA, and it was agreed on May 27 2013 that it would fund 10 aircraft. The board agreed that a second set of 10 aircraft would possibly be funded by a local financier. “It was a resolution, undisputed in the papers, undertaken by the board,” said Pearse. However, this section of the minutes may only have been signed off later in July.

On the argument that Myeni had mistakenly thought two aircraft would be financed, a transcript from a meeting on June 2 reveals that a colleague corrected Myeni by indicating 10 aircraft would be financed, said Pearse. 

However, according to documents sent on June 20 to then public enterprises minister Malusi Gigaba, Myeni informed the minister that the board had resolved that only two aircraft would be financed by Pembroke. She added that SAA would explore local financiers such as the Development Bank of South Africa and the Public Investment Corporation.

“This is a profoundly misleading statement,” said Pearse, as the board had not made the resolution. “The board had not decided on any such thing, and did not change its position on from May 30.”

Subsequently Myeni wrote another letter to the minister on July 11, indicating the correction to 10 aircraft and not two. This letter suggests that three resolutions were reached when in fact there had only been one. Pearse called these communications “untruthful” and “misleading”.

He added that Myeni’s letter on July 11 did not state that she was mistaken. “She did not say ‘I am mistaken, I am sorry I misrepresented’.” 

Further, Myeni’s intention to seek local funders shows that this decision was not a matter of misunderstanding.

Compliance notice 

In early 2015, Pearse said that the commission received two letters requesting an investigation against Myeni regarding her fitness to hold office. However, the integrity of these documents was questionable. As a result the commission afforded Myeni an opportunity to respond to allegations made against her, in addition to meeting with four other SAA directors.

A report from her lawyers was sent to the commission, but Pearse said this did not vindicate her position. Efforts were made to receive more information from Myeni, but these were ignored, explained Pearse. 

“At that point the commission had not clarified whether there was a resolution, but it had letters which had been profoundly misleading to the minister. It is in that context that we issued a compliance notice,” said Pearse.

The commission concluded it had reasonable grounds to issue the notice, namely that insofar as there had been a resolution, there was no record of it, hence an issue of compliance.

Secondly, if there was no resolution, Myeni acted in contravention of her fiduciary duties.

The panel - which included PJ Veldhuizen, Bongi Zulu and Khashane Manamela - asked if an investigation was launched based on the two requests the commission received in 2015.

Pearse explained that the documents were not a firm foundation to initiate an investigation, but instead the commission exercised its powers to monitor compliance based on the letters. He affirmed that Myeni was given fair opportunity to respond and that the process had been thorough and transparent.

He added that an investigation is not a prerequisite to issue a compliance notice.

The panel reserved judgment. It will be issued electronically to the parties at a later stage. 

The Federation of South African Trade Unions (Fedusa) issued a statement in which it welcomed the hearing. 

“Ethical leadership in SAA is critically needed to turn the ailing national carrier around to sustainability and profitability, as South Africans and the weak economy can no longer afford to continuously bailout SAA,” said media officer Frank Nxumalo.

“The airline has suffered losses of more than R10.5bn over the past five years and the situation has deteriorated under the leadership of Myeni.”

In January Fedusa filed a Section 77 Protest Action application to the National Economic Development and Labour Council (Nedlac) related to the lack of “ethical and competent” leadership at state-owned enterprises. Fedusa raised the importance of strengthening whistleblower legislation.

Fedusa’s application will be heard by Nedlac on Wednesday. 

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saa  |  dudu myeni  |  companies  |  industrial

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