Allegation of irregularities in SAA sale: consideration of Minister & former DG submissions

Public Enterprises

13 December 2023
Chairperson: Mr K Magaxa (ANC)
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Meeting Summary

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The Portfolio Committee on Public Enterprises convened virtually to consider the protected disclosure submitted by the former Director-General in the Department of Public Enterprises. The official alleged that there were irregularities in the sale of South African Airways and asserted that Minister Pravin Gordhan orchestrated the sale of SAA to the benefit of a few privileged individuals in an irregular manner.

The matter was referred to the Committee in November 2022 and the Committee heard from both parties.

Having considered the evidence submitted by the Minister and the former DG, as well as the input from legal services, the Committee unanimously agreed that it was unable to provide unqualified support for the SAA transaction because it was shrouded in secrecy. The Committee could not fully exercise its oversight duties because the Minister refused to make the documents available which were central to the allegations made by the former DG.

The Committee resolved that it would report to the Speaker on its unsuccessful attempts to exercise oversight of the deal.

Meeting report

The Chairperson remarked that the Committee would be briefed by the Committee Content Advisor who had been part of the sessions during the investigation. The Committee was tasked by the Speaker to consider the evidence of the former Director-General concerning the allegations of irregularities in the sale of SAA. After a long process, the Committee needed to formally complete the task and hand over a report to the Speaker about the journey travelled so far.

 Draft report on the petition of the former DG

Mr Rodney Mnisi, Committee Content Advisor, highlighted the following key issues contained in the draft report on the petition of the former DG, Mr Tlhakudi.

On 27 October 2022, Mr Tlhakudi made a protected disclosure statement to the President, Mr Ramaphosa, and the Speaker of Parliament. The disclosure was made in terms of the Protected Disclosure Act No. 26 of 2000 and contained the following allegations against the Minister:

Minister Gordhan orchestrated the sale of SAA to the benefit of a few privileged individuals in an irregular manner.

The Minister made use of an unpaid advisor who initiated the unpractical and costly route of the complete closure of SAA instead of recapitalisation.

The Minister engaged in procurement processes and disposing of state assets. Rand Merchant Bank (RMB) was appointed as transaction advisor through a deviation from normal procurement processes due to the Ministers’ intervention.

The Minister engaged Mr Gidon Novick and Mr Srinivasan Venkatakrishnan to engineer an introduction of Mr Novick to Harith General Partners with the goal of introducing Takatso which was not shortlisted as a strategic equity partner.

On 29 October 2022, Mr Tlhakudi submitted supplementary documents in which he made several further allegations including that the valuation of SAA at R51 was problematic as it seemed to devalue SAA, extinguish guaranteed liabilities, and restructure the airline through business rescue.

On 27 March 2023, the Minister submitted a detailed written reply to the Speaker of the National Assembly in response to the allegations made by the former DG. The Minister advised that the suspension and disciplinary action against the former DG were unrelated to the SAA matter.

The Chairperson of the Committee subsequently obtained legal advice from the Parliamentary Legal Services. The Committee was provided with a legal framework of the key pieces of legislation that empowers the Committee to hold the Executive to account.

On 7 June 2023, the former DG made a presentation to the Committee to deal with the context within which he had made the allegations against the Minister. He outlined the merits of his case with the Department which resulted in his dismissal.

The Minister made a presentation to the Committee on 12 September 2023 to place some facts on the record. He rejected any assertion of corrupt behaviour on his part and that of the Department. He stated that the allegations were more of a political campaign than genuine concerns.

The Committee requested the following documents from the Minister, i.e. the shortlist of selected entities from which a final determination was made, the evaluation report performed by RMB, and the share sale and purchase agreement, to test the validity of the allegations.

The Chairperson called on legal services to brief the Committee on the way forward from a legal perspective.

Legal Opinion on the way forward

Mr Andile Tetyana, Senior Parliamentary Legal Advisor, Constitutional and Legal Services Office, said it had been more than a year since the Speaker had referred the matter to the Committee. The documents which the Minister was refusing to make available, were central to the allegations made by the former DG. He presented the following options for the Committee to consider:

The Committee should report the uncooperative conduct of the Minister to the Speaker in terms of Parliament’s Oversight and Accountability Model;

The Committee could invoke section 56(a) of the Constitution and summon the Minister to present the documents on which the Minister had adopted an uncooperative stance; and

The Committee should declare that it could not provide unqualified support for the transaction which was shrouded in secrecy.

