Minister’s response to allegation of irregularities in SAA sale

Meeting report

The Committee observed a moment of silence on the passing of Committee member, Mr Mangosuthu Buthelezi.

The Chairperson welcomed the Minister Pravin Gordhan and indicated that the purpose of the meeting was to receive a response from Minister on the allegations made by the former Director-General, Mr Kgathatso Tlhakudi on 27 October 2022. Mr Tlhakudi submitted a disclosure to both the President and the Speaker of Parliament, in terms of the Protected Disclosure Act 26 of 2000. Mr Tlhakudi made allegations of improper and illegal conduct by the Minister of Public Enterprises. In the disclosure he accused the Minister of orchestrating the disposal of South African Airways (SAA) to benefit a select few individuals irregularly favoured by the Minister. On 29 October 2022, Mr Tlhakudi submitted a supplementary disclosure wherein he provided further information on his experiences and concerns during his tenure in the Department of Public Enterprises, relating to SAA and the conduct of the Minister. On 31 October 2022, the Economic Freedom Fighters Chief Whip, Mr Floyd Shivambu, wrote to the Speaker of Parliament alleging that the disclosure submitted by Mr Tlhakudi pointed to a violation of the Constitution and Parliament should hold an enquiry into these allegations.

On 20 November 2022 the Speaker addressed correspondence to the Portfolio Committee on Public Enterprises Chairperson stating that it would be appropriate for the Speaker to refer Mr Tlhakudi's disclosure and Mr Shivambu's letter to the Committee as a structure to which the Minister will account.

The Chairperson stated that he had to seek legal advice as he questioned the responsibility given to the Committee to address these concerns. On 3 March 2023, he received legal advice from the Parliament Chief Legal Advisor on how the Committee should proceed with the matter and how it is to execute the responsibility. The Minister had since responded to the Committee in writing on 27 March 2023.

The Committee invited Mr Tlhakudi on 7 June 2023 to make his presentation. The Minister was invited to make his presentation on 14 June 2023. However, the meeting could not continue because the Minister wanted to consider the transcript of the 7 June meeting before responding in person. Subsequently, 7 August 2023 was set for the meeting but the meeting could not continue because most Committee members were on recess and some had to attend to their constituency work. The Committee had intentions of having a meeting with the Minister, however, the Minister fell ill and could not attend the meeting and it had to be postponed to 12 September 2023. The Chairperson therefore highlighted the importance of taking the submissions made by the Minister in the current meeting.

The Chairperson stated that Mr Tlhakudi appeared before the Committee with two senior counsel and the Committee did not allow the senior counsel to address them. He advised the Committee to address questions of clarity to the Minister and no one else in his accompanying team. The presentation will not be interrogated but Members should pose only clarity-seeking questions.

Minister's response
Minister Pravin Gordhan thanked the Committee for the opportunity to come before them to address the allegations made against him. The facts that he will be presenting had already been submitted to the Committee in writing on 27 March 2023. These facts were accompanied by comprehensive documentation to substantiate each of the points made. He rejected any assertions of corrupt behaviour on his or the Department's part. Any attempt to negatively portray an important piece of work undertaken by the Department in its attempt to save SAA, it will not discredit the work that has been done – whether it be any political influences or the mischaracterisation of the report by a Chapter 9 Institution, or any other attempt. These unfounded allegations are more of a political campaign than they are genuine concerns.

While he accepts the ruling made by the Chairperson, he is not accompanied by any senior counsel. The Minister was accompanied by the Acting Director-General of the Department, Ms Jacky Molisane; Deputy Director General, Adv Melanchton Makoba; and Mr Sange Mxenge who played a role in the technical aspect of some of the transactions.

The Minister stated that he would be responding to 16 allegations which they have been able to identify. He highlighted the importance of distinguishing between the role of a Minister and the role of a DG in the Department. The Minister's role is to set a political direction and to provide a mandate and clarity on what needs to be done. The DG must execute such a mandate and ensure that the Department is aligned with the political mandate.

Since 2010 the Department of Public Enterprises has been at the heart of State Capture. Much of the transgressions and the transactions that were made to execute the various activities of the State Capture were undertaken through the Department. After 2018 difficult decisions had to be made on the reconstruction process of the various entities under the Department. The task of the Department has been to overcome the effects of State Capture and the corruption that has come from some of the State Owned Entities. This is still a work in progress. He referred to the state of SAA and highlighted that it has been run into the ground by its previous Board and Management. The choice pre-pandemic was either to allow SAA to be liquidated or make attempts to save it, and the instruction that came from the government level was to attempt to restructure the aviation assets of the state and to ensure that the entity is saved. The Department hopes that the three and a half years of hard work will soon be consolidated. He highlighted the harsh impact that the pandemic had on the aviation industry globally. Flights eventually stopped at the end of March 2020 and SAA was already under business rescue.

