6 reasons listed why court must declare SAA's Dudu Myeni delinquent | Fin24
 
  • New Notes

    Long queues have formed in Harare after Zimbabwe released new bank notes and coins.

  • Open Book

    Former President Jacob Zuma says the public protector can access his tax records.

  • Electricity

    Sowetans should pay rate of R150/month to foster a payment culture, says an ANC councillor.

Loading...

6 reasons listed why court must declare SAA's Dudu Myeni delinquent

Mar 08 2017 15:04
Lameez Omarjee

Johannesburg – Under the leadership of Dudu Myeni, South African Airways (SAA) lost R10.6bn over a period of five years, according the Organisation Undoing Tax Abuse (OUTA) and the SAA Pilots Association (SAAPA).

The organisations allege that this has been brought on by “misconduct” by the SAA board under the leadership of Myeni.

As a result, they have filed court papers at the North Gauteng High Court to declare Myeni a “delinquent director”, as the situation at the airline has “worsened” under her leadership.

If the order is granted, Myeni will not be allowed to be appointed as a director or in an executive position of any organisation in South Africa for a minimum of seven years, Ben Theron, OUTA portfolio director for transport, told journalists at a press briefing at the Gordon Institute of Business Science on Wednesday.

READ: OUTA turns to court to declare SAA's Dudu Myeni 'delinquent'

OUTA and SAAPA allege that Myeni abused her position as director to advantage herself and knowingly harm SAA.

The court papers outline six allegations related to botched deals and other governance issues against Myeni.

Appointment of BnP Capital

In April 2016, OUTA stopped the conclusion of a contract in which BnP Capital Services would be appointed transactional advisor for the R15bn debt restructuring of the SAA board. The papers show that SAA did not require a transactional advisor as advised by the Group Treasurer, said Theron. Further the Financial Services Board (FSB) had suspended BnP Capital’s licence.

READ: Outa unveils shocking facts about SAA contractor

The court papers detail how the procurement of BnP Capital was flawed. No due diligence was conducted on the firm, and a fee significantly higher than market related fees for the service was approved, the papers show.

Illegally extended BnP Capital’s  mandate

The papers also reveal that SAA extended BnP Capital’s mandate as transactional advisor to include the sourcing of funds.

The board passed the extension despite the fact that BnP was the sole bidder in the process and that the scope of Transaction Advisor never included the sourcing of funds originally. Further, BnP did not have an FSB licence and SAA had not conducted due diligence on the firm, the organisations allege.

READ: SAA ignored procedure in R14.6 billion contract - report

There was no evidence that BnP Capital had the capability to source funds. The SAA Treasurer had received quotations for sourcing funds at a lower cost than BnP Capital.

Myeni was the first board director to vote in favour of the extension. The extension would see BnP Capital’s shareholders benefit by R256m.

Cancellation fees for BnP Capital

Following the cancellation of the sourcing of funds agreement, BnP Capital sought R49.9m in cancellation fees. OUTA labelled this fee as “excessive and irregular” in the papers.

READ: SAA’s Myeni wants R50m cancellation fee for BnP - report

Despite the chief financial officer, chairperson of the audit and risk committee finding this unlawful, Myeni supported the payment of the fee.

Emirates deal

On January 19, 2015, Emirates had proposed an Enhanced Strategic Partnership deal with SAA. Previously, this was the most “profitable” commercial relationship for SAA. By June 2015 the partnership between the airlines had generated R170m profit annually for SAA.

The new deal would result in a financial gain of R2bn to SAA. It would give SAA an opportunity to ensure greater access and connectivity to global flight routes. It would widen SAA markets and facilitate its expansion and growth, said the papers.

The board approved the proposal following the advice of the Operational Review Committee, appointed by then acting CEO Nico Bezuidenhout.

However Myeni stepped in and instructed Bezuidenhout not to sign the memorandum of understanding (MoU) over reservations President Jacob Zuma had of the deal.

In the papers OUTA highlights that the president has no authority to interfere with the signing of the MoU.

This compromised the relationship between SAA and Emirates and SAA suffered “significant” reputational harm.

The Airbus deal

In March 2015, the board resolved to approve a swap transaction between the airline and Airbus. SAA would lease five aircraft on an operating lease basis for 12 years. If SAA defaults on the swap transaction, it would be subject to a cross default clause with regard to all of its transactions with Airbus, the papers explained. 

The swap transaction would alleviate SAA's liquidity problems.

The acting CEO and the chief financial officer signed the execution documents and the minister of finance unconditionally approved the transaction. 

READ: SAA, Airbus R6bn deal under scrutiny

However, Myeni contributed to the unnecessary delays to the Airbus swap deal by failing to sign the execution documents promptly. 

“She willfully and knowingly created unnecessary delays in the process by calling for reviews, a South African partner and an illogical rand based transaction,” Theron said at the briefing. “She undermined existing approvals by the board and the minister and willfully undermined due process in an effort to spoil this critical deal.”

Disregard of EY report

Professional services firm EY delivered a report in December 2015 regarding the procurement and contract management of SAA, according to the court papers. 

READ: Report shows improper deals behind huge SAA losses

It revealed examples of overpayment, irregular tender practices, conflicts of interest and informal and suspicious contracts.

Myeni and the board had not addressed the issues, the organisations allege.

Read Fin24's top stories trending on Twitter:


saapa  |  saa  |  outa  |  dudu myeni  |  state-owned enterprises
NEXT ON FIN24X

 
 
 
 

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

What do you think about private healthcare in SA?

Previous results · Suggest a vote

Loading...