A mad scheme by former CFO of SA Airways Phumeza Nhantsi to borrow R15bn for the airline from a Russian outfit called Grissag to which she was introduced by a Free State farmer known to her only as Van Der Merwe has come to light in documents detailing her disciplinary hearing.
The absurd story, which is detailed in a report on the disciplinary hearings of Nhantsi and former SAA CEO Musa Zwane, illustrates the depths to which SAA plunged under the leadership of chair Dudu Myeni, who is named as being behind the scheme. Both Nhantsi and Zwane were dismissed from SAA in June 2018 .
Myeni was a close friend of former president Jacob Zuma and despite ongoing allegations of corruption and abuse of power, was considered untouchable and was head of the board for five years until she was finally removed in 2017. SAA’s fortunes deteriorated markedly during Myeni’s tenure and the airline incurred large losses.
Nhantsi and Zwane both testified that Myeni had pressured them into recommending the deal and they had acted under duress. While disciplinary chair Nazir Cassim found this to be true, he found Zwane guilty of “gross misconduct” and said that Nhantsi’s conduct was “wrongful and dishonest”.
The transactions involved originated in a decision in 2015 by the SAA board to consolidate SAA’s R15bn debt. A tender was issued and won by a company called Seacrest, which undertook to provide the loan at an interest rate of 5,6% per annum. This, Nhantsi told Cassim, would provide an R500m saving in interest charges compared to domestic commercial banks. But Seacrest was disqualified after a due diligence exercise found that it had no substantial assets and would rely on Grissag.
Myeni then intervened and introduced the Free State Development Corporation to replace Seacrest. The corporation, which is a government development agency, was also to access the money from Grisssag.
Nhantsi never investigated Grissag nor did she question the instruction that the corporation should be the conduit.
“Nhantsi’s only investigation was that they were two farmers in the Free State of Afrikaans descent who had the connection with Grissag. Her meeting with the farmers and her knowledge of the source of the funds was limited to one farmer’s name, being a Van der Merwe ... For her to actually believe that there was merit in this transaction with only [this] knowledge demonstrates the parlous state of affairs at SAA in terms of governance and functionaries who run this august airline,” wrote Cassim.
The board also decided to appoint a transaction adviser for the deal, an unknown company called BNP, which stood to gain an enormous amount of commission — R256m — for its services. BNP also secured an arrangement that should its contract be terminated, it would receive a R50m cancellation fee.
But before the deal could be done it was scuppered by an expose in the Business Day. The financial services sector regulator, the Financial Services Board, then stepped in to inform SAA that it had suspended BNP’s licence as the main individual in the company had failed the necessary regulatory exams.
Cassim is also scathing of Myeni who he says “orchestrated the entire transaction commencing with the funding of the R15bn debt for an untoward purpose: The purpose being to involve BNP and enrich BNP and on the probabilities to share in the ill-gotten financial proceeds to the detriment of SAA.”
SAA spokesperson Tlali Tlali said on Friday that both Zwane and Nhantsi had been reported the police. He said SAA had a number of forensic investigations underway and would soon provide a progress report.
Myeni did not reply to a request for comment.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.