These contracts are about to be renewed.
SAA says it wants a 30% share of BidAir Services’ SAA grooming, toilet and water contract to be transferred to a black-owned small business, apparently nominated by SAA. Eskom did not disclose whether it would retain the 30% equity it is trying to obtain, or also transfer it to a third party.
In effect, state-owned enterprises are introducing another 30% empowerment requirement over and above existing empowerment legislation. Corporate governance expert Charl Kocks of Ratings Afrika says such a scenario would corrupt existing black empowerment programmes and increase uncertainty in the market about the rules of doing business with government.
Business has seen a Bidvest letter requesting “advice and guidance” on the matter from SAA nonexecutive director Yakhe Kwinana, who apparently made the 30% “request”. It also asks the request “be formalised and communicated in writing for due consideration”.
Bidvest would not comment, saying the letter “forms part of an ongoing engagement with SAA”. In the letter, the company says BidAir Services is already 63.42% black-owned and a transfer of a further 30% to a black-owned small business will result in 74.39% black shareholding.
It explains BidAir Services provides similar services to other airlines and a new company would have to be established for the SAA contract to accommodate a 30% partner, with start-up costs of about R20 million. SAA says its “intention is to contribute to transformation of services rendered by Bidvest to SAA. The 30% applies to [the] SAA contract, not to Bidvest as a company” and is made in support of a government call to support black industrialists by levelling the playing fields.
Eskom says it has a mandate “to negotiate a 30% shareholding from boiler-serve contractors Steinmuller, Actom and Babcock in return for a portion of the order book, which is valued at about R30 billion”.
Eskom said: “It is unfortunate that the information was perceived as a non-negotiable and shut condition, which is in clear contradiction to the way Eskom conducts its business.”
Kocks said the upshot was companies would increase their bids by up to 30% to provide for increased risk and that cost would be passed on to the taxpayer.
“This kind of irrational demand introduces a new level of risk. Companies will ask themselves what to expect tomorrow and the day thereafter.
“Who at SAA will identify the entities that will benefit?” Kocks says the discipline of a competitive market is being diluted by this kind of central control and inefficiencies will increase, while the door is being opened for corruption.