The Minister said that in the confusion of Mr Tlhakudi’s accusations where he tries to defend the indefensible, there is one important question that has not been asked: “What did he do wrong?”. What Mr Tlhakudi did wrong was detected by the Public Service Commission through a complaint lodged through the PSC. The complaint was communicated to the Minister through a letter on 8 March 2022, and the PSC directed the Minister to investigate the matter accordingly. The Department obtained the services of a forensic firm. Mr Tlhakudi interfered in the process of an appointment of an individual, by replacing the name suggested by the interviewing panel with his preferred candidate. All the attempts made by the former DG through the labour courts have failed.

The letter from the PSC set off the events that followed about this matter. When a DG is confronted with these challenges, the matter is referred to the Presidency, and after investigation, the Presidency nominates another minister to manage the matter. In the case at hand, Mr Ronald Lamola was appointed and he was to determine based on evidence how to proceed with the matter. Mr Tlhakudi’s suspension was undertaken and directed by Minister Lamola, as well as the initiation of the disciplinary enquiry. The report of the disciplinary enquiry was presented to Minister Lamola, and the final dismissal was also undertaken by Minister Lamola. It is interesting to note that long before the process was brought to the attention of Mr Tlhakudi, he insisted that he was already aware of the letter from the PSC as it had arrived through the Department registry. However in the weeks before while he was aware of the letter, Mr Tlhakudi did not approach him at all to ask how the matter would be handled. Minister Gordhan personally approached the former DG and informed him that he had to take special leave while the process went on.

Minister Gordhan stated that there were fundamental differences, in terms of the legal opinions offered to the Portfolio Committee on the protected disclosure which happens under Act 26 of 2000. A provision for a protected disclosure is to protect an employee from occupational hazards arising from the disclosure of wrongdoings by a fellow employee or the employer. The protected disclosure occurred after the processes aforementioned, which led to the disciplinary enquiry, had already been set in motion.

Allegations made by Mr Tlhakudi
1. The disciplinary charges are untrue:
Minister Gordhan stated once again that this is false as previously described in his opening remarks. The Minister and the Department had to act in terms of what the letter from the PSC had instructed them to do. The facts were all put before the disciplinary committee. The file with all the supporting evidence will be made available to the Portfolio Committee. Minister Gordhan refuted the claims that the process was aimed at victimising or being unfair towards Mr Tlhakudi. He was dismissed through a very clear process and Minister Gordhan had nothing to do with his dismissal.

2. Concerns on SAA transactions being communicated to the Minister and the Presidency:
Minister Gordhan said that he cannot speak for the Presidency. Mr Tlakudi had been involved at all times in the various processes until the time of his dismissal. Mr Tlhakudi played various roles in this period and there were some technical roles carried by the Department. There was never an occasion when Mr Tlhakudi had material concerns about the transactions, apart from the doubts about the content of the golden share and these issues were clarified with him. SAA was financially unsustainable and in 2019 a total of R10.5 billion was set aside by the government and provided to SAA before November 2019 to assist the entity. Notwithstanding that, on 6 December 2019, the SAA Board and the pressure from the lenders decided that SAA should go into business rescue.

3. Placing SAA under business rescue was ill-conceived:
The Minister indicated that the government has put in a lot of money over the years into the entity and there have been a few criticisms from the Committee members. In the 2017/2018 fiscal year, SAA faced significant financial challenges and it prompted auditors to suspend their evaluation until SAA was deemed financially viable. These financial concerns resulted in an audit backlog and it is currently being addressed. SAA has not turned a profit since 2011. The former SAA CEO in 2019 submitted a long-term turnaround strategy and the aim was to quickly stabilise SAA. The strategy did not work. SAA accumulated losses amounting to a staggering R5.3 billion. As a result of these instabilities the Cabinet therefore decided on a restructuring of the airline and to also seek a strategic equity partner (SEP) to lighten the load on the South African fiscus. SAA required R4.1 billion to support its working capital till the end of the 2019 financial year. The government had set out that it wants SAA to reflect a creative, viable, agile, and sustainable airline. The government also intended for the airline not to depend on the SA fiscus; there needs to be a model public-private partnership that is a catalyst for growth and showcases South African talent.

After much debate, the government approved the restructuring of SAA on 3 December 2019 with the inclusion of the SEP. The decision to place SAA under business rescue was the correct decision as well as not allowing it to be liquidated. It was a good decision from the point of labour, as many jobs were spared and there is a possibility for further job creation through these various ongoing processes.

