NPA should investigate allegations against Dudu Myeni

It is a travesty that two civil organisations – the Organisation Undoing Tax Abuse (Outa) and the South African Pilots Association (Saapa) – had to approach the court, at their own cost, in an attempt to bring a director of a company to account for alleged unlawful actions.

At a time when South Africa is about to fall off the fiscal cliff, it is more than a travesty that the directors responsible for hollowing out major state-owned enterprises (SOEs) such as South African Airways (SAA), which are largely responsible for South Africa’s impending bankruptcy, have so far not been charged with any criminality.

The order to have Dudu Myeni, former non-executive chair of SAA, declared a delinquent director by the court has no standing on any criminal investigation into her alleged involvement in further acts of corruption, maladministration, and money laundering at SAA.

The plaintiffs suggest that these matters be fully investigated by the National Prosecuting Authority (NPA) without further delay, and that appropriate action be taken.

Limited insight into the scale of what took place

To ensure that the delinquency trial could be completed in the allotted five weeks, a decision was made to lead evidence on only two of the cases of alleged misconduct: the ‘Emirates deal’ and the ‘Airbus swap transaction’.

While judgment is only expected to be handed down in a few weeks’ time (the hearings concluded on Friday), these two cases of misconduct are seen as sufficient to ensure a lifelong declaration of delinquency.

Evidence was not led on three additional causes of action: a 2016 BNP deal, a 2013 Pembroke transaction, and an Ernst & Young report. It is to be noted that the plaintiffs did not absolve Myeni of any misconduct in these three matters, nor did they concede any weakness in their case.

For sake of completeness, the five matters are briefly summarised below:

The Emirates deal

Myeni scuttled a non-binding memorandum of understanding (MoU) between SAA and Emirates in 2015, irreparably harming SAA’s relationship with Emirates. The revenue lost was a minimum of $100 million per year.

The Airbus ‘swap’ transaction

Myeni obstructed a deal with Airbus to allow SAA to escape an onerous contract for the purchase of aircraft. Further, she misrepresented board resolutions, acted without board authority, misrepresented the facts to the minister of finance and parliament, and put SAA’s financial position at risk.

The 2016 BNP deal

BNP Capital won an SAA tender to provide financial advice on debt relief and source a R15 billion loan. Many parties were involved in this transaction, but essentially BNP would be charging R2.6 million for the financial advice and would make R256 million on raising the R15 billion loan.

Outa accused SAA and Myeni of not following the correct procurement procedures in awarding the tender to BNP. In 2018, former BNP CEO Daniel Mahlangu agreed to comply with Outa’s subpoena that he hand over all documentation relating to the deal. Substantial evidence on this transaction was led at the Zondo Commission of Inquiry into allegations of state capture, and it is up to the NPA to delve into any criminality.

The 2013 Pembroke transaction

In May 2013 the SAA board resolved that the first 10 Airbus A320 aircraft were to be acquired through a novation sale-and-leaseback transaction with Pembroke Aircraft Leasing, the aircraft financing arm of Standard Chartered Bank.

In other words, Pembroke would purchase the 10 aircraft from Airbus, and Pembroke would then lease the aircraft back to SAA. Myeni, however, informed the minister of public enterprises that only two A320-200 aircraft would be purchased by Pembroke and leased to SAA, and then she attempted to force the company secretary to amend the board minutes and the board to overturn its May resolution.

The Ernst & Young report

A report prepared by Ernst & Young in December 2015 identified substantial problems in procurement and contract management practices at SAA. The report identified numerous irregularities, including:

• Overpayment in respect of SAA’s contract with Kintetsu World Express South Africa;
• Overpayment in respect of SAA’s contract with Société Internationale de Télécommunication Aeronautiques;
• Failure to follow correct tender processes and overpayment in respect of Air Chefs’ contract with ADJ Maintenance cc; and
• Conflict of interest and overpayment in respect of SAA Technical’s contract with Mtha Aviation.

Myeni and the board took no action to give effect to the recommendations of the report.

Closing arguments 

In closing arguments, counsel for the plaintiffs, Advocate Carol Steinberg said: “During her time at SAA, Ms Myeni blocked, delayed and obstructed key initiatives to turn the airline around. In doing so, she broke the law and flouted basic governance principles.”

Shocking evidence was led to demonstrate Myeni’s alleged involvement in “further acts of corruption, maladministration, and money laundering at SAA”.

The evidence established four repeated forms of serious misconduct:

• Dishonesty;
• Obstruction and interference;
• Improperly inserting middlemen; and
• Governance failures.

This is, however, not a criminal trial.

The purpose of this action is to seek an order from the court to declare Myeni a delinquent director for life under the Companies Act.

A delinquency order – if given – carries no jail sentence.

Any criminal action is to be pursued by the NPA. Every South African should be hoping that it is.

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