SAA Sale Irregularity Allegations: follow-up evidence submitted to Parliament

Meeting report

Opening Remarks by the Chairperson
The Chairperson welcomed the Members, the Legal Advisor, and the different media teams to the meeting. He said that the Committee was expecting to receive a briefing from the Legal Advisor on the contents of the last document received by the Committee from the Minister [of Public Enterprises]. The Committee understood that there were concerns from the Minister about the confidentiality of the information on the document. The Committee had agreed to give one copy of the document to the Legal Advisor so that he could study the document and then brief the Committee on its contents so it could decide on the next steps to take.

The Chairperson said that the meeting would not be confidential until the Legal Advisor indicated the need for the Committee to have a closed meeting. The Committee decided not to share the document to avoid leaking sensitive information and sought the assistance of the Legal Advisor to make an informed decision concerning the investigation of the matter. The investigation started a long time ago when the Committee investigated a list of allegations made by the former Director-General of the Department of Public Enterprises against the Minister of Public Enterprises, as per the instruction of Parliament.

Briefing by Parliamentary Legal Advisor
Mr Andile Tetyana, Parliamentary Legal Advisor, said he looked at the former DG’s presentation which he made to the Committee on 07 June 2023. He also looked at the Minister’s presentation which he made to the Committee on 12 September 2023 and the recent document. In the previous week, the Minister had referred the Committee to section 59(2) of the Constitution, which deals with public access to and involvement in the National Assembly. The section reads as follows: “The National Assembly may not exclude the public, including the media, from a seating of the Committee unless it is reasonable and justifiable to do so in an open and democratic society.”

The South African case law had many instances where there was contestation of a few rights in the Constitution, including the Right to Privacy (section 14), Freedom of Expression (section 16), and the Protection of Information Act. The Constitutional Court ruled that, in a situation where rights are on a collision course, this could be only resolved through a balancing Act as guided by section 36 of the Constitution, which is the Limitation Clause. Therefore, the document that Mr Tetyana would present before the Committee was not going to be confidential because all the information contained in it was already known by the public.

Mr Tetyana said that this was neither a legal opinion nor an appraisal of the commercial viability of the transaction in question. This was a briefing note which dealt with a narrow issue arising from the subject transaction – namely, whether Takatso Consortium was part of the shortlist in which a final determination was made regarding the appointment of the preferred Strategic Equity Partner (SEP) for South African Airways (SAA).

In July 2020, Rand Merchant Bank (RMB) was appointed by the Department of Public Enterprises (DPE) as Transaction Advisor to help the DPE identify equity funders for SAA. The selection criteria that RMB used were anchored on five pillars: funding capacity, immediate equity injection, perceived interest and strategic fit, operational capability and track record within the aviation industry, and national interest considerations.

When RMB assessed and evaluated the Expressions of Interest (“EOIs”) of potential SEPs, Takatso Consortium – i.e., Harith General Partners (Harith) and Global Aviation Operations (Global) – were not on the shortlist. Reference to Harith in the RMB report was in relation to its interest in Mango and had not expressed an interest in the SAA Group. At the end of phase one (EOI Evaluation), the most promising of the EOIs were identified to be from ASL/BlueSky Consortium and the Fairfax Consortium. However, the inability of both consortiums to provide proof of funding was found to be a handicap. This meant that there were no suitable SEPs that could be identified as none of the potential SEPs had an offer that could be accepted by the DPE, as these entities were not showing evidence of immediate funding to restart operations.

ASL/BlueSky was disqualified, as it did not have the funding. This was evident from the letter addressed by the former DG to ASL/BlueSky Consortium dated 07 April 2021. And Air-A/Lufhansa Consulting was also disqualified as they had a prerequisite that Airports Company South Africa (“ACSA”) must be included in the transaction. This was also evident from the letter addressed by the former DG to Air-A/Lufhansa Consulting, dated 07 April 2021.

