Airports Company of South Africa (Acsa) chief executive officer Monhla Hlahla says it is okay for her to have a shareholding in two companies that are major service providers to Acsa because her shareholding is too small for it to constitute a conflict of interest.
Acsa is 75% state-owned, 20% being owned by Aeroporti di Roma (AdR), a Rome-headquartered company that has the option to buy a further 10%.
Hlahla was responding to e-mailed questions regarding her shareholding in Imperial and its subsidiary Tourvest.
Hlahla is part of the Lereko Investment consortium, which includes former Cabinet minister Valli Moosa.
Lereko has been allocated a 7,5% stake in Imperial, which is Acsa’s second-largest car rental company operating on its premises. Imperial’s subsidiary Tourvest also operates duty-free concessions on Acsa premises.
Hlahla says her interest, as calculated by AMB Capital, is too small — 0,115% in Imperial and 0,078% in Tourvest — to constitute a conflict of interest.
These holdings are worth about R26-million and just under R1-million respectively at present market values.
But, counters Hlahla, “I would like to point out that Lereko’s acquisition of the 7,5% equity in Imperial Holdings was through raising of debt, a structure which is not available to me.
“The Imperial shares were purchased at a price of R96,85 using mostly debt finance. At a [recent] share price of R100,90, my theoretical interest would only be worth a few hundred thousand rand.
“However, I cannot access this value as the debt financiers have first recourse to any value. Further, if the transaction were to be unwound before the agreed financing period, the debt financiers would impose penalties which would erode this theoretical value.”
Hlahla says she has a 5% interest as a passive shareholder in Lereko “which I acquired in February 2005. I am not a director of Lereko.”
But is Hlahla not incentivised, as an Imperial and Tourvest shareholder, to boost its earnings and so the value of her holdings in these companies?
Tourvest, for instance, has just announced a deal whereby foreign visitors will be able to access a VAT refundable card at South African airports for use in South African shops. How do stakeholders know if decisions such as these are designed to favour Imperial or Tourvest?
Hlahla says the VAT refundable card is a proposal rather than a reality: “The proposal in relation to the VAT refundable card from Tourvest is currently under consideration by Acsa Retail and has not yet been presented to the Acsa tender board for approval. The tender board will make a decision in this regard.
“All tenders are concluded by the tender board which is independent of the CEO and the CEO’s office. I do not sit on the tender board, take no part in its discussions and have no influence on its decisions.”
Hlahla says she has no part in the possible part-sale of AdR’s interest in Acsa to South African empowerment groups.
“Please note that, currently, there is no formal bidding process for AdR’s shares in Acsa.
“However, and in anticipation of that, AdR could sell some or all of its shares in Acsa to a BEE [black economic empowerment] company. Various BEE companies have made contact with AdR’s advisers in South Africa to express their interest to bid.
“I am not aware of the list of consortia or companies they have engaged with. As Acsa CEO, I have access to Acsa shares through a management incentive scheme which currently owns some Acsa shares, and has an option to increase its shareholding in Acsa. There is therefore no need for me to seek other avenues to participate in Acsa equity. I am therefore not involved in any consortium bidding for Acsa shares, nor am I interested in such participation. I have also asked Lereko Investments about their interest, and they confirmed that they have never intended to pursue any opportunity to make an equity investment in Acsa.”
Hlahla says any participation by her “in any consortium bidding for Acsa shares would create a serious conflict of interest for me. As CEO of Acsa, I have to ensure continuous value creation for all future Acsa shareholders and stakeholders”.
Acsa’s South African stakeholders have lost hundreds of millions of rands of value as a 10% option held by AdR has been extended several times.
AdR paid R819-million for a 20% stake in 1998, valuing Acsa at just more than R4-billion. It could buy a further 10% at the same price. This option ran to 2001.
The option has subsequently been extended, the last extension being to June 2005.
Acsa reported profits of R363-million when the AdR purchase was announced in 1998. Its before-tax profits are expected to top R900-million this year, says one Acsa watcher. The 1998 deal had a price-to-earnings ratio of 11. A similar ratio now would value Acsa at close to R10-billion.
Allowing AdR to delay exercising the 10% option has cost the state hundreds of millions of rands, given Acsa’s dramatic increase in value. The Department of Transport Director General Mpumi Mpofu told the Mail & Guardian that AdR’s option was extended because “the shareholders had not finalised the issues that they were still negotiating between themselves relating to their respective interests in Acsa”.
Acsa’s other investor is an empowerment consortium led by Mashudu Ramano, which has a 5,4% stake.