OUTA and SAAPA’s first witness describes the sinking of SAA’s deal with Emirates

This is what former SAA acting CEO Nico Bezuidenhout told the court in his evidence which started on 31 January 2020.

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05/02/2020 08:35:20

                                                                                                                OUTA and SAAPA’s first witness describes the sinking of SAA’s deal with Emirates


                                                                                                                Nico Bezuidenhout, the current CEO of Mango Airlines and former acting CEO of SAA, was the first witness called to give evidence in the OUTA and SAAPA application to have Dudu Myeni declared a delinquent director.

                                                                                                                Bezuidenhout was the CEO of Mango who was brought in as acting CEO of SAA from January to June 2013 and again from November 2014 to July 2015. Myeni chaired the SAA board at all material times.

                                                                                                                Shooting down the $100m-a-year Emirates deal

                                                                                                                After detailing his extensive experience and expertise, Bezuidenhout told the Pretoria High Court about the numerous essential corporate policy documents which form a “Bible” of sorts for the board of SAA. He also detailed the documents which formed part of SAA’s strategic plan, including the Long Term Turn Around Strategy (LTTS), the Corporate Plan, the Network and Fleet Plan and the 90-Day Action Plan.  It was Bezuidenhout’s view that if these plans had been followed, SAA would be profitable today.

                                                                                                                Of these strategic documents, the LTTS, which was approved by all relevant parties including two separate ministries (Public Enterprises and National Treasury) Bezuidenhout noted that it clearly stated that a strategic partnership with a Middle Eastern carrier was a necessity. 

                                                                                                                The relationship between SAA and Emirates was a long standing one, dating back to 1997 and described by Bezuidenhout as the single most profitable relationship in the airline’s history. In January 2015, Emirates approached SAA with a strategic partnership proposal which included an annual revenue guarantee to SAA of $100 million and other benefits, such as:

                                                                                                                • Guaranteeing that Emirates limit its strategic partnerships in the region to SAA;

                                                                                                                • Addressing SAA’s overstaffing problem; and

                                                                                                                • Mitigating the potential damage caused by strike action within SAA.

                                                                                                                In order to see this strategic partnership come to fruition, a non-binding memorandum of understanding (MOU) was approved by every board member except Myeni, who provided no formal reason for her disapproval. Bezuidenhout stated that she did however raise concerns that Emirates was attempting to buy SAA, an allegation completely without substance but one that nonetheless saw a safeguard clause included in the draft MOU. Myeni further stated that the Middle Eastern carriers were taking away South Africa’s animals. Bezuidenhout described the detailed interaction the board had about the MOU to be totally irregular.

                                                                                                                Beuizdenhout noted that whilst the MOU was nonbinding it was of vast importance. SAA was in dire financial straits, so the public signing of an MOU with the largest airline in the world – with a strategic partnership modelled on a proven relationship between Quantas and Emirates – would have greatly increased investor confidence in SAA.

                                                                                                                At Myeni’s insistence, Bezuidenhout arranged an engagement between the non-executive board members of SAA and the executive of Emirates, a form of engagement which Bezuidenhout described as “unusual”.  Myeni failed to attend any of the meetings scheduled with Emirates in respect of the strategic partnership. Bezuidenhout described her conduct as embarrassing and a slap in the face to Emirates.

                                                                                                                Bezuidenhout emphasized that Myeni’s conduct had far-reaching consequences, particularly considering the current business rescue proceedings SAA is dealing with. His attempts to reach out to Emirates were unsuccessful and, now when SAA finds itself in need of an equity partner, it likely won’t find one in Emirates.

                                                                                                                The MOU, the Paris Show and the WhatsApp message

                                                                                                                Bezuidenhout was asked about Nick Linnell, who had provided a legal opinion on the MOU with Emirates. He confirmed that Linnell, a non-practicing attorney, was an advisor to Myeni whom she allegedly engaged with at the Mhlathuze Water Board which she had also chaired, and that SAA would have paid his salary. Bezuidenhout noted that SAA had its own internal legal advisors and an external legal panel. Despite his alleged closeness to Myeni, Linnell’s legal opinion noted that failure to sign the MOU risked potential reputational harm to SAA.

                                                                                                                Bezuidenhout commented on a series of control lists which were used as the board had problems implementing actions. In these control lists, confirmed by an extract of the minutes, it emerged that Myeni undertook to provide her comments on the MOU by 9 June 2015. Despite multiple follow ups, Myeni failed to provide her input and the control list remained unresolved in August 2015.

