SAA boss Dudu Myeni and President Jacob Zuma. Picture: GCIS
SAA boss Dudu Myeni and President Jacob Zuma. Picture: GCIS

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The scheme to hijack South Africa’s national carrier financially has since crashed and burned, thanks to the heroics of Nene, Gordhan and others. Nevertheless the implications of what was attempted needs to be understood, as the ramifications are profound.

Pre-flight check

In 2002, SAA entered into a purchase agreement with Airbus to acquire A320-200 aircraft. From a total order of 20x A320s, the first ten were delivered in 2013. But in order to defray costs, SAA immediately sold the aircraft - with the approval of Airbus - to Pembroke (the aviation division of Standard Chartered, an international bank) and then SAA leased the aircraft back [1].

The final order of 10x A320s were set to be delivered between 2015 and 2017, with a series of pre-delivery payments falling due. Prior to delivery of the aircraft, SAA was endemically cash-strapped, and so was struggling to fulfil its obligations. Furthermore, because of escalations built into the original purchase agreement with Airbus, the amount due for the 10 aircraft exceeded their market value.

To rectify the onerous contract, SAA and Airbus came up with a sensible, and even elegant, solution [2]. Since SAA's previous purchase had resulted in an immediate sale and lease-back, Airbus agreed to cancel the purchase agreement and the outstanding order of 10x A320s, and instead it would lease to SAA 5x A330-300s (a more modern, more fuel efficient, and longer ranged aircraft) [3][4].

This swap transaction would result in Airbus refunding SAA R1.3 billion of payments the airline had already made towards the as yet undelivered ten A320s, it would absolve SAA of the outstanding R5.2 billion pre-delivery payments for the A320s, and it nullified R1 billion in payment impairments resulting from the price versus market-value difference [5].

In September 2015, the swap transaction was unconditionally approved by treasury, under Nene [6].

Yet, the SAA board and its chairperson, Duduzile (“Dudu”) Myeni, refused to sign off on the deal [Fin24].

Myeni is said to be a close personal friend of Zuma and is seen as untouchable [7][8]. There were rumours that their relationship was romantic [9][10], but this was denied by Zuma in a December 2015 statement, a couple of days after he had fired Nene [11].

Myeni is the chairperson of the Jacob Zuma Foundation. Sam Sole reported in August 2012 for Amabhungane that the Foundation’s memorandum of association states that it is a public benefit organisation, promoting community-based projects and the provision of educational programmes for “abandoned, abused, neglected, orphaned or homeless children” [12]. In that same article, Sole stated that Myeni ran the foundation from her private house in Richard’s Bay [13]. As at August 2012, the Foundation had not released an annual report since its registration in 2008 [14], and in a January 2015 Daily Maverick article by Rebecca Davis it stated that there appeared to be little transparency about the foundation’s operations or funding [15].

City Press reported in July 2015 that Myeni was making tens of thousands of rands selling access to Zuma, using her private company, Dudu Myeni Consulting, which charges for meetings with and introductions to “HE”, an abbreviation for His Excellency President Jacob Zuma [16]. In that same subject, City Press stated that Myeni, speaking through her lawyers, refused to comment on detailed questions, despite initial undertakings to do so in telephone conversations and emails [17].)     

Fly in the ointment

Myeni - without the agreement or involvement of SAA executives [18][19], but claiming as much [20] - approached Airbus directly to renegotiate the swap transaction.

She insisted that an unnamed “African leasing company” was to act as financier in a straight-out purchase of the aircraft [21][22], after which it would lease the aircraft to SAA. Myeni stated that the financier had R6 billion available, and that her hand-picked transaction advisor would manage the process [M&G] [23][24].

The media has since established that Quartile Capital was the African leasing company in question, and its chief executive, Modise Motloba, was Myeni’s transactional advisor [25]. (How the company intended financing the purchase remains a mystery.)

Nevertheless, at the time, several SAA executives were in the dark about the identity of the company Myeni was lobbying for [26][27][28]; and Myeni failed to take the public into her confidence (so it was left to the media to uncover the truth). Treasury, too, was not informed of the identity of the local leasing company, or how it intended financing the deal [29], or even what the proposed leasing terms were - which treasury was concerned may be “more onerous than assumed by SAA” [30].

After Myeni had met with Airbus, the head of sales at Airbus called the then SAA CFO Wolf Meyer and allegedly said, “What the f**k is going on here?” [31]

[For those who are interested, Myeni made Airbus two payment proposals, both resulting in SAA leasing the aircraft from the African leasing company: 1. The leasing company lends money to SAA-> SAA pays Airbus and receives the aircraft -> SAA sells the aircraft to the leasing company -> the leasing company leases the aircraft to SAA; or 2. The leasing company buys the aircraft directly from Airbus -> the leasing company then leases the aircraft to SAA [32]. Myeni showed no preference for either option, as long as, in the end, SAA leased the aircraft through the African leasing company.

