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ACSA cleans up its act but is Government interfering?

This brief sketches the background to attempts by the ACSA Board to address alleged fraud and corruption - and in reaction, the Minister of Transport attempts to fire almost half the Board.

ACSA Background 

The Airports Company South Africa SOC Ltd (ACSA) owns and manages nine major airports in South Africa.  The South African Government (through the Department of Transport) is the majority shareholder, with a 74.6% shareholding.  The balance is held by the Public Investment Corporation (20%), a group of empowerment investors (4.21%) and ACSA’s staff share scheme (1.19%).  The empowerment investors consist of G10 Investment, African Harvest, Pybus Thirty Four Investments, Tele Investments and Upfront Investments.  

Board action in relation to alleged fraud and corruption

ACSA has been in the news on and off since November 2016, on account of a variety of allegations relating to corruption and tender fraud.  On 7 November 2016, the ACSA Board of Directors suspended three of its senior executives, following the alleged unlawful award of tenders.  A decision was also taken at that Board meeting to suspend ACSA’s CEO, Bongani Maseko, but this decision was not implemented.
 
At the beginning of February 2017, the Board decided to extend the suspension of the executives and to charge them formally.  Independent auditors and lawyers advised it in assessing the alleged offences and the appropriate sanctions.  It was also decided to suspend Bongani Maseko, pending his alleged misconduct on a variety of counts.  These include the unauthorised expenditure of R6.84 million in favour of Incentive Driven Marketing and R7 million to Paul Ranamane, for legal services.  Ranamane Mokolane attorneys was not only not on ACSA’s approved panel of attorneys, but in addition, Paul Ranamane had been struck from the attorneys roll by the Law Society in October 2016 on grounds of, inter alia, the misappropriation of trust funds in an amount of R5 million.  Payments from ACSA could not be made directly to him in the absence of a tax clearance and were routed through someone else.  The charges against Bongani Maseko also include the authorisation of the unlawful eviction of Exclusive Books from its premises at ORT.
 
The Board decided to appoint three members of the Board to meet the Minister of Transport and to advise her of the decisions.  The delegation was to include Roshan Morar (Acting Chairman), Mathole Mabela and Kenosi Moroka.  The Board then awaited the minutes of the meeting to be circulated, before arranging to meet the Minister.  The minutes have not yet been circulated.  Instead, it was learnt that the Acting Chairman had met with the Minister, without notifying the Board.

Action by the Minister of Transport to remove four directors from the Board

On 10 February 2017 a notice was sent to shareholders, notifying them of a shareholders’ meeting to be held on 20 February 2017.  It is assumed, given its contents, that this was done at the request of the Minister (as representative of the majority shareholder, the South African Government).  The notification stated that the purpose of the meeting was to consider a resolution to remove the following directors with immediate effect:  MJ Lamola, MK Moroka, C Mabude and B Luthuli.  No reasons were given for the proposed removal of these directors.  This was followed on 13 February 2017 by another notice, in which it was proposed to remove K Matlou, MK Moroka, C Mabude and B Luthuli.  MJ Lamola’s name no longer appears in the list, but in her place, K Matlou is to be removed.  Once again, no reasons have been  provided in this amending notification.  In addition, the notice of 13 February 2017 also requested shareholders to waive a violation of the required notice period for a shareholders’ meeting (in other words, accepting that the notification of 10 February 2017 had contravened this).
 
However, according to a press report of 13 February 2017 (www.iol.co.za/business), “Transport Minister Dipuo Peters’ office on Monday dismissed reports that she has moved to suspend four board members of the struggling Airports Company of South Africa (ACSA) as speculation. ….. Business Day reported that this was seen as an attempt to shield CEO Bongani Maseko from being suspended and disciplined for flouting the parastatal’s supply chain rules …..”.
 
It was subsequently reported in Business Day of 16 February 2017 that “Transport Minister Dipuo Peters has made an about-turn after buckling to ACSA minority shareholder demands, postponing a meeting at which four board members would have been fired”. 
 

Summary of events 

 
The sequence of events of the last two weeks can be summarised as follows: no Board minutes were prepared and circulated following the Board meeting of 3 February 2017, but a shareholders’ meeting was convened by the majority shareholder (represented by the Minister of Transport) on 10 February 2017 to take place on 20 February (thereby breaching the required notice period). The stated purpose of this shareholders’ meeting was to remove four directors (out of a total of nine) on unspecified grounds with immediate effect. This was followed by a further notification three days later substituting one of the directors to be removed by another one, once again on unspecified grounds. These notifications of resolutions to be proposed contain no reference to the CEO, whom the Board had decided to suspend on 3 February 2017.  It does not require much imagination to sense that the proposed firing of four Board members in one go for no apparent reason and in such obvious haste is an attempt to interfere in the balance of power within the Board by the Minister of Transport. However, the Minister has now apparently decided to postpone the shareholders’ meetings, but the further development of this case is difficult to predict. 
 

Conclusion

 
This shambolic drama goes much further than just another instance of poor corporate governance at state-owned enterprises. It also clearly shows an unwillingness to deal with allegations of serious offences in an appropriate manner. The nature of these alleged offences have been known for some time and independently verified by the Board. The Minister of Transport, as the Government’s representative shareholder in ACSA, cannot avoid the blame in this respect and if the proposed removal of four directors from the Board is carried through, it will only lead to accusations that things are being covered up.
 
Anton van Dalsen
Legal Counsellor
anton@hsf.org.za