The patience of Airports Company South Africa (Acsa) minority shareholders was tested once again at the company’s three-hour annual general meeting (AGM) on Friday over the board’s handling of corruption allegations levelled against CEO Bongani Maseko.
Acsa is a state-owned entity (SOE) that manages SA’s nine biggest airports, including OR Tambo International in Gauteng, Cape Town International in the Western Cape and others.
There has been widespread concern over corporate governance issues at Acsa. Its CEO has been at the centre of more than three forensic reports that have recommended disciplinary action against him.
The reports have been conducted by independent parties – including Deloitte, Norton Rose Fulbright, and Open Water Advanced Risk Solutions – since 2014, with the latest report concluding in January 2018. They implicated Maseko and three senior managers in the flouting of Acsa’s supply chain management processes and violations of the Public Finance Management Act (PFMA).
Moneyweb has seen a copy of the Open Water report, which found that Maseko personally appointed service providers from 2016 on an “emergency basis” and without following proper procurement procedures under the PFMA.
The service providers include law firm Ranamane Mokalane Incorporated (headed by sole director Ranamane Mokalane, who has been banned by the Law Society), which benefitted from irregular payments totalling R11.5 million, and marketing firm Incentive Driven Marketing, which received R2.3 million from Acsa.
Acsa’s three senior managers – Jabulani Khambule (a general manager), Percy Sithole (a procurement manager), and Bongani Machobane (legal counsel) – were dismissed on charges of corruption, and fruitless and wasteful expenditure.
In February 2018, Acsa’s board resolved to act against Maseko but it has not done so. Instead, Maseko’s contract of employment, which was due to expire in May, was extended by Transport Minister Blade Nzimande to the end of November 2018. The state, represented by Nzimande, is a 74.6% shareholder of Acsa.
The inaction over sanctions against Maseko has vexed shareholders, among them African Harvest Strategic Investments, which holds a 1.4% minority shareholding in Acsa.
Minority representative Alun Frost expressed shareholders’ frustrations at the AGM: “Our view is that the Acsa board has a fiduciary duty to act against issues around the CEO.
“In a media release in May 2018, you [Nzimande] asked the board to give a report around the CEO matter and all allegations against him. We want to know what has happened since then… It still seems to be an issue that is bubbling around after five forensic investigations.”
Long-standing governance issues at Acsa have led to an exodus of board members, with the SOE at one point (in July 2018) operating with only two non-executive directors – Maseko (executive director and CEO) and acting non-executive chair Deon Botha.
In response to Frost’s frustrations about allegations of corruption against Maseko, Nzimande said the matter had been deferred until a new Acsa board had been appointed. Cabinet approved the appointment of seven new board members in August, with Nolulamo Gwagwa appointed as the SOE’s chairperson.
“When I engaged the new board, we came to the understanding that it’s better I extend the contract of Maseko,” said Nzimande. “I agreed to it as it was not for the CEO to be subjected to a kangaroo process. I wanted the board to be able to deal with the matter adequately.”
Botha, as Acsa acting non-executive chair, said all the forensic reports that implicate Maseko have been handed over to the new board.
“The committees (of the board, including remuneration and audit) have been tasked with working through the reports,” he said. “External advice has been sought as well, to guide them (the new board) on certain matters. This process will soon be completed.”
Nzimande said he is in the process of appointing advocate Sandile Nogxina to the board to further strengthen it and also to replace Botha.
Acsa is an exception as far as South Africa’s SOEs are concerned: it is profitable and does not have government guarantees. For the year ended March 2018, it recorded a revenue of R6.6 billion and profit after tax of R843 million. However, it recorded fruitless and wasteful expenditure (meaning proper procurement processes were not followed) that amounted to R39 million, compared with R37 million in the 2017 financial year. On a cumulative basis (including historic expenses), irregular expenditure amounts to R1 billion compared with R603 million in March 2017.
African Harvest’s Frost said the ballooning irregular expenditure reflects Acsa’s poor governance.
Brought to you by Moneyweb