4. The Department did not follow due process in the appointment of Takatso:
The Minister said that one of the main issues was that the selling of the percentage of the shares constitutes an activity under Section 217 of the Constitution related to procurement, and the importance of transparency and competition thereof. As far as the SAA transaction, it is not a normal process, it is a merger and acquisition process. The transaction is conducted by the Shareholder and not the entity itself. The Department undertook a fair, equitable, and competitive process, ensuring that the outcome would be the best for the airline, the country, and its staff.

Once the expressions of interest in the airline began to come in, a transaction advisor was appointed and they were privy to all the expressions of interest in the airline. The responsibilities of evaluating the interests and meeting the concerned parties were undertaken by the transaction advisors. Through the entire process, a key issue that emerged was if those who showed an interest had the cash to put in, to operate the airline.
 
From a government point of view, it was clear that there would not be any further funding from the fiscus to support the airline. The parties that showed an interest in this process articulated a certain set of needs such as ensuring that the “past is cleaned up”, taking operational control of the airline, and eliminating any sort of political interference in the process. The conditions crystallised as the transaction advisors went through the process at the beginning of 2021. It became clearer that the pandemic had devastating effects on the aviation industry globally, as there were global companies that showed an interest but when it boiled down to putting in cash none of the parties had the cash. In the absence of having available cash of up to R3 billion as operating capital, it would be limiting in terms of the transaction process.

After a rigorous process of negotiation, Takatso was appointed as the preferred SEP. Takatso has the requisite composition and a combination of financial and operational capabilities. Part of the commitment from Takatso was to advance the transformation agenda within the entity. The process is still ongoing and there are two more steps before the shareholder agreement is signed.

5. The Board was requested to assess the shortlisted companies:
The shareholder could have delegated the board of directors or anyone to run the process on its behalf, however, the shareholder chose to run the process as it was entitled.

6. Escrow account in violation of the Public Finance Management Act
The escrow account has not yet been created, it is a technical provision that would have kicked in if there were technicalities that still needed to be resolved and money was set aside such as unflown tickets, and nothing in the PFMA prohibits such regulations. The purpose of the sale of shares agreement is to outline the terms of the agreement between the parties involved. The account was established to safeguard the government and Takatso against unforeseen circumstances. The Department has encouraged SAA to pay off as much of the unflown tickets as possible. The government has already committed to provide the funding to fulfill the necessary business rescue obligations. There has not been any legal advice provided to the Department to state that such an account violates the PFMA. Therefore the allegation was dismissed.

7. SAA was undervalued:
Valuations that were done in the middle of the recovery period from the pandemic will provide one set of results. On the other hand, valuations done in the current climate will have different outcomes. The types of valuations which are done also differ, such as the going concern valuation which is currently being done. The biggest difference between the past and the present is that formerly SAA was flat on the ground and currently SAA is operating and flying. The second type of valuation is the valuation of the assets of the company, inclusive of the landing slots; and the properties. What is yet to be decided is how much of these assets Takatso intends to retain and whichever assets it wishes to not retain. The unretained assets will continue to belong to the state and be dealt with by the state. Valuations are done to indicate what prices the parties involved are willing to pay for assets and what the prospect of the business would look like. This allegation is invalid.

8. Due diligence of Takatso was not undertaken:
The Minister stated that the allegation was untrue because due diligence was undertaken by the legal team representing the Department of Public Enterprises. The due diligence done by the lawyers representing the Department did not reveal any red flags on the company.

9. Mr Tlhakudi was not involved in the process:
In the documents accompanying the letter to the Speaker, it is evident that Mr Tlhakudi was involved in the process until his dismissal for his transgressions and violation of the law.
- On 8 April 2021 Mr Tlhakudi wrote to Haritts: “After due consideration, we are pleased to inform you that the DPE have progressed with the expression of your interest in the SAA group to the next round, the due diligence phase”. This counters one of the claims made by Mr Tlhakudi, that Takatso was not identified in the transaction advisor process as a potential SEP.
- On 29 July 2021 a meeting was held between Takatso consortium and DPE with the DG in attendance.
- On 25 August 2021, a similar meeting was held and he was present and participating.
- He also wrote to the Broad-Based Black Economic Empowerment Commission to confirm that the relevant legislation was taken into account when Takatso was assigned a 51% stake in SAA.