Harith and Global proposals received favourable consideration from the DPE’s Evaluation Committee, and this was evident from the letters addressed by the former DG to both entities, dated 08 April 2021. Furthermore, in terms of the Molisane memorandum which the former DG signed on 08 April 2021, mention was made of the fact that, from the four shortlisted SEPs, Global and Harith were shortlisted as they indicated a significant airline interest. In addition, it was stated that an option that would need to be tested was for Global and Harith to combine, as the two bidders could complement each other in the airline’s long-term strategy.

Subsequently, a proposal by Harith and Global which later became the Takatso Consortium (Takatso) was made to the DPE, and this offer satisfied the DPE’s requirements, including the ability to provide the funding needed to restart operations. Takatso was then appointed as the preferred SEP. The preferred SEP was thereafter approved by Cabinet. In the DPE’s presentation dated 28 February 2024, it was stated that the Auditor-General audited the transaction and recommended that the DPE develop a framework on the disposal of shares for SEP transactions as government had plans to engage in more of such transactions. The DPE confirmed that such a framework was developed. However, whether the said framework was made available to the Portfolio Committee on Public Enterprises was unclear.

In the Minister’s presentation to the Committee on 12 September 2023, the Minister mentioned that a new valuation of SAA was underway, and this point was repeated in numerous communications between the Minister and the Committee. However, to date, no feedback has been placed before the Committee in that regard.

Discussion
Mr N Dlamini (ANC) said that the Minister had said the allegations by the former DG were not supported by any evidence. He wanted to know whether there was any evidence to support the allegations by the DG from what was presented by the Legal Advisor.

Dr M Gondwe (DA) asked Mr Tetyana to clarify whether there was nothing confidential in the document he had presented as in his opening remarks, as the Chairperson noted the Minister’s concerns about the confidentiality of transactions. She also asked for clarity on how many shares were sold to Takatso Consortium during the transaction and the valuation that was placed on the shares by RMB because the Minister had also mentioned that a new valuation process of SAA was underway. The Auditor-General had mentioned that the framework on the disposal of shares on SEP transactions was not developed. The AG also made some findings and recommendations around the transaction of SAA. More clarity was needed on all of that. She also asked for clarity on whether Mr Tetyana said that Takatso was not initially in the running for the SAA bid and was added on later.

Ms N Mhlongo (EFF) said that the Legal Advisor highlighted that Takatso was not shortlisted in the initial evaluation phase of the transaction, and asked him to explain the stage in which Takatso Consortium was shortlisted. Was the appointment of RMB for the work they did in phase one of the transaction shown in the document received last week? Was it true that RMB did not invoice the Department for the work they did in phase one and then later asked to be excused? How many shares were sold, and for how much? Regarding the valuation process, she understood that the valuation of SAA was done during COVID-19 when most of the flights in the airline were grounded and there were neither domestic or international flights in the country. Was the Department still using the old valuation done during COVID-19 or was the new valuation concluded?

She asked for more time to study the document that was presented, as the Committee did not have enough time to do so. She also asked for the document to be shared via email along with the document that was sent by the Minister.

Ms T Siweya (ANC) said that, given the questions that were asked by the Members before her, it was clear that the Minister would need to return to the Committee to answer some of the questions because the Legal Advisor would not be able to answer them. She said that the Committee ran this process of investigation because it was trying to save the airline and was concerned that some of the information being made available to the media was dangerous – especially during an election period – because the information could be used to manipulate others. She said that the meeting was supposed to be held privately with the Department so that the Committee could hold them accountable privately to avoid media houses pushing the wrong agenda.

Mr F Essack (DA) said that many of the questions that came up, including some that he had, were supposed to be directed to the Department. He was also interested in how Takatso Consortium was not part of the initial shortlist of SEPs for the SAA transaction. He needed clarity on the matter. He also wanted to interrogate the Department on whether it had sufficient capacity to handle the transaction and the valuation. He also proposed a follow-up meeting to investigate those matters. He was concerned about the Minister’s statement in which he said he was advised that, should the Committee release the documents, the Committee would be liable for the liability and not the Department. He asked for clarity in that regard.

Ms V Malinga (ANC) also wanted clarity from the Department on whether they had the capacity to deal with the transaction, because they were not just disposing of goods and services but state assets. She said that the Legal Advisor mentioned the Molisane Memorandum signed by the former DG, but the former DG had said that he was not part of the Takatso Consortium deal when he addressed the Committee. So, she was unsure which memorandum was signed by the former DG.