Myeni eventually justified her actions by stating that SAA would prefer leasing the aircraft from a domestic company rather than Airbus or any other non-local company, because that way it would ensure that SAA is not exposed to currency fluctuations, as the lease agreement would be rand-denominated.

However, aviation experts together with an ex-SAA board member, Russell Loubser, have rubbished Myeni’s claims, on the basis that the domestic financier would price in the dollar-denominated asset into the contract [33][34][35].

SAA in the doodoo

In short order, Airbus rejected Myeni’s proposal, as it failed to meet its internal compliance standards [36].

Since the swap transaction had, by all accounts, fallen through, Airbus issued a formal letter to SAA for the (now overdue) R1.6 billion pre-delivery payments, based on the original purchase agreement[37].

As a result, a memorandum, drafted by the then CFO Meyer to the SAA board, spelt out the airline’s precarious financial position relating to the Airbus transaction swap [38][39]. (SAA successfully applied for an urgent gag order of the memo through the courts, but the High Court later set aside the gag, marking a significant victory for media freedom).

By not accepting the swap transaction, the memo stated that SAA was required to make Airbus pre-delivery payments, but that the airline did not have sufficient cash resources to pay Airbus as well as all its other debts [40].

SAA had been given R14.5 billion in state guarantees, but only R3 billion remained [41]. (The national carrier is said to currently require at least R14 billion more [42]). The memo warned the board that should Airbus issue a notice of default or terminate the purchase agreement for breach, it could trigger cross-default clauses on other loans and leases – meaning that banks and lessors have the right to call for full repayment of all outstanding debt (plus claims for damages), which would amount to some R11 billion [43]. This would result in financial distress and/or insolvency for SAA.

The memo stated that by having not accepted the swap transaction, there were reasonable grounds to show that the board had carried out its business “recklessly” or “negligently”, and under such circumstances, any director of the company was liable for any loss, damages or costs sustained by the company.

The memo concluded that SAA was financially distressed, and thus the board had to either place SAA in Business Rescue, or the directors were obliged to urgently file for liquidation. It was recommended that the board secure funding, and immediately revive and finalise the swap transaction with Airbus [44].

On 3 of December 2015, treasury determined that SAA had failed to produce any evidence that the airline would be in a better financial position if it pursued the arrangement Myeni proposed. Furthermore, it determined that, "A default would have severe negative consequences for SAA and could have spill-over consequences for the country as a whole. Specifically it would negatively impact on government’s capacity to deliver on its social and developmental objectives." [45][46] That same day, Nene ordered SAA’s chair and board to ratify the swap transaction before 21 of December, or the SAA board would be deemed to have breached the Public Finance Management Act. This would constitute an act of financial misconduct, which could be grounds for sanction against the board [47]. The police started a probe into SAA.

Nene’s directive was said to have incensed Myeni. She, two other board members, and the acting-CEO Musa Zwane, wrote to Zuma to intervene (Business Report) [48]. During this period, Nene was believed to have been on the verge of announcing a new SAA board, as was his right as finance minister [49][50].

On the 9 of December 2015, Zuma fired Nene (just hours after the SAA board held a meeting) [51]. Consequently, the original purchase for 10x A320s remained enforceable by Airbus, and R1.6 billion pre-delivery payments became payable on 21 of December 2015 [52][53].

On the 13 of December 2015, Gordhan was appointed new finance minister.

On the 21 of December 2015, the SAA board approved the transaction swap at the 11 hour [54].

And, on the 28 of December 2015, the lease agreement between SAA and Airbus was officially concluded [55][56].

That’s how close we came to the liquidation of South African Airways, thanks to the negligence and recklessness of Myeni and her supporters on the board.

The good, the bad, and the ugly

Myeni’s stated reasons for trying to renegotiate the Airbus lease deal were, according to ex-SAA board member Russell Loubser, just plain “stupid”[57]. So the question remains – What were her real intentions? Some have speculated that it was an attempt to solicit “rents” [58] or “incentive payments”[59]. 

Loubser (in an interview with Alex Hogg) said that to get to the bottom of what was attempted at SAA, all one needed to do was “shine the sunlight” onto the African leasing company involved in the renegotiations and then “you’ll see the largesse that is being dished out.”[60] So let’s start there.

The African leasing company that Myeni referred to in her dealings with Airbus were said to have secured finance of up to R6 billion [61][62]. But from whom? Who was hiding behind the African leasing company?

In a letter to the SAA board written in October 2015 (and seen by M&G’s amaBhungane), Myeni wrote, “a South African third party has indicated that it wishes to make a funding proposal … This consortium comprises both private and state-controlled financial institutions” [63][64]. And at a standing committee of finance (Scof) in Parliament in November 2015, Myeni asserted that local banks as well as the Public Investment Corporation (PIC) and the Development Bank of Southern Africa (DBSA) had expressed an appetite for the deal [65]. Nene determined that these assertions were misleading and unsubstantiated [66][67].