10. Vacancy rate in the Department:
The Minister stated that these are all departmental matters which are of little relevance to Mr Tlhakudi as it stands. The former DG had a habit of filling vacancies for the sake of just filling vacancies, and thus spending money on junior positions and administrative positions when the DPE required high-level skills to allow it to engage with energy-related matters or logistics involved in an entity such as Transnet. The focus of the Minister was to bring in more expertise which would enable the Department to overcome the effects of State Capture as well as to reposition the SOEs. The current Acting DG has done more work to bring in short-term expertise to strengthen Department processes. The 20% vacancy rate is neither here nor there.

11. Climate of fear in the Department:
Minister Gordhan highlighted that the only people who had any apprehensive feelings would be those who were leaking documents to the former DG. After his suspension, the former DG is known to contact people in the Department through WhatsApp messages, which should not be happening. The Department is a lot more creative, professional, and forward-thinking than it was in the past.

12. Paralysis in decision-making:
The Minister refuted the allegations and added that everything that is meant to happen within the Department, whether administrative or policy-making, is going ahead as planned without paralysis.

13. Toxic administration and political environment:
Minister Gordhan stated that the Department works hard to ensure that it is building a culture of integrity and accountability. Nothing has been compromised in terms of the administration of the Department. The assertions made by the former DG have nothing to do with the future of the work done by the Department and they are irrelevant.

14. Alleged bullying:
The Minister highlighted that this is a common accusation that is made by the former DG, it is unethical, improper, and disrespectful. The former DG has signed his future by partaking in the dealings he is accused of by the PSC and has been found guilty of. The Department has a zero-tolerance policy on bullying at whichever level.

15. Disciplinary action is being taken against officials who were aligned with the former DG:
The Minister stated that there is no victimisation of any of the employees at DPE. However, some individuals have crossed the line in terms of the law, not conducting themselves by the regulations of the Department, and not performing their duties as they should and these employees need to face the consequences of their actions. The Minister reiterated their commitment to good governance and integrity.

16. Commentary on unqualified audit reports being achieved only during Mr Tlhakudi’s tenure:
The Department has continued to obtain unqualified audit outcomes in the absence of the former DG, as a result of the Acting DG and her colleagues. The systems that are in place remain firm in moving forward the work of the Department

In closing the Minister said that the allegations have no foundation whatsoever in facts. The allegations are a political smear and the former DG has decided to take sides. Transactions have been conducted transparently and all the relevant information will be made available.

Discussion
The Chairperson asked Committee members to comment and engage on the responses from the Minister.

Mr G Cachalia (DA) asked if Minister Gordhan would be able to categorically stand by the correctness of his procedural actions against Mr Tlhakudi in all respects. He asked if the Minister can confirm to Parliament that these allegations have not in any way informed his actions towards the former DG procedurally. He asked the Minister to confirm that the allegations, in particular on the SAA transactions, are without merit in every aspect. He asked if the Minister would be able to voluntarily submit to an ad hoc parliamentary enquiry to investigate with singular focus the matter and put it to rest, as well as any allegations about his office.

Ms N Mhlongo (EFF) said that from her observations the Minister is in Cape Town primarily for the removal of the Public Protector from office.

Ms Mhlongo asked the Minister to advise the Committee on the interim Auditor General audit report for the 2023 financial year, and the areas of concern which have been flagged. She asked the Minister to confirm if the Department is facing a possible qualification.

She asked the Minister to advise the Committee on the appointment of the DPE Deputy Director General and the process followed. She asked for clarity on the allegation that this particular appointment and appointments at a lower level are dominated by people of Indian descent. She said that Transnet and Eskom have been requested to second officials into roles where they will be performing oversight over their employers – is that not a conflict of interest?

She sought clarity on the process that informed the appointment of Mr Les Matuson from Matuson and Associates, and Mr Siviwe Dongwana from Adamantem as business rescue practitioners. She questioned if the process was competitive and in line with Section 217 of the Constitution.

She asked the Minister to provide clarity on the allegation that the Department appointed Mr Matuson, primed through the Minister's former advisor and now a non-executive director, Mr Dipak Patel, before the board meeting on the evening of 5 December 2019. She asked if the Minister thinks that the decision was made in good faith. If he is denying the allegation, he should say it on record.

She sought clarity on the criteria used to select both Mr Matuson and Mr Dongwana as business rescue practitioners.

She asked the Minister to clarify the exact amount of recapitalisation required by SAA in the 2019/20 financial year, before its placement into business rescue. She asked if it was true that almost R1.6 billion were required compared to the estimated R5.5 billion that was provided in the remainder of the same financial year.