The new valuation of SAA which the Minister spoke of, was not presented before the Committee, and the Auditor General’s approval of the disposal of the shares of SAA was also not presented before the Committee. So, it was unclear what the Committee was doing in the investigation because it was supposed to be appraised with such information. It was surprising that a renowned financial institution would abandon such a deal, and the Department would take over such a serious process with a lot of public interest but there was no proof provided by the Department that there was another institution that could have done the work that the DPE wanted other than RMB. The former DG said Takatso Consortium was handpicked for the deal. As long as there was no proof provided by the Department that it was not handpicked, then she would believe the word of the former DG.

Ms J Mkhwanazi (ANC) asked the Chairperson and the Legal Advisor to reiterate the original task of the Committee on the SAA transaction because that would help the Committee know what to do going forward. She also asked the Members to request the right information because this was supposed to be a short process that was finished in September or October 2023. She said that if Members were still pushing to receive information provided at previous meetings, the matter would not be concluded soon.

She agreed with Ms Malinga that if the Committee did not receive evidence to show how the process was advertised and how Takatso Consortium was shortlisted through it, then the Committee must believe what the former DG said. She asked the Legal Advisor to repeat the dates on which RMB was appointed and their role because, if the Department had enough capacity to handle the transaction, they surely did not need to appoint RMB. So, she wanted to understand what informed the Department to go for an Evaluation Committee that had officials from the Department. She also asked for clarification on the involvement of the former DG in the process, as she understood that he had signed some memorandums and that the current Acting DG had signed some memorandums.

Ms Mkhwanazi was also interested in the sale of shares agreement and asked the Legal Advisor whether he thought the route taken by the Department in the SAA transaction was the best decision considering the information that was at his disposal.  

The Chairperson said that the Committee was dealing with a matter that was prolonged. In the process of that delay, Members were chopped and changed in the Committee from their political parties, so it was difficult for some of them to understand the process that was happening. The original task of the Committee was to investigate the allegations made against the Speaker of Parliament by the former Director-General of the Department of Public Enterprises. The Committee was to look at the correctness or the validity of the allegations, of which the Committee asked for legal advice to assist it in the process of executing that task.

The Committee was given a guideline to follow, including writing to the Minister, sensitising him about the allegations and having the Minister write back to the Committee in response. Secondly, the Committee would allow the former Director-General to make a formal presentation to it. Thereafter, the Committee would also give the Minister an opportunity to make his formal presentation, with both of them providing the necessary documents to support their claims and to give evidence to the Committee, respectively. However, the process was also delayed, and the delay was unfortunately always on one part of the investigation – the Minister.

The Chairperson said that it would not be right to have the Minister come before the Committee to present his case again, because he had already done so and the only thing that was left for the Committee to receive was the document - that which the Minister had promised to give to it, which the Committee only received its last part last week. All the Committee had to do was to receive the document and then determine the next steps.

The Committee had all the facts and was in the process of making a determination. Mr Tetyana was there to help the Committee interact with the information at its disposal. It was not the job of the Legal Advisor to determine whether anything was wrong or right, but that was the job of the Committee. After determining that, the Committee would report to the Speaker’s Office. The former DG might have said he had nothing to do with the SAA transaction, but that assertion must be backed by facts and the same goes for the Minister.   

RMB was a transaction advisor, and they were doing that work on the basis that there was no capacity in the Department and whether RMB stopped being advisor because the Department found the capacity within itself could be determined later. The copies of the presentation that Members asked for would be circulated to them, because the Legal Advisor assured the Members that they were not confidential because the information was already available in the public domain.

Ms Gondwe asked if the documents would be shared with the Committee and the public.

The Chairperson said he was referring to the document presented in the meeting.

Parliamentary Legal Advisor’s Response
Mr Tetyana said that at the heart of what the former DG said was that Takatso Consortium was not part of the shortlist. He did not know how it ended up involved in the SAA transaction. All the legal team did was highlight some of the governance lapses. As to whether there was any evidence of corruption in the transaction – there was none because RMB was appointed because the Department needed a transaction advisor, as it had no capacity within itself. Logically, if the transaction advisor is released of its contract and the process is then handled by the Department, then there is a disjuncture and the Department would have to account.

