OUTA and SAAPA institute legal action against Dudu Myeni
This day saw the mass resignation of seven supporters of the South African Airways (SAA) Board, including Chairperson Cheryl Carolus and the appointment of Duduzile Cheryl Myeni (Dudu) in her place.
History will show that SAA’s situation has worsened significantly and unnecessarily at the hands of Ms Myeni, and why it was necessary for the Organisation Undoing Tax Abuse (OUTA) and the SAA Pilots Association (SAAPA) to institute legal action in the North Gauteng High Court on Tuesday 7th March 2017.
During Ms Myeni’s tenure as Chairperson, SAA has lost an estimated R10.5 billion over a period of 5 years, despite that fact that SAA was profitable between 2010 and 2012. The company has seemingly been at war with itself, stumbling from crisis to crisis and mired by accusations of maladministration and irregular dealings, which we know to be substantive.
One substantive matter we list in our claim, pertains to the Chairperson proceeding with the appointment of BnP Capital in May 2016, as a transaction advisor, despite expert advice by the Group Treasurer that this service was not required. This was further exacerbated when the “illegal” contract was extended to include services related to the sourcing of funds. Not only was the appointment process flawed from the outset, the Board either failed to perform due diligence on this little known company, or simply ignored the fact that BnP Capital did not have a valid Financial Service Provider (FSP) Licence, which was required in order for it to provide these services to SAA. The planned contract was terminated only after OUTA brought the irregularities of the contract to light and threatened legal action against those responsible.
However, the cancellation of the contract was not the end of the fiasco. After SAA terminated the contract, BnP Capital brazenly sought a cancellation fee of R49.9 million from SAA, the approval of which was circulated via a draft round robin resolution. The CFO and Chairperson of Audit and Risk advised that the cancellation fee was irregular and unlawful. Only Ms Myeni voted on favour of the resolution.
The BnP Capital crisis was unfortunately just one of many Ms Myeni brought upon the airline. On the 19th of January 2015, Emirates proposed an Enhanced Strategic Partnership between it and SAA. This deal would have greatly benefitted SAA in many ways, including a direct financial gain of R2 billion for the company. When the SAA Board voted to approve the proposal, subject to Memorandum of Understanding between SAA and Emirates, only Ms Myeni voted against it. However, her interference did not end there as she instructed Mr Nico Bezuidenhout, the CEO of SAA at the time, not to sign the MOU, allegedly citing President Jacob Zuma’s disapproval of the deal as her reason for the instruction. As a consequence of this instruction the Emirates deal never came to fruition and SAA suffered yet another loss.
On another substantive matter, Ms Myeni overstepped the boundaries of her authority as Chairperson of SAA, to the detriment of the company, when in the course of 2015, Ms Myeni, exposed SAA unnecessarily to financial and reputational damage, and also caused unnecessary delays in concluding the Swap transaction with Airbus. She wilfully and knowingly created unnecessary delays in the process by calling for reviews, a South African partner and an illogical rand based transaction. She undermined existing approvals by the Board and the Minister and wilfully undermined due process in an effort to spoil this critical deal.
The fact that Ms Myeni has “acted in a manner materially inconsistent with the duties of a director”, are the words reflected by the Companies and Intellectual Property Commission (CIPC) in their recent ruling on former SAA Chief Executive Officer, Mr Monwabisi Kalawe’s claim that she had attempted to split Airbus deal for ten new A320 aircraft to benefit from an incentive payment. The CIPC confirmed that Ms Myeni misrepresented to Minister of Public Enterprises, Mr Malusi Gigaba, that the Board had resolved to lease only two aircraft from Airbus instead of ten.
These failures and more occurred at SAA, either at Ms Myeni’s own hand or under her watch. It cannot be said that she was unaware of these crises as not only was she duty bound to oversee the airline but Ernst and Young released a report in December of 2015 covering procurement and contract management practices at SAA and Air Chefs, Mango and SAA Technical (SAAT). This report covered numerous examples of overpayment, irregular tender practices, conflicts of interest and informal and suspicious contracts.
The legal action brought against Ms Myeni is based on our claims that she has been seriously remiss in her fiduciary duties and responsibilities as the Chairperson and as such, has caused the airline significant harm, by contravening Section 162(5) of the Companies Act. OUTA believes that this action is necessary, as it will bring Ms Myeni to account for her conduct. The totality of the evidence arrayed against her indicates that she has:
Grossly abused her position of a director;
Intentionally, or by gross negligence, inflicted harm upon SAA;
Acted in a manner that amounted to gross negligence, wilful misconduct or breach of trust in relation to the performance of a director’s functions within, and duties to SAA.
Accordingly, OUTA in conjunction with the SAA Pilots Association (SAAPA), has instituted legal action to have Ms Myeni declared a delinquent director. Should our action prove successful, Ms Myeni could be disqualified to fulfil the position of a director or executive for any organisation within South Africa, for at least seven years and/or longer.