So the question arises: why did Myeni structure a deal to purchase the aircraft through the African leasing company – and the “third party” it represented – when they did not actually have the “R6 billion” to finance it?

In answer, it is possible that Myeni, her supporters, and backers found themselves in a Mexican standoff. The “third party” could not raise the funds for the renegotiated Airbus deal until Nene approved it (because it would then be government guaranteed), and Nene would not sign off on the deal until the third party proved they had the funds and had spelt out their terms and conditions.

In other words, the third party was demanding Nene sign a blank cheque, so that they could use it as collateral to raise the necessary funds; and Nene refused to sign on the dotted line until they had proved their side of the bargain.

Someone had to blink, and it ended up being Nene, by being fired.

(Fiona Forde of the Financial Mail reported that in a statement issued from Zuma’s office a couple of days after he axed Nene - when the president was forced to explain his reckless move in an effort to contain the economic chaos that followed - he said it was because the SA government had identified Nene as the preferred candidate to head the Africa Regional Centre of the New Development Bank, BRICS Bank. However, nearly two months after Nene’s dismissal, the Financial Mail was informed by him that he was still in the dark about the job and had not had any communication with either Shanghai or Pretoria. “I still have not received a formal offer,” Nene said [68][69] . The Rand Daily Mail’s headline read simply, “Zuma lied about Nene ‘job’ at Brics.”[70] Observers have expressed the perception that Zuma’s reasons for dropping Nene had little to do with BRICS and everything to do with needing fuller access to the fiscus for his pet projects[71].)

Now, if van Rooyen (Zuma’s newly appointed featherweight finance minister, after Nene’s departure) had stayed on longer than four days, and had signed off on Myeni’s SAA deal – What then?

The third party – obscured behind the African leasing company - would have most likely raised the majority of funds from government lending institutions (such as the PIC, DBSA, FDC etc) on the strength of the lease deal being guaranteed by national government. They would have then purchased the aircraft fleet, after which secured the rights to lease billions of rand’s worth of aircraft to SAA, all cloaked in a dense structure that is built for “rents”, “largess”, “incentive payments” etc.

Soap opera at 30 000ft

What makes Myeni’s 2015 attempted hijacking of the Airbus deal all the more remarkable, is that she had tried the scheme not once, not twice, but three times, including a procurement deal worth up to R70 billion [72].

But the intrigue doesn’t stop there – there was alleged bribery, mass resignations, people forced out, secret emails, and a cryptic sms…

In August 2012 the SAA fleet committee recommended the purchase of 23x long-haul A350 Airbus at a cost of up to R70 billion [73]; and the board, under Cheryl Carolus, approved the choice, as part of the board’s 20 year plan for the airline [74]. However, a month later, in September 2012, the public enterprises ministry, under Malusi Gigaba, said that there was no more cash for SAA, and so the programme had to be revised, to be aligned with a long-term strategy that was being developed [75]. M&G wrote that the ministry’s explanation of why the procurement process was placed on hold was called into question by allegations of a disturbing pattern of interference in procurement matters [76]. (Procurement demands for an African leasing company and an unknown transactional advisor, perhaps?)

In September 2012, after Gigaba delayed tabling the airline’s financial statements, seven out of 14 SAA board members and the chair, Cheryl Carolus, all resigned in protest [77].  Myeni was one of the board members not to resign. Two days after the mass resignations, Gigaba appointed Vuyisile Kona as SAA’s acting board chair. One week later, in early October 2012, CEO Siza Mzimela and key members of the fleet committee resigned.

Fast running out of personnel, SAA appointed Kona as acting-CEO while he retained his acting-chairmanship. In effect, the separation of powers at the airline had disappeared, thus endangering corporate governance [M&G].

Two weeks later, in late October 2012, Kona was invited by Gigaba’s special advisor, Siyabonga Mahlangu, to what was termed a “stakeholder” meeting at the Gupta family’s Saxonwold home in Johannesburg [Sunday Times] [78].

(As an aside, M&G reported that Mahlangu [79] was a key player in securing a deal for the Gupta-owned newspaper the New Age with SAA. Mahlangu denied putting pressure on state entities in this regard.)

The Saxonwold meeting was attended by Mahlangu, Rajesh “Tony” Gupta, Zuma’s son Duduzane, and Free State premier Ace Magashule’s son Tshepiso. (The Sunday Times spoke to several sources who had knowledge of the meeting).

Tony and Duduzane are directors of the black economic empowerment group, Mabengela [80][81][82], which was involved in purchasing a minority share of the Shiva Uranium mine within the Gupta-owned Oakbay Resources and Energy (Oakbay). In a press statement in 2010, Oakbay highlighted a consortium of black economic empowerment investors that formed part of the company’s shareholding, it included: Mabengela Investments; the Umkonto weSizwe War Veterans Women's Group; and the MK War Veterans [83][84].