When three rights are conflicting, in terms of section 36, what is in the public domain and what is not must be considered before it could be decided which right trumps the other. So, the information presented in the meeting was already in the public domain, as it was extracted from what was presented by the former DG last year. It would be shared with the Committee. The issue of the share purchase agreement was a sensitive issue, and it was not addressed in the meeting because the SAA issue was currently a live transaction and needed to be respected as such.

The issue of the framework was raised by the AGSA. Had that framework been made prior to the commencement of the transaction, the Committee would not be investigating the transaction because the framework would have been a guideline for how a transaction of this nature would be done. Mr Tetyana said that, when he assessed the information he discovered that, during the RMB process, there was no Takatso Consortium. Perhaps the Department could speak on that matter. The Department said it had the framework that was suggested by the AGSA, but the framework was not presented before the Portfolio Committee.

The oversight function of the Committee would continue on the transaction, and the report that the Committee would submit to the Speaker would not be the end of the oversight process because the Department would still need to answer some of the questions. RMB was appointed in July 2020. Regarding the timeline given to the Department regarding the SEP process, between September 2020 and March 2021, the Department received expressions of interest, and they were valuated. He said he was not in a position to answer whether the transaction was the best possible development for South Africa, as he would be doing a disservice to the Committee.

Follow-up Discussion
Mr S Gumede (ANC) said that the process needed the Chairperson to ensure that it is concluded, as Members were putting the Legal Advisor in a tight corner to answer questions that he should not have to answer. He said the biggest question that came out from the presentation, which none of them could interpret, was that someone had lied. A lot of money was spent on the matter, and the truth must be found. He then asked the Legal Advisor if the contract with RMB was terminated or if they voluntarily left after the work was finished but they could not find a suitable partner for the Department in the SAA transaction.

Dr Gondwe asked the Chairperson to give direction on how the documents would be treated, going forward, and whether the documents would be treated as confidential documents, because she was concerned that they were dealing with a state asset that had a lot of public interest. The Committee has a constitutional obligation to be transparent to the public in its processes, including the investigation. The Committee would fail to exercise its oversight over the transaction if it would tip-toe around the documents and keep them from public consumption.

Ms Mhlongo said that the Department must answer the questions that were directed at it in the meeting. She felt that it would be unfair for the Committee to conclude the report if it still had questions that were unanswered. She added that the Minister was given an opportunity to present before the Committee and should not be given another opportunity because he chose not to bring all the documents at once. The Committee must work with the documents that were made available to it.

Mr Dlamini said that the process was initiated by a complaint from the former DG about specific conduct from the Minister; it was not a matter between the Committee and the Department. The Minister must clarify the parts that are unclear, as this would allow the Committee to decide objectively on the next steps to take because there was no urgency to conclude the matter if all the boxes were not ticked. He said that his question of whether there was any evidence to support the claims of the former DG was deliberate because he was asking for some understanding of the law of evidence, which would help the Committee reach the conclusion of the matter. He said that the Committee must accept the legal advice, note the concerns, and then reconvene to try and get some of the documents it requested, so that it could make its own conclusion and submit it to the Speaker.

Ms Malinga said, legally speaking, when a company is appointed to do work, it must sign a contract. In that contract, there are terms of reference. RMB was appointed in July 2020, and the Department took over the process from September 2020 to March 2021, but it was not mentioned whether RMB abandoned the contract or not due to specific reasons. There should be reasons for RMB to step out of the mandate that was given by the Department.

Regarding the confidentiality of the documents, she said that two laws in South Africa complement each other – the Promotion of Access to Information Act (PAIA) and the Protection of Personal Information Act (POPIA). The PAIA allows the public to get access to information on the state or its entities, and POPIA gives the constitutional right to privacy. But the two laws work together. She was unsure what the Committee faced regarding the documents and what rights the Committee had in that regard because the Committee must ascertain the details of the transaction, as there were allegations made against the transaction. She asked the legal advisor to clarify the matter.