                                                                                                                Bezuidenhout testified that on 16 June 2015, during the Paris Air Show, the MOU was due to be signed in Paris. After speaking to the Emirates representatives and notifying them he still did not have approval from the board, the Emirates representatives stated they would escalate the matter. Bezuidenhout then received a phone call at 2am from a very upset Myeni in which she informed him that Emirates had got hold of President Jacob Zuma. She stated that neither she nor Zuma wanted the deal to proceed but did not provide any reason for this.

                                                                                                                Bezuidenhout and his wife received a WhatsApp message from Myeni, stating: “We do not approve signing any non-binding MOU”. Bezuidenhout interpreted the “we” to mean Myeni and Zuma in the light of their earlier conversation and as every other board member had approved this.
                                                                                                                Bezuidenhout also spoke about a meeting held with Myeni in mid-July 2015, in which she had her security guard confiscate his e-cigarette as she believed it to be a recording device. She asked him to dismiss SAA Chief Commercial Officer Sylvain Bosc and SAA Chief Financial Officer Wolf Meyer. When he refused, she warned him that she had a whistleblower complaint against him.

                                                                                                                The allegations in this complaint included that:

                                                                                                                1. Bezuidenhout was conspiring with the EFF and Pravin Gordhan to unseat Myeni as chair;
                                                                                                                2. Bezuidenhout and Meyer had stolen four aircraft;
                                                                                                                3. Bezuidenhout was the owner of the opposition business LSG Sky Chefs; and
                                                                                                                4. SAA was subsidising Mango’s fuel fees.

                                                                                                                Bezuidenhout saw this report only after participating in the Zondo Commission this year. Every allegation was dismissed. 

                                                                                                                Bezuidenhout also spoke about a meeting he held with the Hawks, in which they asked that he detail why SAA had changed a route from Senegal to Ghana. This took a more sinister turn when the Hawks asked him to return as they had lost an USB stick he had previously provided, and the Hawks indicated that they knew about his movements and other allegations against him. These allegations mirrored some of those in the above report. He left feeling uneasy and that he had been monitored.

                                                                                                                Cross-examination by Advocate Nqabayethu Buthelezi 

                                                                                                                Advocate Buthelezi, on behalf of Myeni, started off by saying that he would prove that the Emirates deal was a “sham”, that it was unlawful and that Bezuidenhout had acted unlawfully. 

                                                                                                                Buthelezi raised the allegation that Bezuidenhout had falsified his qualifications, although Bezuidenhout had already testified that the SAA board itself had noted the allegations arose from an error in their annual reports. He noted a media article quoting a DA MP, but did not produce it before the court.

                                                                                                                Buthelezi put it to Bezuidenhout that the Emirates deal went against the Network and Fleet Plan and was a conspiracy aimed at undermining government policy. During the 2010 World Cup, Emirates had an allocation of four flights a day, which the Department of Transport subsequently wanted to reduce to three. Buthelezi’s view was that Emirates wanted to maintain those four flights a day through the back door, by doing a deal with SAA. Bezuidenhout said that the rights assigned to airlines in this regard were not within the purview of SAA, but fell within the ambit of the Department of Transport.

                                                                                                                Buthelezi also put it to Bezuidenhout that he had attempted to influence legal proceedings between the department and Emirates over the rights Emirates held. Bezuidenhout said that SAA was not a party to the proceedings and could only apply for or oppose such rights being granted to airlines.

                                                                                                                Buthelezi referred to certain pages of a presentation in respect of the Network and Fleet Plan which detailed some detriments to the existing relationship between Emirates and SAA. Judge Ronel Tolmay noted that the next few pages addressed this and detailed the benefits of the new Emirates deal.

                                                                                                                Buthelezi said that certain sections of the MOU were in fact binding, while Bezuidenhout noted that none of the National Treasury, the board or the legal reviews of the MOU took this view. Bezuidenhout also said that this issue was never raised as a concern by any board member or during any of the legal reviews in respect of the MOU.

                                                                                                                Buthelezi claimed that the MOU was a “sham” and pointed out that the MOU did not include many of the benefits which had been listed. Bezuidenhout noted that the MOU wasn’t meant to include absolutely everything by design and that it should be read in conjunction with the Strategic Partnership Proposal from which it arose.

                                                                                                                Picture - Wikimedia Commons

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