Ms Mhlongo asked for clarity on the role played by Mr Michael Katz of ENS Africa in the SAA board meeting, on 5 December 2019. Is it true that ENS Africa was the legal advisor to SAA before the business rescue and later became the legal advisor to the business rescue practitioners? She asked if the Minister did not allow his relationship with Mr Katz to cloud his judgment in this regard.

She asked if it was true that Bowmans was the legal advisor to the Department during the business rescue and switched to advise the Takatso Consortium after they were selected. She asked if this does not trouble the minister and what he has done to hold Bowman accountable. She asked the Minister to advise the Committee on the nature of his relationship with Bowman’s chairperson, Mr Ezra Davids. Is it not true that Bowmans was appointed after the request was made by the Minister to the former DG? Bowman’s was contracted on a R1.1 million contract; however, they invoiced the department over R10 million. She asked for clarity.

The business rescue practitioners and their advisors made R243 million through their management of the business rescue process and the funds were sourced from National Treasury. She asked if the Minister believes the state got value for its money or if he believes otherwise, what has been done to address the exorbitant funds.

She asked if the Minister still insists that placing the airline under business rescue was the best way to deal with the restructuring process. The Minister should note that 7000 people lost their jobs during these processes.

Is it correct that the Rand Merchant Bank was appointed as the transaction advisor to oversee the selection of the SEP for SAA after the Minister had made the recommendation to the former DG with claims that RMB was the best aviation investment unit in the financial industry?

The former DG claimed that RMB requested to be released from their obligations in January 2021, and it did not invoice the Department for the work done up until such point. According to RMB, the process was taking longer than planned. She asked the Minister to provide clarity. She asked for the terms of the RMB appointment.

Minister Gordhan asked for a minute to share a few remarks.

Ms Mhlongo objected and asked the Chairperson to take control of his meeting and not allow other people to chair on his behalf.

The Chairperson indicated the importance of the session and asked Committee members to refrain from disrupting the process. He said that he has the authority to state if a point of order is accepted or not, and he should be allowed space to perform these duties.

Minister Gordhan raised a point of order stating that it is clear that Mr Tlhakudi is reappearing through a proxy with a range of issues which were not in his original submissions. Departmental information is now being supplied in a particular manner and abused. He is appearing before the Committee to respond to what Mr Tlhakudi had originally said and new revelations are being brought up. There should not be an operation via proxy. There should be an understanding of the parameters within which they work.

The Chairperson suggested that the Committee member should be allowed to finish raising her points and whether or not the Minister agrees with the points he will get a chance to respond to what is relevant in his case. The Minister will not be forced to answer questions that he does not have an understanding of in terms of the process.

Ms Mhlongo said that DPE insisted that the RMB process did not produce a preferred SEP. She asked if the Minister stands by this claim, that none of the bidders was suitable.

She asked for clarity on the process which produced Takatso as the preferred SEP, as the understanding is that it was not recommended by RMB. In a sit down with Sakina Kamwendo on Good Morning South Africa, Adv Makoba claimed that there was a technical committee which produced Takatso. Ms Mhlongo asked for clarity on the members of the technical committee and the documents to support the answer provided.

She asked the Minister to advise how Mr Gidon Novick, former CEO of Takatso, would claim that he was approached by senior Department officials and introduced to Harith General Partners.
An independent investigation is required to establish the facts.

Ms Mhlongo asked the Minister to confirm that the Takatso transaction conforms with the Broad-Based Black Economic Empowerment Act 53 of 2003.

She asked the Minister to explain the appointment of Takatso while Harith General Partners had been cited for further investigation by the Mpati Commission into the affairs of the Public Investment Corporation.

The former DG claims that the Sale Purchase Agreement (SPA) was hastily signed on 14 February 2022, with the Acting DG as the signatory. The entire process was sprung on the SAA Board.

Is it true that the SPA obligated DPE to provide R900 million to an escrow account controlled by Takatso by March 2022 to cover liabilities that may arise from the business rescue process – which violated the PFMA? The Department has refused to share the SPA with Parliament and relevant parties, with claims that the Takatso transaction was in a closed period. She sought clarity.

The former DG called a meeting with Takatso and the meeting was attended by the Minister at Protea Hotel in Midrand, in March 2022, seeking to renegotiate the R900 million clause.

Ms C Phiri (ANC) raised a point of order. She expressed confusion about the current process as she was under the impression that questions should be based on the allegations made by the former DG and his expulsion from his role. The departmental matter should have a space of its own and not be addressed in the current meeting.

The Chairperson explained that Committee members are meant to engage on the responses given by the Minister. He cannot determine how Members choose to ask their questions. However, the Minister will only respond to what is relevant to the matter at hand.