Tshepiso (the Free State premier’s son), who was also present at the meeting, listed Mabengela as his employer.

The meeting was said to have dissolved after Kona allegedly refused a R500 000 cash offer from Tony; the Sunday Times article does not specify what the money was for, but that Kona said “No” and left. Kona later told at least one confidante that he was stunned by what had transpired at the meeting.

(According to the Sunday Times, Mahlangu and Tshepiso denied knowledge of the cash offer or that any illegal activities were discussed; attempts to speak to Kona by the newspaper were unsuccessful; and a spokesman for the Gupta family said that nothing unlawful was discussed and that the meeting was regarding possibly switching their corporate travel business to SAA).

After the meeting, Kona confided the events to his fellow board member Myeni. When rumours of the meeting began to leak, Mahlangu sms’ed Kona at the end of November 2012, saying "Uyangithengisa [you are selling me out]. Why did you let her know that u knew where she was going. U will compromise the mission." M&G said that it appears likely that the text message was in reference to Kona’s discussion with Myeni, who was appointed acting-chairperson of SAA a week later. While, a well-placed SAA source told M&G that, “The ‘mission’ was clearly this contract [for 23x A350s], all of these contracts.” The contract being considered at the time were for the 23x large long-haul A350 Airbus aircraft worth R70 billion[85], and the contract for the purchase of A320s was ongoing. (Mahlangu denied there was any connection between his text message and Kona’s meeting with the Gutpas.)

Almost immediately after Kona had arrived at SAA, he had demanded access to information about key, large contracts. But his efforts all ground to a halt not long after Mahlangu's November 2012 text message. Kona was removed as acting SAA chair, with Myeni assuming the position; the SAA security department began spying on him and would later send its reports to Myeni [Business Day]; the board began overruling him over appointments and union negotiations; in February 2013, the SAA board announced his “cautionary suspension” as acting-CEO; and in March 2013, Gigaba removed him from the board, citing a breakdown in trust.

[The above subsection is based on a 17 March 2013 article by Sabelo Skiti of the Sunday Times entitled “Guptas tried to ‘buy’ SAA boss with R500k”, and a follow up article by Sam Sole and Lionel Faull of the Mail & Guardian on 22 March 2013 entitled “R10bn contract behind the dogfight at SAA” .

A few months after these articles were published, the Gupta family sued the Sunday Times and the M&G for R500 million each. The Gupta’s court papers said the articles were “wrongful and defamatory” and were intended and understood by the reader to mean that Rajesh Gupta and the family were “dishonest, corrupt and deceitful”[86].

Both editors of the M&G and Sunday Times at the time called the lawsuit amount “ludicrous” and the M&G editor viewed it as more about intimidation than justice. The Sunday Times editor added that not only were they sure of their facts, but that they believed a trial would shed some much-needed light on the way the Gupta family does business in South Africa [87][88].

[From the information gathered, it appears the lawsuits are dormant, and the two newspapers did not apologise or retract their articles.] 

The Guptas have known business interests in the aviation industry.

A Bombardier jet is registered to the company Westdawn Investments [89], which is majority-owned by the Guptas and partnered with Duduzane Zuma. In August 2015, the jet was leased for the deputy president Cyril Ramaphosa’s trip to Japan (accompanied by a delegation) at a cost of R5 million to government [90].

Atul Gupta was a nonexecutive member of Comair and the Guptas owned a 5% stake in the airline (until Comair did a share buyback in February 2015) [91][92][93].

Peter Bruce wrote in Business Day that the Guptas have been keen on a stake in SAA for years and would happily take the opportunity if it arose [94].
In April/May 2013, Airbus had delivered the first batch of 10x A320s, and as stated earlier, the SAA board quickly resolved to sell the ten aircraft to Pembroke and then lease them back; the swap transaction eventually took place in July 2013, but not before a peculiar delay [95].

In June 2013, one month before the Pembroke swap transaction was concluded, Monwabisi Kalawe took up office as SAA CEO. He would later allege in an affidavit filed at the Labour Court in April 2015 as well as to M&G, that Meyni attempted on numerous occasions to reduce the board’s resolution of lease-swapping from ten aircraft, to just two. Kalawe said that in his view, Myeni was intent on securing a direct purchase arrangement with Airbus for the remaining eight aircraft[96]. His assertion is in line with a letter that Business Day had seen which was signed by six SAA non-executive directors and sent in January 2014. It was addressed to Myeni and the then minister of public enterprises Gigaba.

In the letter, the directors expressed their “major dissatisfaction” with Myeni’s leadership[97]. (After Business Day broke the story in April 2014, Myeni said that she rejected the letter’s allegations as untrue and without merit, and that she had responded in writing to the letter, refuting in factual detail each and every inference).

