Treasury raised concerns but played no role in SAA deal, says Dondo Mogajane

The National Treasury has revealed that it was not part of the process of disposing of the 51% of the government’s shareholding in SAA to a strategic equity partner last year.

Treasury director-general Dondo Mogajane has told parliament’s public accounts watchdog, the standing committee on public accounts (Scopa), that the Treasury never gave any consent to the transaction nor could it vouch for the compliance of the process followed by the department of public enterprises in this regard.

“It is important that the committee notes that National Treasury has played no role in the selection process of the preferred strategic equity partner (SEP) including the conceptualisation, negotiation and finalisation of the terms and conditions relating to the transaction,” he said in a letter dated March 18, addressed to Scopa chair Mkhuleko Hlengwa.

He said the Treasury raised concerns in relation to some of the terms and conditions agreed to between the preferred partner and the department of public enterprises (DPE).

“It must also be noted that the Treasury was consulted only after the DPE had concluded the memorandum of understanding and agreed on the principles of the transaction with the selected SEP.”

The Treasury appeared before Scopa on March 9 where the committee asked for a written response to questions relating to the disposal of the majority of the government's shareholding in SAA.

In his letter, Mogajane said the Treasury was not in a position to indicate which process had been undertaken by the DPE as it did not play any role in the selection process of the preferred SEP, including the conceptualisation, negotiation and finalisation of the terms and conditions related to the transaction. 

“Was the process followed compliant? National Treasury is not able to state whether the process undertaken was compliant for the same reasons stated (above),” he said. 

He, however, revealed that the finance minister raised the Treasury’s concerns in respect of the terms and conditions of the transaction. 

“Therefore, the minister of finance only noted the intention of the DPE to dispose of the majority of government’s shareholding in SAA and raised Treasury’s concerns in respect of the terms and conditions of the transaction.”

Tito Mboweni was finance minister at the time.

Mogajane said the legal advice the Treasury sought indicated that approval in terms of section 54(2) of the Public Finance Management Act that was sought by SAA did not apply in this case.

He said section 54(2) of the act applies only when a public entity concludes a transaction mentioned under that section of the law. Furthermore, the disposal of majority shareholding in SAA had already been approved by the cabinet and no approval, concurrence or noting was required from the minister of finance in terms of the act.

“Therefore, the minister of finance only noted the intention of the DPE to dispose of the majority of government’s shareholding in SAA and raised the Treasury’s concerns in respect of the terms and conditions of the transaction.”

Section 54(2) states that: “Before a public entity concludes any of the following transactions, the accounting authority for the public entity must promptly and in writing inform the relevant treasury of the transaction and submit relevant particulars of the transaction to its executive authority for approval of the transaction:  

(a) establishment or participation in the establishment of a company;

(b) participation in a significant partnership, trust, unincorporated joint venture or similar arrangement;

(c) acquisition or disposal of a significant shareholding in a company;

(d) acquisition or disposal of a significant asset;

(e) commencement or cessation of a significant business activity; and

(f) a significant change in the nature or extent of its interest in a significant partnership, trust, unincorporated joint venture or similar arrangement.

At the time of publishing, the Treasury had not responded to questions about the concerns Mogajane says were raised about the transaction.

DA MP Alf Lees said he had submitted a parliamentary question to Godongwana to obtain the details of the terms and conditions that were of concern to the Treasury as well as what action the Treasury have taken to deal with these concerns.

The government announced a private consortium, Takatso, as its preferred strategic equity partner in June last year. Takatso consists of pan-African infrastructure investor Harith General Partners and local aviation group Global Aviation, the owner of low-cost carrier Lift.

Takatso chair Tshepo Mahloele is also chair of Arena Holdings, which publishes the Sunday Times, TimesLIVE and Business Day.

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