Mr N Dlamini (ANC) stated that it would assist the meeting to remind the Committee about the purpose of the meeting. He suggested that the line of questioning should be confined to the two presentations from the former DG and the Minister, and determine to have a separate forum to discuss some of the matters raised. None of the letters from either the former DG or the Minister refer to the names mentioned by the Committee member. The information from Ms Mhlongo may be relevant in the broader scheme; however, for the meeting it is information overload.

The Chairperson urged Committee members to exercise tolerance towards one another and to allow the Member to raise her points. The process will determine the relevance thereof.

Ms Mhlongo continued with her line of questioning and asked the Minister to enlighten the Committee on who hired and paid the SAA evaluators. She asked if it was true that Harith General Partners paid for these evaluations, and why a buyer was allowed to set the price.

She asked for clarity on the SAA R3 billion and R51 evaluation. She asked the Minister to respond to the claims that SAA has been undervalued, taking into consideration the points raised by the Minister concerning the effects of the pandemic. There is a view that was supported by the SAA interim board chairperson, Mr Derek Hanekom, that the interim board would be performing an interim evaluation. The Committee was made to understand that SAA management had valued SAA property at R6 billion against the Takatso valuation. She asked for an update on the progress of this process.

She asked the Minister to explain the latest speculation in The Citizen which states that the SAA minority stake is worth R600 million. These minorities did not claim anything from the stake. How was the Minister addressing the matter since these were previously advantaged white males?

Mr Dlamini said that the Minister's response leans more towards taking the Committee through the history of the process. The Minister's response does not address the former DG's allegations. Before his response, the Minister should have had access to the presentation made by the former DG, as it included some of the issues raised by his colleague, Ms Mhlongo. On page 28 the former DG cites a newspaper article where he accuses the Minister of approaching him to be a part of the Takatso deal. That is a big problem that needs to be addressed.

The Committee was not satisfied with the amounts mentioned during the SAA board meeting, the R3 billion and R51. The Committee felt that these numbers needed to be renegotiated as that environment was not the same as the current climate. The deal is not beneficial for the state and the entity cannot bind itself to an amount that does not make sense for its position. Throughout the presentations, there seems to be consistency about the interim board. He asked when was the last time SAA had an actual board.

Mr N Kwankwa (UDM) requested the Minister to avail any due diligence report or any kind of preparatory work done before the deal was entered into. Even the President on 22 June 2021 indicated that the entire SAA deal depended on the due diligence phase and that the ability of Takatso to raise the money will rely on what they can find in SAA. The Minister said that due diligence had been done into Takatso and it was found to have the financial and operational capabilities to enter into the deal. The Minister also indicated that the documents were provided to the Department. Those same documents and reports need to be made available to the Committee to provide a clear understanding of how certain decisions were made.

Mr Kwankwa did not understand the statement made by the Minister in his reference to the different valuations made under different environments - post-pandemic and during the pandemic, and taking into consideration the physical assets. The Minister also went on to say that since the physical assets aspect had not yet been concluded, Takatso would still need to determine which assets to retain and which not to retain. If the valuation process is still in process, how was the value of R3 billion then determined? it does not make logical sense. Investors always perform what is referred to as market timing, by looking at the asset value and the amount of profit it could generate. Therefore when the market was down it was a no-brainer that SAA was going to be undervalued. Making a valuation on how to sell SAA when it was undervalued was robbing the state. The difference between the shareholder and the investor is that the investor wants to engage in market timing. The shareholder has time in the market and the shareholder is able to determine the realistic value of the asset.

Mr Kwankwa said Gen Bantu Holomisa wrote to the Chairperson of the Standing Committee on Public Accounts, Mr Mkhululeko Hlengwa, asking SCOPA to look into all these allegations. An issue that is of great concern is that Harith General Partners, which is a partner in Takatso, was painted in a negative light during the Mpati Commission and the due diligence report would have shown this matter. The Public Investment Corporation also owns part of Harith, which is also part of Takatso. He asked for a realistic picture of the shareholding of the state, and if these matters were taken into consideration when determining the true value of the shares.

Although there were different valuations done, SAA Technical engineering department may be worth R5 billion in assets and intellectual property. Yet Takatso is allowed to have 51% for R3 billion when one subsidiary of SAA costs more than that. The Department should avail all the documents that informed the decision-making in this process.

He pleaded with the Minister that it cannot be that while Parliament is investigating this process, and the Committee remains unhappy with certain aspects of the same process, the Department goes ahead as though it is business as usual. He suggested that the process should be placed on hold until all investigative processes scrutinising the decision-making that arrived at this, are concluded.