The nonexecutive directors alleged in the letter that Myeni personally pursued alternative funding for the A320 aircraft without the involvement of the relevant executives. In addition, she made four attempts to have the number of aircraft to be purchased under the Pembroke package reduced from the 10 that the board had approved to two [98]. The directors also alleged that she went as far as writing to Gigaba claiming that the board had amended its resolution from financing 10 aircraft, to two. "This amounted to a gross misrepresentation of the facts," the directors said [99][100]. An insider speaking to Business Day said the government preferred to secure local, rand-denominated financing and this was the reason for the delay in the 10x A320s lease swap. Two months after it was agreed by the board, the Pembroke lease swap finally went through for the 10 aircraft.

(As an aside, the then CEO Kalawe was suspended by Myeni in October 2014 [101]. Public enterprise minister Lynn Brown demanded his reinstatement in November 2014, as Myeni had given no reasons for his suspension – a month later SAA was transferred out of the public enterprise ministry into treasury. Kalawe resigned as CEO in April 2015 [102]).

In July 2013, the same time the Pembroke swap was concluded, a rift developed between Gigaba and Myeni, as the board complained that Myeni had issued the request for proposals for 23 long-haul aircraft worth R70 billion without their consent and without informing Gigaba [Sunday Times] [103][104]. A month prior, Myeni had allegedly misrepresented the facts to him about the board’s decision to lease all 10x A320s [105][106][107] not just two.

In addition, Myeni allegedly arranged a meeting with one of the bidding companies during the procurement process for the long-haul aircraft. The Sunday Times saw the e-mail in which Myeni invited other board members to her meeting with aircraft manufacture Airbus in October 2013. In the e-mail, Myeni said a meeting with another bidder, Boeing, had not been confirmed [108][109]. Insiders told the Sunday Times that board members cautioned her about holding a meeting with Airbus during the bidding process.

In January 2014, Gigaba announced that he had ordered the withdrawal of SAA’s tender for the 23 long haul aircraft, as it did not comply with government policies. “There must be benefits for our country,” Gigaba said [110].

Later, some senior managers quoted Myeni as boasting that before the May 2014 elections she was going to get rid of Gigaba and her opponents on the board [111]. Myeni was only slightly wrong - Gigaba was removed from his post by Zuma three weeks after the May 2014 general elections, and not before.

(During that same cabinet reshuffle, Nene was appointed as finance minister in place of Gordhan.)

Thus, as it turns out, Myeni’s attempt in 2015 to strong-arm her way into the Airbus deal was not exceptional; it’s corporate governance best practise Myeni-style. But this time, instead of coming up against the minister of public enterprises, she - with Zuma and his benefactors - took on finance minister Nene, and got far more than they ever bargained for.

The vial high club

As devious as the above graft-from-craft scheme could have been; it is likely that an even more sinister plot was afoot.

In February 2015, treasury had refused to recapitalise SAA (beyond the R14.5 billion guarantees it had already provided [112]), and so the airline had to find ways to raise a further R14 billion, by debt-restructuring and consolidation. How the airline was meant to do that resulted in constant accusations and disagreements between the board and the executive, including accusations by Myeni against the then CFO Meyer that he was unjustly excluding certain unnamed players from the process. (Meyer eventually resigned in November 2015 [113].)

In Myeni’s October 2015 letter to the board, in which she referred to a funding proposal by a “third party” - she also recommended that the African leasing company should be appointed to advise the board on consolidating all of SAA’s existing debt into one giant borrowing transaction of R15 billion [114]. This raises the question of whether this “third party” of unnamed players was perhaps prepared to bankroll SAA’s entire debt - not just the purchase of aircraft – by, as proposed before, raising the majority of funds from government lending institutions?

An SAA insider told Business Report that after Nene had closed all avenues for further engagement on Myeni’s Airbus deal in December 2015, they had sought Zuma’s intervention, because SAA had secured R14 billion funding from the Free State Development Corporation [115] (FDC).

Thus, the motive may have been far bigger than the mere leasing of a few jumbos – it was likely an attempt at the “grabification” of SAA itself. (Read on for a definition.)


In the 1990’s, after the fall of the Soviet Union, the Russian economy was in disarray, while the government was severely cash strapped and saddled with badly managed State Owned Enterprises (SOE’s). In order for the government to raise much-needed funds, it was decided that the Russian banks would lend the government money, in exchange for temporary stakes in the SOEs. If the government defaulted on its loans, the banks then got to keep their stakes. The banks eagerly obliged, and as expected, the government defaulted on its loans, resulting in the banks taking ownership of their SOE stakes at fire-sale prices. Russian voters called this policy “grabification” [Business Insider] [116].

