South Africa’s giant public transport utility Transnet used millions of rands in taxpayers’ money to provide lavish accommodation for controversial former South African Airways (SAA) CEO Coleman Andrews.
A Mail & Guardian investigation has found that the utility spent about R5-million in 1998 — on the instruction of former Transnet MD Saki Macozoma — acquiring a lavish house for Andrews in Bryanston, a plush suburb north of Johannesburg.
The transaction was not approved by the Transnet board and appears to have flouted the parastatal’s policy. The property was sold last year for R4,6-million — more than R300 000 less than the parastatal bought it for.
Andrews lived in the house rent-free for more than six months, but subsequently paid the rent arrears after some senior Transnet officials questioned the matter.
This revelation is the latest in a series of upsets, involving Andrews’s extraordinary contract and its benefits, to hit the parastatal.
Last year Minister of Public Enterprises Jeff Radebe revealed that the American executive’s contract, which cost SAA R232-million for the two and half years he was at the helm of the national airline, was concluded without proper approval.
The employment contract was entered into between Macozoma and Andrews. Radebe’s statement led to a major political row between the minister and Macozoma, who reacted angrily to Radebe’s statements, saying they were inaccurate.
Macozoma is a former African National Congress MP and a member of the party’s national executive committee, as is Radebe.
The row led to serious divisions within the Cabinet, which has since concluded that no one was to blame for the debacle.
Shortly after the clash with Radebe, Macozoma was appointed head of Nail’s media empire, which owns the country’s largest daily newspaper, the Sowetan.
Transnet this week confirmed that Macozoma ordered the purchasing of the Bryanston property after Andrews identified it. The M&G‘s efforts to get a comment from Macozoma on Wednesday and Thursday this week failed.
Transnet Housing CEO Martin Sebesho said the transaction was ”approved by former Transnet MD [Macozoma] and [the] former SAA chair … When instructed to proceed with the acquisition of the property in question it was decided to make use of a [dormant] company named Leisurebird to register the said property. This was mainly to separate this operation from the day-to-day operations of Transnet Housing and to ensure that in the event of possible disposal the process will be easier,” said Sebesho.
Andrews was occupying a suite at Johannesburg’s posh Hyatt hotel, at taxpayers’ expense, at the time. SAA’s spokesperson Rich Mkhondo this week said the national airline was ”contractually obliged to comply with the accommodation clause in Mr Andrews’s contract”.
Transnet, and more specifically Macozoma, recruited Andrews after an exhaustive international search for someone to restore the ailing SAA to profitability. The airline was bleeding to the tune of about R250-million a year and was on track to lose R500-million in the year Andrews took over.
Andrews arrived at SAA with the reputation of a miracle man and Macozoma shielded him from political interference throughout his tenure at the national airline.
But Andrews’s services seems to have come at a high price.
Sebesho said Transnet decided to buy the R5-million house for Andrews on instructions from Macozoma because Transnet Housing ”had no suitable house” for the American, although it owns thousands of residential properties throughout the country.
Senior Transnet officials said Macozoma had flouted the parastatal’s policies when he instructed and ordered Transnet Housing to buy Andrews’s property.
Sebesho denied this. He said Transnet Housing — on the instruction of the parastatal’s business units — is ”required to provide accommodation to employees who perform strategic roles, who do not wish to purchase a property for whatever reason”.
”If we do not have a house suitable for the level of the employee then Transnet Housing would buy the house on the market and make it available for rental to the business unit in question,” said Sebesho.
Senior Transnet officials disputed Sebesho’s assertion. One said: ”According to Transnet Housing policy, the parastatal’s objective with regards to property management is the total alienation of all non-core properties. In the case of Andrews, Transnet was not doing that. Instead it was doing the opposite.”
Another Transnet official said Transnet had also incurred ”unnecessary costs to the company” through Andrews’s transaction. ”What they failed to ask is what would happen to the house if Andrews quit. It was just an unnecessary burden to the public entity, which already has thousands of residential properties that it is struggling to dispose of,” said a Transnet official.
Sebesho conceded that Andrews did not pay the R45 000-a-month rent for the six months at his Bryanston property. ”There were discussions whether the house was part of his fringe benefits or not,” Sebesho said.
Andrews refused to pay the rent on the grounds that the property was part of his employment conditions.
”Transnet Housing was embarrassed by the whole affair and decided to sell it to SAA,” another senior Transnet official said.
During 1999, Sebesho said, Leisurebird, the company established to register Andrews’s house, was sold to SAA ”lock stock and barrel, as a going concern”.
Andrews, Sebesho said, subsequently paid about R290 000 by cheque to cover his unpaid rent before the property was sold to SAA.
But Mkhondo said: ”No money was deducted from the salary of Mr Andrews while Transnet was administering the house. Once SAA purchased the house, the arrears plus interest on the arrears was recovered from his salary. Rent was then deducted every month from his salary until his departure.”
SAA, Mkhondo said, sold the house in May last year after ”the departure of Mr Andrews for R4,6-million”. The M&G has learned, however, that Andrews was still living in the property early this year.
It is not clear why he was still living there and whether he paid rent for that period.
”His family left last year and the furniture was moved the same year. But he lived here alone for a while until early this year,” Andrews’s former neighbour said, adding that Andrews appeared to lead a ”flamboyant lifestyle”.
Andrews has defended his record at SAA. Asked about his controversial package last year, he said his much-maligned R232-million windfall ”would not even make it on to the radar screen of the top 100 US public company CEOs in terms of maximum payout potential”.
But whether the South African public got their money’s worth is debatable. The legacy of Andrews’s tenure is not yet clear. When Andrews took over, the national airline was valued by Transnet at R1,5-billion. Less than a year later it was valued at R7-billion after the R1,4-billion the Swiss-based SAirGroup paid for its 20% stake in the parastatal. By March 2000 losses had been turned into a R350-million profit.
Andrews has been credited for the turnaround, but there is concern about its sustainability. Airline industry players have levelled criticism at Andrews’s turnaround strategy, saying it has been achieved mainly through the sale of assets, rather than through sustainable operational improvements.
The decision to upgrade the SAA fleet with Boeing aircraft taken during Andrews’s tenure has recently been totally reversed, and SAA will now equip its fleet with Airbus aircraft.
Concerns have also been raised about Andrews’s close relationship with United States consulting group Bain & Company, parent of Bain Capital, the venture capital group he set up before moving into aviation. Andrews has been accused in the past of relying too heavily on Bain executives, creating a leadership vacuum at the national airline.
Radebe told Parliament last year: ”For the period from 1998 to March 31 2001 total payments to consultants was R243,1-millon.” Radebe said Bain & Company was the largest provider and earned R208-million. He said the majority of the appointments did not comply with company tender processes.
Macozoma has since defended Andrews’s actions, saying Andrews had inherited a chaotic situation with no management that he could rely on.
”He could not be expected to go to tender on consultants he needed. He had to roll up his sleeves and go to work,” he said.
- Meanwhile Spoornet property management head Chain Vilakazi has been suspended for his role in the case of the parastatal’s CEO, Zandile Jakavula.
Jakavula was suspended last month after the M&G revealed how he irregularly bought a river-front property from the parastatal and had his subordinates renovate it, initially using taxpayers’ funds.
Jakavula and Vilakazi have received company disciplinary charge sheets. It is not clear when the investigation will be concluded.