 Discussion

The Chairperson said the Content Advisor reminded the Committee of the road travelled and the steps followed until this point. The role of the Committee was to provide direction in closing this part of the road.

Ms S Graham-Mare (DA) requested the Legal Advisor to repeat option three as she was earlier unable to hear him clearly.

Ms C Phiri (ANC) asked if the Legal Advisor could read section 56(a) of the Constitution for the purpose of all those present in the meeting.

Mr Tetyana replied to Ms Graham-Mare that the Committee should declare that it could not give unqualified support for the transaction given only the DGs version was heard and the transaction was clouded in secrecy. He explained that in terms of section 56(a) of the Constitution, the National Assembly may summon any person to provide information or produce documents.

Ms J Mkhwanazi (ANC) raised concerns about the lack of support from the office of the Minister which had been delaying the work of the Committee. The process was supposed to be concluded in six months but took longer than expected. She supported option two of the Legal Advisor to obtain the documents by issuing a summons to the Minister. It was important for South Africans to understand the purchase agreement and the transaction amount involved. The document of shortlisted companies that produced Takatso as a partner should also be made available. Without the documents, the Committee would only have the version of the former DG. The report should be referred to the Speaker in terms of section 56(a) of the Constitution.

Mr F Essack (DA) said various meetings and discussions had been held on the matter. The Legal Advisor, Adv Jenkins, made it clear on 9 November 2022 that it was the duty of the Committee in terms of Rule 227 to hold the Executive to account. The matter is of national importance given that SAA had been a cause of concern for a very long time. The performance of the Department and the privatisation of SOEs have been widely reported in the media. The former DG made very strong allegations about SAA assets being undervalued by between R7 and R15 billion compared to the shares valued at R51 and about Takatso not having the financial and technical capacity to consummate the transaction. He supported the Legal Advisor’s proposal to invoke in-camera deliberations with the Minister to obtain the documents.

Ms O Maotwe (EFF) expressed her disappointment in the manner in which the Minister had been handling the matter. He did not provide credible responses to the allegations and was making it very difficult for the Committee to do its work. She questioned the existence of the documents and considered whether there was substance to the allegations. The Auditor-General’s (AGs) finding to review the appointment process of Takatso should not be ignored. She proposed that the Committee request the Speaker to appoint an ad-hoc committee to investigate the entire transaction. Given the lack of cooperation from the Minister, the Public Protector should be involved in the investigation of the Minister. The Takatso deal should be put on hold until the ad-hoc committee concludes its work.

Mr E Dlamini (ANC) held the view that the section 56 process would be a repetition of the same process that the Committee was trying to conclude. He proposed that the Committee proceed to report the matter to the Speaker in terms of the work that had been done instead of delivering an opinion. The Committee advocated for the deal to be made favourable to the government. An oversight visit to SAA was cancelled at the eleventh hour. He asked if the Committee was able to access the decision of the Competition Commission on how the determination was made to approve the deal. He proposed that the Committee request the Speaker to bring the matter to the attention of the Leader of Government Business.

Ms Graham-Mare said the two most critical documents have been withheld. This was casting aspersions on the Minister’s version. She suggested that the Committee follow all three options suggested by the Legal Advisor. The Minister was uncooperative in withholding the documents and needed to be summoned for an in-camera meeting. SAA is a public enterprise and belongs to the people and not the Minister.
 

Mr S Gumede (ANC) said Members appeared to have reached a consensus on the matter. He supported the proposal to invoke section 56(a) of the Constitution to obtain the documents. The Committee would have broader powers with the support of both the Speaker and the Chief Whip. Although he supported the idea of an ad-hoc committee, he felt it might be premature because the report must first be submitted to the Speaker who should determine how the process would be taken forward. He feared that the Minister would not respect the ad-hoc committee in the same way he disrespected this Committee. He was concerned that the transaction would have been concluded by the time the report is finalised. Takatso would be fighting their appointment in court if it is challenged by the Committee. He supported the advice of the Legal Advisor to not give unqualified support for the transaction. This would exempt the Committee from potential corruption claims. The AG's opinion that the Minister must develop a framework should be included in the report. Currently, there is no clear legislation for SOEs to sell non-core assets and no clear policy for the disposal of shares. The AG identified risks in the transaction process which must be factored in the report. To allow the Speaker to take a decisive position, the report should not be open-ended. The Speaker should give direction in terms of whether the Committee should continue with the work or follow alternative options. In a previous meeting, the Committee had decided that the transaction should be suspended but this had not happened.