The scenario with SAA: The airline would consolidate all of its existing debt (with the “help” of a local leasing fronting company) into one giant borrowing transaction worth R15 billion, and then secure funding through a “third party”, with onerous terms. The third party would then sit back and wait for the struggling SOE to default on its payments. Inevitably this would occur, thus ensuring the third party are the first in line to take a substantial stake in the (yet again) near-bankrupt SAA at a fire-sale price.
What this means of course is the privatisation of SAA, either partially or totally. But as opposed to a rational, well-considered privatisation process, which is based on sound economic principles to strengthen all SOEs as a collective, grabification involves privatisation of an SOE through brute force, after it has already been pummelled to its knees.
(Under such circumstances, instead of calling it “privatisation”, Peter Bruce in Business Day proposed the word: “alienation” [117]. It could also be called “insider privatisation”, but “grabification” is equally apt.)

For grabification to succeed, the SOE must be vulnerable, mismanaged, and cash strapped.

This may explain (the otherwise inexplicable reasons for) Myeni’s appointment at SAA, when she lacks any of the skills and qualifications required[118].

Moreover, any transaction that may improve the SOEs sorry state would be sabotaged until after grabification had been achieved. Thus grabification may also explain why a deal such as that between SAA and Emirates Airlines in July 2015 - which would have generated approximately R1.7 billion [119] within 18 months for the near-bankrupt SAA [120] - was stopped by Myeni just hours before a “partnership signing” event was due to take place in a hotel room in Paris, France. The president of Emirates was to fly out especially for the signing.  The Sunday Times reported that all indications were that the senior SAA executive backed the deal with Emirates, as did several of the few remaining board members [121].

SAA’s then acting-CEO Nico Bezuidenhout, together with Myeni, and SAA’s chief commercial officer were meant to fly out to Paris for the signing, but Myeni was a no-show. Bezuidenhout was telephoned by Myeni at 1 a.m. and told not to sign. A source said that a red-faced Bezuidenhout had walked into the Paris hotel room where the Emirates team were, and informed them that he could not proceed with the signing. The Emirates officials were said to be livid about SAA’s about-turn [Sunday Times, Rand Daily Mail, Business Day] [122][123][124][125][126].

 Four days after the incident, Bezuidenhout allegedly explained in an e-mail to the board and SAA top executives that, “In the early hours of June 16 I received a call from the SAA chair, advising that the chair had received a call from the President on this matter.” [127] [Business Day]. The email went on to say that, “I advised Emirates that we don’t have complete unanimity at this time and that I do not want to be in contradiction with my chair on this matter.” Two analysts suggested that involvement by Zuma, if true, would amount to interference and a violation of corporate governance [128]. (An SAA spokesman denied the matter had ever been referred to Zuma [129]). Myeni failed to respond to journalists’ questions about, amongst other things, whether Zuma called her personally to stop the agreement between SAA and Emirates; and in Parliament Myeni again refused to answer the same question[130].

A few weeks after the email, acting-CEO Bezuidenhout was encouraged to leave SAA with an offer from Mango, and the job specifications for SAA’s CEO position were changed to include qualifications he did not possess [Business Day][131].
Grabification could perhaps also explain why when public enterprise minister Brown announced in November 2014 that government would seek potential buyers for an equity stake in SAA as part of a recovery plan, that a month later SAA was unceremoniously jolted out of her ministry to treasury, under Nene [132][133].

One final observation regarding the alleged grabification attempt of SAA.

It could well be described as “grabification-lite” because instead of the “third party” using its own money to gain a stake in a SOE, it was allegedly trying to raise capital through government financial institutions (e.g. the DBSA, PIC, and FDC). This adds an extra dynamic, and the implications are profound.
To illustrate: if the “third party” planned to finance the Myeni Airbus deal in large part through the Free State Development Corporation (FDC) - as an SAA insider claimed - and this was done with the approval of the Free State provincial government, then one would have the nonsensical situation where the Free State province bankrolled a private organisation to prey on vulnerable state assets, resulting in a kind of twisted government cannibalism. Under such circumstances, the Free State could be viewed as a rogue state.

In summary, it is probable that state funds - be it from provincial or national sources, and thus by all intents and purposes is government bailout money – would have been loaned to a private third party (with presidential influence). The third party would then channel the funds through a middleman to SAA, which in return would be forced to sign an onerous contract. National government would then be saddled indirectly with all the risks, responsibilities, and costs of that “loan” while paying an obscure entity. Upon SAA’s payment default, the third party would take part or full ownership of SAA and its fleet of aircraft, based on a fire-sale value.

So instead of national government providing SAA directly with bailout guarantees, it would be providing a hidden private “third party” with those guarantees in an onerous contract.

Therefore, it was all an alleged attempt to grab a private stake in SAA using government money to do it.