The Chairperson said all the activities of Parliament have legal advice. For anything that he does to assist the Committee in his capacity as its Chairperson, he must consult legal advice. In the documents, Mr Tetyana mentioned that the transaction was still live and there were still processes that could negatively impact on it if information was leaked. So, Mr Tetyana would assist the Committee by informing it whether it would be legal for it to take documents that it was sensitised about regarding their vulnerability, to the public, and whether those parts of the document were crucial to its work.

Responses
Mr Tetyana said that the Committee was dealing with a live transaction. SAA has competitors, and the information that could be splashed in the public domain was never required of SAA’s competitors. The SPA was still going to change as the evaluations were still in progress.

Ms Malinga raised a point of order to say that she was uncomfortable with Mr Tetyana saying the Committee wanted to splash the documents to the public because the Committee was requesting information and it still needed to decide whether it would be in an open or closed meeting.

The Chairperson did not see the problem with the terminology, and recounted that Mr Tetyana said that there was a possibility that the information could be leaked to the public if it goes to Members as they are public representatives.

Ms Malinga raised a point of order. She said that would mean that the oath that Members took did not apply to the Committee because the Chairperson also suspected that Members would leak information that would be deemed confidential.

The Chairperson did not understand Ms Malinga’s problem with the word.

Ms Malinga said that her problem was the perception that Members wanted to leak confidential information to the public.

Mr Tetyana apologised to Ms Malinga and explained that he did not intend to say that the Members were going to spread information to the public. He added that because the Members did not have enough time to read through the document that was given to the Committee last week, and given the suggestion that Mr Dlamini made that the Committee could not compile a report without having seen the document, the Committee would still need to deal with the document in a closed meeting. He was not saying that the Committee would leak information to the public, but that the confidentiality regime suggested by the Minister could not be rejected by the Committee when dealing with the documents.

Dr Gondwe asked whether Mr Tetyana was saying that the confidentiality regime that the Minister suggested trumps their responsibilities and obligations as Members of Parliament and further trumps the duty that is placed on Parliament to ensure a participatory democracy that allows members of the public and the media to be part of the business of Parliament.

Mr Tetyana said that Dr Gondwe did not understand him. He reminded her that Members were asked to sign non-disclosure agreements (NDAs) and they opposed that. The issue was whether the information provided was confidential, and the answer was that it was confidential, and that the Committee must access the information but in a closed meeting because the transaction was still live.

Mr Dlamini said that it would assist Members to accept the advice that was given by the Legal Advisor and avoid treating the legal advice with suspicion.

Ms Mkhwanazi said it would be important for the Committee not to pass its responsibility on to anyone. The matter was not between the Committee and the Department but between the Committee, the former DG, and the Minister. She suggested adjourning the meeting to a suitable urgent date wherein the Committee would finalise the matter because the longer it took to resolve the matter would complicate the entire process.

Ms Malinga asked: if the document would need to be discussed privately by the Committee with no media presence and the only document the Committee was not supposed to receive was the SPA, which documents would be discussed off camera by the Committee?

Mr Tetyana recounted that, in the previous week, the Minister had spoken of section 184 of the Rules of the National Assembly, because there are instances where meetings of Portfolio Committees should be closed. Mr Tetyana had advised the Chairperson that the Committee must look at the document and determine whether its contents warranted that the meeting would be closed or not.

The Chairperson thanked Mr Tetyana for his assistance, and noted that the Committee may need him again. He said that they would not be asking questions forever and would have to come up with a solution soon because it was unfair to the public to delay the process further. The Committee would have to decide on the matter going forward and will determine a time and date next week to deal with the matters in either a closed or open meeting. The media will be informed well in time on whether it will be an open or closed meeting or a partially closed meeting.

Mr Essack asked whether the Committee would get the agreement to study before it decides on the way forward.

The Chairperson said that the Committee would receive all the necessary documentation, except where there is advice on a particular document that the Committee should view privately.

Ms Mhlongo asked for the presentation made in the meeting and other documents to be shared with Members.

The meeting was adjourned.