Delinquency hearing: Dudu Myeni had a ‘complete disregard for public funds’

Dudu Myeni should be declared a delinquent director for life and the NPA should investigate her actions while chairing SAA's board, the North Gauteng High Court heard on Friday. 

Myeni, who stands accused of risking the airline and country's finances and lying to the finance minister, denies the allegations.

Myeni made a telling statement about her leadership under cross-examination, argued with advocate Carol Steinberg on Friday in the North Gauteng High Court.

Judge Ronel Tolmay, presiding over the Organisation Undoing Tax Abuse (Outa) and SAA Pilots' Association's (Saapa) attempt to have Myeni declared a delinquent director, asked whether the former SAA chairperson was concerned that the airline would have to pay billions if it failed to sign a deal with Airbus in 2015.

Myeni responded: “South African Airways belongs to government 100%, they are the 100% shareholders, they wouldn’t allow South African Airways to fail.”

During closing arguments on Friday, Steinberg, representing Outa and Saapa, said Myeni had a “complete disregard for public funds”.

“She honestly believed that there was no problem if SAA defaulted on its debts despite explicit repeated warnings,” argued Steinberg.

Outa and Saapa called on the court to declare Myeni a delinquent director for life and for the court to refer the judgment to the National Prosecuting Authority (NPA) to investigate her motives for allegedly obstructing crucial deals at the airline, which is now in business rescue.

Their case has centred around two 2015 deals Myeni, who served on SAA's board from 2009 and was chairperson from 2012 to 2013, is accused of obstructing.

In June 2015, SAA executives travelled to Paris to sign a non-binding memorandum of understanding (MOU) with Emirates that would have guaranteed SAA an additional $100-million a year in revenue, expanded its network and allowed it to cancel the loss-making Abu Dhabi route.

Former SAA CEO Nico Bezuidenhout and CFO Wolfgang Meyer testified that Myeni called and then texted them on the eve of signing the deal and told them not to sign on the instruction of former president Jacob Zuma.

The board, minus Myeni, allegedly backed the deal but the chairperson did not ask them their opinions before the executives travelled to Paris, breaching her responsibility as a director and chairperson, argued Steinberg.

Myeni denied that she said acted on Zuma's instruction and was showing caution in having the board approve the deal while it had outstanding questions about the benefits for SAA. Outa and Saapa argued that whether Myeni acted on Zuma's instruction or not, she failed to meet her obligations.

“During her time as the chairperson, evidence showed Ms Myeni blocked, delayed and obstructed key initiatives to turn the airline around. In doing so, she broke the law and she flouted the most basic governance principles,” said Steinberg.

Advocate Nqabayethu Buthelezi, representing Myeni, said: “If you fail to prove that the chair acted on the instructions of Zuma then none of the things that you say on Emirates matter. That's the end of it.”

SAA eventually approved the Emirates deal but Myeni never rescinded her direct instruction to Bezuidenhout that ended the deal, which SAA officials said was crucial for the airline.

Myeni's actions regarding a deal with Airbus has come under heavy scrutiny during the five weeks of hearings.

In 2015, SAA spent months negotiating a “swop deal” with the aircraft manufacturer to switch a 2002 purchasing agreement to buy A320s, 10 of which had been delivered, to a lease agreement for five A330s.

The 2002 deal had become too costly for SAA and the new deal would save the airline billions in pre-delivery payments (PDPs) that it couldn't afford.

The board approved the negotiated lease agreement in March 2015 before finance minister Nhanhla Nene also approved it. In September 2015, while SAA was under intense pressure to sign the deal and executives were concerned about the delay, Myeni wrote to Airbus saying SAA had decided to do the deal differently and introduce an African leasing company as a middleman.

Airbus had warned SAA that if it failed to sign the new deal, the cash-strapped airline would have to pay $17-million immediately and $100-million within 30 days.

Steinberg said Myeni wrote to Airbus without the board's approval to alter the proposed lease agreement, that no board resolution had been taken to rescind the March 2015 approval, and that she lied by suggesting SAA had found a local leasing company while none had been identified.

“This is deliberate dishonesty. It's a gross abuse,” said Steinberg.

Outa and Saapa also accused Myeni of repeatedly lying to the finance minister. In her correspondence on introducing a local lessor, Myeni said SAA would not have to pay the hefty PDP payments. She only admitted it would after the SAA CFO, Meyer, warned the minister.

Writing at the time, Meyer said there would be disastrous consequences for SAA and Treasury should the deal fail. Eventually, after both Nene and former finance minister Pravin Gordhan rejected the amended lease proposal, Gordhan ordered the board to sign the original deal.

“The point here is that Ms Myeni was willing and did take both the country and the company to the edge of a cliff and it was frankly the minister and his staff that managed to pull the company and the country back from the edge,” said Steinberg.

“She misrepresented facts to her shareholder. She misrepresented facts to Parliament. She misrepresented facts to Airbus. She stopped the signing of financial statements,” she added.

Myeni denied she willingly misled Nene and claimed that while there was no clear written board resolution to modify the Airbus lease agreement, board members were still behind it.

Buthelezi said emails from the SAA company secretary, former board member Tony Dixon, and Nene suggested the board had approved the amended deal, which executives who testified denied.

Buthelezi said about the delayed Airbus deal “this refusal to sign was not a refusal to sign of the chairperson. It was a refusal to sign by the board in its entirety while it was being indulged by the ministers and while it was being indulged by Airbus giving extensions to these deals”.

Myeni repeatedly claimed that she should not be held accountable for the actions of her board, which Steinberg rejected, citing the Companies Act, which says directors can be jointly and severally held liable.

“The interests of the entire South African public are at stake, not simply narrow a narrow class of shareholders. This is particularly so as SAA received billions in government guarantees leaving the government liable should SAA have defaulted on any of its liabilities,” said Steinberg.

The hearings are due to finish on Friday. DM