BEEs are a-buzzing

Black Economic Empowerment legislation (BEE) was enacted to help normalise South African society from the distortions and prejudices of the past, in a responsible and judicious way. It should be a positive and transformative process, ultimately to the benefit of the country as a whole. But when these policies are exploited by those in positions of power for their own nefarious purposes, then rather than encouraging social cohesion, its abuse does the exact opposite. 

In Zuma’s February 2015 State of the Nation speech, he said that government will set-aside 30% of appropriate categories of state procurement for purchasing from small business [134]. SAA, under Myeni and her supporters, decided to treat Zuma’s comment as an “instruction” [135] – as if Zuma’s every utterance is law, without the necessity of it first being recognized as government policy in the normal course of a constitutional democracy. 

In July 2015, SAA began demanding that a 30% share of its contracts with service providers must be transferred to black-owned small businesses - apparently nominated by SAA - irrespective of the service providers’ existing BEE credentials. (Moneyweb provided a real-life example:  A SAA service provider was already over 60% black empowered, and so by transferring a further 30% to an as yet unknown black-owned SMME would have resulted in just below 75% black shareholding).

Corporate governance expert Charl Kocks of Ratings Afrika told Moneyweb that it is untenable for companies to tender, not knowing who will be given to them as partners. “Who at SAA will identify the entities that will benefit?” Kocks asked [136]. He said that, besides market competitiveness being diluted with this kind of central control and inefficiencies, it opens the door for corruption. As a result, companies may either avoid doing business with government, or build in substantial risk premiums that will be paid by the people of South Africa [137].

Three independent sources within SAA told Moneyweb that all existing maintenance and services contracts with SAA were being reviewed by the board to monitor compliance with transformation requirements. This has “got completely out of hand”, Moneyweb was told, with certain board members interfering in procurement, including that of fuel, and insisting on having 30% of contracts set-aside for small businesses with no track record in aviation [138].

(Two other state-owned companies have also started implementing Zuma’s 30% directive [139][140], including Eskom which is managed by CEO Brian Molefe – who tried to secure funding for Zuma from the PIC for the Gupta-Zuma uranium mine in 2010 - and CFO Anoj Singh – who allegedly helped facilitate kickbacks paid from Neotel to an ex-Gupta associate while Singh was CFO at Transnet, according to the M&G. Transnet, on Singh’s behalf, denied he had been involved or that there were any factual basis for the allegations against him.)

In September 2015, DTI’s acting B-BBEE commissioner ordered SAA to cease implementing the 30% set-aside until it was approved by government. And treasury’s chief procurement officer, Kenneth Brown, wrote to SAA informing them that their 30% set-aside is not supported by a procurement legal framework “and must be stopped with immediate effect.”[141]
In reference to a specific SAA contract being altered to include the 30% set-aside with a service provider, the then SAA CFO Meyer warned the board that the proposed amendments would be non-compliant with supply chain policies, the Public Finance Management Act and good governance [142].

In a constitutional democracy, the president is not a law unto himself.

In an interview with News24, Myeni said, “Transformation means somebody out there must be able to say there was once a caring board at SAA and that it brought change at the parastatal.” She added, “Maybe it is only the rich people that do not like transformation, I don’t know…. The majority of South Africans are becoming impatient, they want to see change.” [143]

Business Day said that Myeni supporters, including those on the SAA board, argued the intense scrutiny of the SAA board and executives is due to opposition to her efforts to “transform” the airline, and those who leaked information were trying to keep SAA in “white hands” [144]. Myeni herself said to EWN, “Because we’re focusing on transformation, I’m being attacked left, right and centre.”[145]

An insider interviewed by M&G said that Myeni’s claims that she wants localisation and transformation are a “smokescreen” [146].

In Menyi’s October 2015 letter to the SAA board - in which she referred to an unnamed “third party” for funding, as well as the consolidation of SAA’s R15 billion debt into a “giant borrowing transaction” by her preferred transactional advisor - she further stated that SAA’s current request for proposals (RFP) for the R15 billion transaction was flawed. She wrote, “The current RFP does not talk about 8-BEE and the 30% set aside, a clear demonstration of a deliberate strategy to continue to exclude historically disadvantaged groupings and military veterans in contradiction of board resolutions.”[147]

As it just so happens, in an Oakbay press statement in May 2010, Mabengela Investments, along with the MK War Veterans and its War Veterans women’s group [148][149], were listed as part of a consortium of black economic empowerment shareholders by the Gupta-controlled company, to explain how a government financial institution (the IDC) came to fund, on the face of it, R250 million for a R275 million uranium mine purchase [150][151].
Moreover, the source of Oakbay’s funding is not dissimilar to that proffered by the “third party” in Myeni’s letter to the board, and what Myeni said in person to treasury. In the case of the purchase of Shiva Uranium, the raising of funds were from government sources (the IDC), allegedly helped by their presidential links, and resulted in the Guptas winning the lion’s share of the company.