He agreed with Mr Cachalia's suggestion that the Minister should commit himself and the Department, to avail themselves to a process of providing all the relevant information and complying with the investigation processes of Parliament in the event that the Committee should decide to undertake a separate process.

Mr S Gumede (ANC) highlighted that the Committee finds itself in a dilemma. The Minister's response outlined the different roles played by himself and the DG and that he regrets having to respond to these allegations which he regards as work that needed to be done by the former DG.

Mr Gumede asked if Mr Tlhakudi has a case in this matter. A great part of the Minister's narrative takes time to explain to the Committee what a protected disclosure entails. According to his understanding, the SAA process and the suspension of the former DG are not related issues. However, one is a causal matter to the other. The interpretation would state that because the former DG was being disciplined as a result of protecting himself, he raised the SAA matter. He asked if the matter is not considered as a protected disclosure, does it mean that the SAA matter is going to be nullified because it was raised by the former DG in wrong timing.

Mr Gumede asked if the Minister would be able to outline all the bidders for the Committee. He sought clarity on the due diligence and asked the Minister to indicate at which point due diligence was done. Was it after or during the appointment process?

Mr Gumede said that it raises alarm that the former DG indicated that some of those signatures in the documents did not belong to him.

Mr Gumede asked the Minister to clarify the official status of the former DG – if he was terminated – because in his interview the former DG argued that he was not dismissed at the time and that the dismissal was prematurely done.

Mr Gumede noted that the former DG said that it was not that he would not sign, but he had intentions of merging the two positions due to the liquidity issue. He asked for clarity.

Mr Gumede asked if it would have been appropriate for the DG to raise with the Minister that he saw the letter and what difference would this have made at the time.

He asked for clarity on if Takatso has paid the three billion rands and if they have not paid it yet, is the SEP still needed?

Mr F Essack (DA) supported the suggestion by Mr Cachalia for the commitment to an enquiry that will help the Department to lay the matter to rest and provide answers to the country.

Mr Essack said that Mr Tlhakudi made a damning statement during his presentation: “The sale of SAA was orchestrated by Minister Gordhan to benefit a few privileged individuals”. It is important to get to the bottom of such a statement. Mr Tlhakudi also alluded to Minister Gordhan misrepresenting the issues within the Department and the moratorium on employees. He also mentioned the legal fees that have been spent and are yet to be spent. He asked for clarity and said that a parliamentary enquiry would be needed to iron out some of these matters.

He asked if the Minister was happy with the SAA valuation from a business point of view.

Ms S Graham (DA) said that as an alternate member of the Committee she does not have a lot of background on these issues. She asked if the DG had raised concerns on matters related to the sale of SAA as it was part of his duty. Would he have been taken seriously or would he be obligated to fulfill that mandate?

Ms Graham said that the Minister implied that the protected disclosure was made after the decision for a disciplinary enquiry had been made. The dismissal was finalised on 2 June and the protected disclosure was made on 20 October 2022. This means that the protected disclosure was made while he was still a DPE employee. Therefore it would fulfil the definition of a protected disclosure.

When SAA is referred to as undervalued it is the understanding that it was at the time, and there are currently new valuations underway. She asked the Minister to provide timeframes for that process and its progress.

On the claim that due diligence was not done on Takatso, the Minister had stated that a due diligence report was done. She asked if the report was done after the protected disclosure was made. It seems strange that the former DG would claim not to have been involved in these processes when he was involved for three years on the same process. The letter from Minister Gordhan indicated links to where the former DG was involved.

Ms Graham asked how the Department vacancy rate is relevant to the discussion.

Ms Graham said that only five of the 16 allegations are subjective but the rest are verifiable by fact. She questioned if these would have kept him in the job and what exactly he had hoped to achieve in the current climate.

Ms J Mkhwanazi (ANC) said that her concerns were covered by other Committee members on the matter of shareholding and the appointment of the interim board. She asked if the SAA deal would be considered the best deal for South Africa, taking into consideration all the processes involved.

There was a discussion with the Board on the shareholding percentages and the Committee's dissatisfaction with the percentages. The percentages need to be looked into once again. The Committee needs to have the oversight meeting that was previously postponed.

The Chairperson said that the former DG mentioned that Takatso was not among the companies that were identified in the beginning. He asked if it was true that Takatso was not listed among the shortlisted companies and how the company emerged.

He asked for clarity that Takatso participated in the SAA valuation while having an interest to purchase.

The Chairperson asked the Minister to respond to the allegations of a relative being involved in the processes.

