CHALLENGING DUDU MYENI
WHY DECLARE DUDU MYENI A DELINQUENT DIRECTOR?
In March 2017, OUTA and the SAA Pilots' Association (SAAPA) brought an application in the Pretoria High Court for an order to declare Dudu Myeni a delinquent director in terms of section 162(5) of the Companies Act. The application is based on her conduct while chair of the SAA board from December 2012 until October 2017 when she left the board. This is believed to have been the first application brought to declare a director of a state-owned entity (SOE) a delinquent director.
During those five years (2012/13 to 2016/17)‚ SAA ran up losses of R16.844bn‚ although it had previously been profitable.
The airline has stumbled from crisis to crisis, mired by accusations of maladministration and irregular dealings. We believe this was the foundation for the collapse of the finances resulting in SAA going into business rescue in December 2019.
If the court declares Myeni a delinquent director, it would mean that she is barred from serving as a director, senior executive or on the board of organisations throughout South Africa for a period of seven years or longer.
SOEs are supposed to act as catalysts and engines that drive the economy, but in many instances, they have become organisations steeped in maladministration and corruption. OUTA will not stand by while state coffers are used to bail out SOEs which fail due to gross mismanagement and poor leadership. We hope this action will send a strong message that accountability should be the norm instead of the exception and that state officials come to respect the power which the public can bring to bear.
OUTA and SAAPA brought the case against Myeni alone, as she was the chair of the board and also acted by herself in some of these matters.
WHAT ARE THE ISSUES?
These are the key allegations which form the basis of the legal case against Myeni:
1. That the board’s appointment of BnP Capital in April 2016 as a transaction advisor to SAA was unlawful.
2. That the board’s extension in May 2016 of the BnP Capital contract to include sourcing funding of R15 billion for SAA was unlawful and that BnP had by then lost its Financial Services Provider licence.
3. That the board’s decision in July 2016 to create and pay to BnP a cancellation fee of R49.9m for the failed contract was irregular and unlawful.
4. That in June 2015, Myeni unlawfully intervened in a board-approved deal between SAA and Emirates airline to block it, claiming that then President Jacob Zuma had reservations about the deal and resulting in significant financial losses and reputational harm for SAA.
5. That in 2013, Myeni unlawfully interfered in the financing for SAA’s contract to buy 20 new Airbus A320-200 aircraft for SAA, apparently to gain a financial advantage for another party. Then in September 2015, Myeni unlawfully intervened to block an SAA agreement with Airbus to cancel the purchase of the remaining 10 aircraft in favour of leasing five aircraft. Myeni’s action was intended to improperly involve and benefit a new aircraft leasing company and would cause unnecessary costs to SAA.
6. That when Ernst & Young reported to the board in December 2015 on significant problems with SAA procurement and contract management, Myeni and the board ignored the report and took no action to safeguard SAA’s interests and assets.
PROGRESS IN THE CASE AGAINST MYENI
The OUTA and SAAPA case against Myeni finally started in the Pretoria High Court on 7 October 2019.
Myeni is contesting the action.
It was postponed several times as Myeni was not ready.
Myeni brought three applications against OUTA and SAAPA, attempting to derail the case. She asked the court to block OUTA from bringing the case, claiming that OUTA did not have legal standing to do this. She asked the court if she could change her plea to the case, although she had filed this plea more than two years earlier. She also asked the court to join all the other SAA directors of that time to the case, so that they could share any blame. The court is still to rule on whether OUTA may be involved in the case (this is expected on 12 December 2019); even if OUTA loses this application, the case will continue as SAAPA's role is not challenged and we have used a joint legal team. The court ruled against Myeni in the other two matters.
HERE ARE SOME OF THE COURT DOCUMENTS
2 December 2019: The court ruling dismissing two of Myeni's three applications is here.
The court ruling dismissing two of Myeni's three applications
The OUTA-SAAPA argument opposing the plea change
The OUTA-SAAPA argument on the special plea on OUTA’s standing