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JEREMY MAGGS: In a statement the National Union of Metal Workers of South Africa (Numsa) has strongly condemned the Competition Commission for recommending that the Competition Tribunal approve the proposed merger between Takatso Aviation and South African Airways (SAA). If you’ve been following this one, you know that Takatso intends acquiring a 51% stake in SAA. Speaking for the union, Phakamile Hlubi, who joins us now on Moneyweb@Midday, good afternoon to you, you say there are glaring governance gaps in the process. What are those gaps?
PHAKAMILE HLUBI: So yes, as Numsa, we are raising the flag again on the fact that we believe that this deal, which has been engineered by Minister Pravin Gordhan, is dodgy and it is our view that because of the glaring governance gaps, we can presume that this is a corrupt deal.
JEREMY MAGGS: What are those gaps?
PHAKAMILE HLUBI: First and foremost, we still don’t know what process DPE (Department of Public Enterprises) followed to identify Takatso out of all the possible bidders as the so-called right partner for SAA as an equity partner. Gordhan has refused to disclose to the public or to Parliament about the process that the DPE followed.
Secondly, one of the things that we find very, very strange is that where in the history of business have you heard of a consortium that has sold a company, certainly a company the size of SAA, based on their potential to raise capital.
You either have the capital or you don’t have the capital and Takatso does not have capital. So what was the justification for Pravin Gordhan to pick Takatso ahead of other possible bidders?
The other issue that we feel is something that needs to be strongly raised is the issue around the valuation of SAA. The only financials that we have of SAA are the financials for the 2016/2017 financial year, when SAA was valued at R14 billion. We found out later through Derek Hanekom that Takatso did their own valuation, and they value the airline at R3 billion.
Listen/read:
‘The minorities knew’ – Takatso
All indications SAA will show a modest profit – Derek Hanekom
A new broom at SAA to sweep it all under the carpet?
We also read through media statements that SAA has been sold for R51. So basically, an entity that as of 2016/2017 was valued at R14 billion has allegedly been sold for R51, which means its value as far as DPE is concerned, is now at zero.
We have serious questions about that and how is it possible, again, and we keep having to repeat this, that an entity which is state-owned could have undergone this entire process and Parliament is not asking these questions.
JEREMY MAGGS: When you raise these issues either with the minister or with the broader parliamentary process, and it’s not the first time that you’ve made these allegations, what response do you get?
PHAKAMILE HLUBI: Well, from the minister, we get no response, but that’s no surprise. But what surprises us is the stone-cold silence from Parliament. We actually wrote a letter to the chairperson of Scopa (Standing Committee on Public Accounts), and we did so on 30 April, to the honourable Khayalethu Magaxawho, who is the chairperson of Scopa.
We requested a meeting with him to raise these issues, but also, we want to deal with some of the allegations that are being made by the former director-general of SAA, who himself has also raised serious questions about the lack of due diligence in this process. We’ve just had no answer from Scopa on this issue.
Watch: Pravin Gordhan appears before Scopa
JEREMY MAGGS: Do you believe or does Numsa believe that South African Airways can survive in its current incarnation without an equity partner?
PHAKAMILE HLUBI: It’s already shown that it can. There was an interview that Derek Hanekom did with one of the other radio stations where he confirmed that the latest financials that he has seen show that SAA is actually profiting, so that’s already happening. So again, it raises questions as to why is it so important for us to continue with this deal when SAA is already showing that it can stand on its own two feet without the involvement of this equity partner.
JEREMY MAGGS: The interview, Phakamile, was with Moneyweb, I spoke to him myself. He went on to say though that it was showing a small profit, but there’s still a huge amount of legacy debt, which runs well over a billion rand. That would still indicate surely some weakness within the structure of the carrier itself. So surely it does need some kind of equity relationship.
PHAKAMILE HLUBI: Well, the problem, Jeremy, is that we have to take their word for it. Where are the statements? The last statements that we have for SAA is for 2016/2017. Part of our problem that we’ve had with Minister Pravin Gordhan, even the decision to replace the interim board with another interim board, we see this also as deeply suspicious because we are told by some of the board members, former board members, that the reason this was done is because they were actually opposed to this deal proceeding.
They felt that they could demonstrate that SAA could continue on its own and the reason they were replaced is because they’re standing in the way of this very dodgy deal, which Pravin has personally engineered, which he refuses to account or explain himself to the public on.
I think this is not something we should allow him to get away with because this is an entity owned by the state. He should not have this level of power to make decisions on our behalf without our engagement or our involvement.
Read:
Gordhan appoints Hanekom SAA interim board chair
SAA’s preferred bidder disappointed with airline’s further R1bn bailout
SAA is stuck in a bygone era
JEREMY MAGGS: Just very quickly, your statement goes on to say, even if we were to concede to a partial sale of the airline, which is unlikely, a new and legitimate and transparent process would have to be undertaken. What would that entail then should you concede to this?
PHAKAMILE HLUBI: What should have happened is from the minute that they made the announcement, they should have made the bidding process transparent. We should, for example, know who the other bidders were who tried to bid for SAA. We should know what were the standards or the minimum requirements that they were looking for from all the potential bidders.
We should know what monies do these entities have in order to fund the airline, because what concerns us greatly as Numsa is that the undervaluation of SAA means that what we foresee is a situation where Takatso embarks on a flash sale of SAA assets – because those assets have not been publicly declared because they, frankly, do not have funding to run the airline.
JEREMY MAGGS: Thank you very much for joining us, Phakamile Hlubi, we are going to leave it there, thank you very much indeed, speaks for the National Union of Metal Workers. On Monday’s programme, Moneyweb@Midday, we are scheduled to speak to the interim chief executive officer of SAA, Professor John Lamola.