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SAA's BnP capitulation 'victory for whistleblowers, taxpayers'

Jul 21 2016 19:27
Carin Smith

Cape Town - The decision by South African Airways (SAA) to terminate the services of BnP Capital as a financial services provider to the airline is a victory for whistleblowers, the Organisation Undoing Tax Abuse (Outa) said on Thursday.

SAA announced earlier on Thursday that it had terminated its appointment of BnP Capital as transaction adviser and its appointment to source funds on behalf of the airline. According to SAA, the decision was communicated to BnP Capital on Wednesday.

Outa, however, claimed SAA has terminated the services of BnP because of its (Outa's) exposure and legal challenge to SAA's board members. Outa accused the national carrier of being complicit in behaviour "that would have enabled a virtually unknown middleman - Daniel Muhlangu of BnP Capital - to obtain a financing deal of over R250m".

Outa said it had served court papers on SAA at 13:50 on Thursday July 21 2016, "causing SAA to capitulate to its demands two hours later" by issuing the statement regarding the termination of its relationship with BnP Capital. The matter was scheduled to be heard in the South Gauteng High Court on Tuesday July 26 2016, according to Outa.

An investigation by Outa also revealed that a joint venture partner of SAA, Inline Trading 10, had fraudulently used the Financial Services Board (FSB) number of another company in bid documents. Outa also exposed the suspension of BnP Capital's FSB licence.

SEE: FULL STATEMENT: Outa exposes illegal SAA deal

Outa said it intends to report SAA's interim chief financial officer Phumeza Nhantsi and head of of its audit and risk committee Yahke Kwinana to the SA Institute of Chartered Accountants and lay criminal charges for fraud against Mahlangu and the directors of Inline Trading 10.

READ: SAA could face court action despite putting ‘unlawful’ deal on ice

According to Ivan Herselman, Outa's director of legal affairs, this is the first part of a longer-term strategy to hold the board members and directors of SAA (and other entities) to account for what Outa deems breaches of their fiduciary duties and responsibilities.

"Outa will fight to protect the rights of each whistleblower who came forward to provide us with the information it required to expose this and other unlawful activities within SAA," Herselman said.

The DA also welcomed the decision by SAA to cancel the contract with “boutique financier” BnP Capital.

"It is staggering that the decision to appoint BnP was ever made and mind-boggling that it took a concerted effort to force SAA to save the taxpayer some R171m," Alf Lees, the DA's deputy shadow minister of finance, said in a statement.

In the DA's view, SAA is being run in a reckless way and should be placed under business rescue.

READ:  SAA must be put under business rescue - DA

"It is clear that without further cash injections SAA will not be able to pay its debts as they become due in the ordinary course of business," said Lees.

"The minister of finance has not been able to implement the turnaround plan that he announced in February 2016. This stalemate between Minister Pravin Gordhan and SAA board chair Dudu Myeni is rapidly driving SAA to total collapse and simply can’t be allowed to happen to the national carrier."

Nedbank tender

News24 exclusively revealed on Tuesday that SAA's controversial appointment of BnP Capital was not only expensive, but also put on hold an approved banking tender to Nedbank. News24 revealed that SAA's board approved the awarding of banking services to Nedbank on May 27, for five years, at an estimated cost of R278m.

But the awarding of this contract would be on condition that the "Nedbank contract [be] deferred subject to [the] debt consolidation process finalisation". BnP Capital was appointed to advise SAA on how to restructure its R15bn debt.

This would be done for a fee of R256m - even though SAA's treasurer, Cynthia Stimpel, said it could be done at a fraction of the cost. BnP Capital won the contract in March ahead of several well-established companies including Nedbank, Regiments and Deloitte & Touche.

According to SAA, it contacted BnP Capital on July 8 2016 to enquire specifically about claims that had been made involving the latter’s FSB licence.

SAA emphasised in its statement that no payments had been made to BNP Capital. The decision to terminate the service was arrived at after a review of the award to BnP Capital.

Stimpel's suspension

On Stimpel's suspension, SAA said she was placed on suspension by SAA management on July 5 2016 for misconduct as "she had acted in contravention of SAA’s code of conduct".

According to SAA the decision to suspend her had nothing to do with media reports suggesting she had allegedly objected to SAA’s decision to award a tender to BnP Capital.

"Her suspension remains in place pending the finalisation of an investigation and a possible institution of a disciplinary hearing. Michael Kleyn has been appointed as acting group treasurer," SAA said.

"SAA remains committed to ensuring that the financial management of the entire group improves and the airline’s finances are turned around. In doing so, SAA also welcomes within the confines of the law (including its internal procedures) any report of a whistle-blower."

SAA said employees are reminded that disclosures in terms of the prevailing law are protected if they pertain to information about impropriety and have been made to the right person, according to the scheme established by the Protected Disclosures Act 26 of 2000 (PDA).

"Leaks of information by employees to entities which do not qualify in terms of the provisions of the PDA do not constitute protected disclosures under the PDA," the airline said.

ALSO READ: EXCLUSIVE: SAA banking tender deferred due to debt consolidation

bnp capital  |  saa  |  aviation  |  airlines
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