So, Myeni’s insistence on a 30% BEE component in the “giant borrowing transaction” and its composition happens to fit miraculously with that of the consortium of BEE shareholders which the Guptas used to raise government funds to eventually obtain a majority share in the private company. While the lender, the IDC, was given a minority stake in the company, as payment for the loan.

It is also interesting that the directors of Mabengela - Duduzane and Tony - were present at the “stakeholder” meeting where Tony allegedly offered Kona R500 000. This occurred around the time SAA was looking to procure R70 billions worth of aircraft, and a few months before the delivery of the first 10x A320s, for which Myeni attempted to force a direct purchase of eight of the aircraft, against the board’s decision.

Equally intriguing is that Tshepiso – an employee of Mabengela and also present at the Gupta meeting - is the son of Ace Magashule, a staunch Zuma loyalist, and premier of the Free State. This, coincidentally, is where one finds the Free State Development Corporation (FDC), that was said by an insider to be allegedly willing and able to provide R14 billion for the local leasing of aircraft to SAA.

All of this illustrates the dangers of perverting empowerment policies so that it becomes nothing more than a vehicle to dispense patronage to family members, benefactors and supporters. And, as a consequence, it disempowers the majority for the grotesque benefit of an elite few. In Zuma’s predatory state transformational policies have only invited a feast amongst the wolves.

As an aside: An investigation by the M&G allegedly linked the FDC, the Free State government, the Free State premier Ace Magashule, the then Free State Agricultural MEC Zwane - now mineral resources minister - and the Guptas to the Vrede dairy project, which promised the community 51% BEE ownership, but unknown beneficiaries had already been selected.

The project was riddled with irregularities, including inflated pricing, 30 dead cows and calves, and the unilateral handing over of government funds and resources to a private company with alleged links to the Guptas. The company had no history of running a dairy farm, and its sole director worked in information technology with apparently no farming background. The project, which was to cost over half a billion rand, was shut down after treasury conducted an investigation; but not before R144 million had already been spent, for which the Free State province had practically nothing to show for it, except an even more impoverished community – some of whom had sold their cattle to be part of the project [153][154]. The local chair of the African Farmers Association of South Africa in Vrede, Ephraim Dlamini, said, “Politicians don’t understand…these are people’s lives.” [M&G].

As to SAA, a Business Day editorial stated it succinctly: It is time that cronyism, to which many SAA board members owe their places on the board, is regarded as anti-transformational and rejected with contempt [155].

You reap what you SOE

The objective of grabification is not to create functioning, efficient SOE’s, but rather to run them into the ground so that they are ripe for the picking. As a Business Day editorial observed, “Incompetence is one thing, and there is a fair amount of that in the governance structures of SA’s state-owned entities. But the deliberate and destructive flouting of the principles of governance and of plain good business is entirely another” [156].

After firing Nene, hiring van Rooyen, firing van Rooyen and hiring Gordhan in a space of six days, Zuma broke his silence, and said, “Government… remains committed to provide support to state-owned companies in a fiscally sustainable manner, including South African Airways.” [157] Yet, Independent Online (IOL) wrote that irregular deals, poor financial management, impunity of culprits, and business challenges have contributed to the R469.4 billion provided in government loan guarantees to state-owned enterprises, of which R225.9 billion has been used, according to latest treasury figures [158].

Peter Bruce in Business Day warned that the grabbing of equity in SAA can easily be applied to a host of other SOEs [159]. This includes the likes of Eskom, Prasa, SABC, SA Post Office, PetroSA and even the somewhat improved Telkom and Transnet [160].

According to Nicky Smith in a 5 of February 2016 Financial Times article, SAA has lost and failed to replace the following executive positions: a permanent CFO, a permanent CEO, a chief strategy officer, a chief procurement officer, and a chief commercial officer. The SAA board has four members, down from an average of 14. Besides the damage done to the executive level, the airline’s commercial division, which Smith says is the heart of an airline’s business, has lost: its general manager; its head of ancillary revenue; its manager in the chief commercial office; and, the head of global sales and alliances (which also oversaw network planning and scheduling, together with revenue management and pricing). Morale among SAA’s staff has tanked [161].

In December 2015, public enterprise minister Lynne Brown said in a speech to the Johannesburg Chamber of Commerce and Industry that many SOEs were in "distress" and needed close monitoring. “It is clear that the current status quo cannot be maintained as it poses major risks." [162]

That same month, Gordhan - whose appointment prevented the treasury from becoming the playground of those who wanted to harvest the South African fiscus [news24] [163] - said, “We are serious that good governance is non-negotiable...we cannot have individuals thinking that state owned entities are toys for personal profit.” [164]

But how long will it be before Zuma and the Guptas again make a play for it?

Organs of state can only be resuscitated when people are appointed who have the required leadership skills and expertise - and who place the country’s interests before their own. This includes the office of the presidency.





































































































































































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