Minister Gordhan response
The Minister said that he finds it extremely offensive to be associated with assertions of corruption. He has never stolen a single cent from the public and it is not right that he is subjected to these kinds of questions. There are upcoming elections and it will not be surprising to know that some of the assertions made during the discussion are related to electioneering from one political party or another. It is important for the viewing public to know that some of the discussions are politically driven.

Minister Gordhan responded to the concerns about the SAA valuation. Indeed it is the best deal that the Department is aware of. Liquidation could be a possibility down the line; therefore the SEP remains the best option.

The Minister stated that SAA was the Department's first attempt at truly recovering an entity that was severely damaged by capture, corruption, and mismanagement over a long period. He believes that the Department is at the edge of concluding a process that will have a positive outcome in the future.

The Minister said that the former DG went through a disciplinary process and it was managed by Minister Lamola. The outcome of the dispute enquiry was his dismissal. There was no suspension; the former DG was dismissed.

Any assertion that the process needs to be checked out by a parliamentary enquiry is all part of a political game. The facts are all on the table. He agreed with Ms Graham that indeed 11 of the 16 points are clear assertions that can be verified by facts, with supporting evidence. The former DG has decided to side with certain political forces some of which are represented in the Committee.

The Minister said that the facts are all available and the Committee can be the judge if the procedures for Mr Tlhakudi were duly followed. There is documentary evidence for all processes. The former DG has been given airtime – with his presentation having no evidence.

The Minister said that all the requests will be considered and all the documents will be made available. It is not fair and it is unethical to play political games.

In his response to Ms Mhlongo, he said that during his presentation he indicated that the Department has had unqualified audit reports until the current process. Indian descendants are South African citizens and they do not belong anywhere else. Therefore the racist references are uncalled for.

He refuted the claim that people from Eskom and Transnet have been seconded according to his current knowledge and it may have happened in the past.

On the business rescue process, Ms Mhlongo should have been told by her advisors that the BRP decision was taken by the SAA Board on 5 December 2019. The Minister stated that he was not in the meeting nor were any Department officials in the meeting. The Minister and Adv Makoba were asked to issue letters and statements that evening and they complied thinking that these were necessary to the process done by the board. The board was in constant contact with the lenders and there was an agreement on Mr Matuson and Mr Dongwana being the business rescue practitioners (BRP). The Department suggested that Mr Matuson should bring in a black partner in accordance with BBBEE and the Minister did not know Mr Dongwana before this point.

The lawyers were chosen by the BRP and not by the Department or the Ministry. Legal firms will work with anyone who approaches them. Bowmans was therefore involved in some parts of the process and they are currently the lawyers for Takatso.

The Minister said that he is not sure from where the reference to R6 billion comes, but on record there is R5 billion in February 2019 and R5.5 billion in August 2019 that came in as recapitalisation amounts from the state towards SAA. The fees of the BRP are decided by the BRP and it is not the decision of the Department.

Mr Cachalia raised a concern that due to time constraints Members would not be able to get a chance for follow up questions. He has one if Members will be allowed to ask them. The Committee is not a platform for political masquerade and if other parties seek to do so it is not his concern. Imputation with reference to him or to his party is unacceptable and out of order. He would like to get to the bottom of the matter. It is not the Minister's prerogative to decide on an Ad Hoc Committee, the Portfolio Committee will decide.

The Minister continued that more than 7000 jobs lost would have been lost had the board opted for liquidation. The company would have totally collapsed, all its assets would have been sold in a fire sale, and there would have been plenty of aviation companies that would have picked them up. Business rescue was better than liquidation.

The procurement of a transaction advisor was done in consultation with National Treasury and managed by Mr Tlhakudi. Non-disclosure agreements were signed and therefore the Department needs to consider its legal options about the manner Mr Tlhakudi continues to conduct himself.

The technical committee was made up of officials and Ms Molisane was a member of the technical team. They evaluated five interested parties and one of the problems was the availability of cash to put into the process.

Mr Gidon Novick was an interested party and the Minister had indicated to him that he cannot be entertained but he can speak to the committee and see if he can be incorporated in some way.

The Minister responded to the concern raised about Harith General Partners. There is a letter dated 3 April 2023 outlining the Mpathi Commission outcome on the Harith General Partners.

Mr Tlhakudi fell ill on the dates where he was meant to sign the agreement and he fell ill a number of times and could not report for duty. However, he was involved in the SEP process and the Acting DG signed.

The Minister referred to the escrow account he had mentioned previously in his presentation.

The legal fees were for the team brought on board by the business rescue practitioners.

He repeated that this is the best deal that the Department has at the moment.

The Department is continually looking for solutions to address the matters at hand and trying its level best to ensure that these are addressed.

The meeting was adjourned.