Ms N Mhlongo (EFF) said the Minister had deliberately delayed the matter. She supported the proposal for an ad-hoc committee to investigate the matter and to put the transaction on hold until the documents have been provided and scrutinised. It was incorrect for the Minister to enter into an agreement with a confidentiality clause to protect the interest of a third party. This made it difficult for the Committee to hold the Minister accountable. The sale should be rejected in its entirety. SAA should remain a strategic asset of the state. The Committee should distance itself from the transaction because the Minister was not given the go-ahead to conclude the deal. The AG's findings should not be ignored. The Committee must scrutinise the documents but the Minister made it clear that he was not going to share the documents. She agreed that the report must be sent to the Speaker.

Mr E Buthelezi (IFP) concurred with the previous speakers that the matter must be referred to the Speaker for further investigation. The Minister was behaving arrogantly and treated the Committee with disdain.

Ms Phiri said the Committee only had a one-sided story but nevertheless executed its work to the best of its ability. The Minister volunteered to submit documents but did not do so. Even if section 56 were to be invoked, the Minister would not cooperate. She agreed that the matter should be referred to the Speaker. She expressed doubt that an ad-hoc committee would be able to conclude the work before the elections. The Speaker should make a determination. She agreed that the transaction should be put on hold because the process was not transparent. The Committee was unable to furnish a well-documented recommendation to the Speaker because it only had one version. She was disappointed and lost hope that the Committee would be able to get proper responses. She felt the ad-hoc committee would be a waste of resources. The Speaker should make a proper recommendation that would satisfy the people.

Ms V Malinga (ANC) said the Committee had been seized with the matter for a very long time. She questioned whether the Committee would be taken seriously when it calls for whistleblowers to come forward given that it was unable to protect the whistleblower in this case. She concurred with previous speakers that it should not be left to the Speaker to make a determination. The Committee should submit a report which includes the recommendations of the Legal Advisor. The former DG was dismissed because of the deal. If it was an unfair dismissal, the Labour Relations Act must come into play. She asked if the former DG should not be reimbursed for legal fees that he had incurred. Something was amiss with the deal which was the reason that the Minister was not cooperating. The office of the Chairperson should move with speed to inform the Speaker. It appeared that the DG had conveyed what really happened since the Minister’s version was not forthcoming. She was concerned about the SAA and other SOE employees. The Committee did its best but was failed by the Minister.

Mr Essack said considering that the wheels of Parliament turn slowly, the Committee should add a timeline in terms of the strategy to proceed on the matter. The Minister made it clear that he was not returning to Parliament after April 2024.

The Chairperson appreciated the contributions from Members. It was a blood-sucking process. When the Committee started dealing with the two individuals in 2019, they worked well together. But since then, the Committee found itself in the quagmire of having to do this investigation. The Committee deliberately decided to conduct an open and fair process. To safeguard the credibility of the process, the Committee Secretary had to be removed due to doubt about his neutrality on the matter. He was replaced with the Content Advisor to ensure that the process was open. Evidence is the most important part of assessing the validity of an allegation. In this case, the Committee was unable to obtain tangible evidence. The DG submitted SMS evidence but it needed to be substantiated. The Committee consulted the Legal Advisor to ensure that the Minister accepted and understood the responsibility of Members. Having considered the evidence obtained, the Committee unanimously agreed that it was unable to provide unqualified support for this transaction. The Committee would be reporting to the Speaker that the Minister did not assist in dealing with the allegations. He held the view that the Committee could not outsource its responsibility to an ad-hoc committee. It was the duty of the Committee to continue doing the work. The Committee still had a role to play in compelling the Minister to provide the documents even if it was done in-camera. He asked if the Legal Advisor had any further comments to make.

Mr Tetyana advised that the documents had never been summoned which meant that not all powers had been exhausted. The landscape would change once a subpoena is issued because it is an offence to ignore a subpoena. To date, only sweetheart letters have been written. In his view, the Committee was within its right with the decision on the way forward.

The Chairperson thanked Members and the staff for their contributions and declared the meeting closed.

The meeting was adjourned.
 

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