/ 27 June 2018

Suspended acting SAA CFO, CEO guilty of ‘gross financial misconduct’

Suspended chief financial officer Phumeza Nhantsi and former acting chief executive Musa Zwane.
Suspended chief financial officer Phumeza Nhantsi and former acting chief executive Musa Zwane.

An internal disciplinary hearing against two senior executives at ailing state airline, South African Airways (SAA), has found the pair guilty of gross financial misconduct, negligence and dishonesty.

The chairperson of the disciplinary hearing — Nazeer Cassim SC — has recommended that the airline fire suspended chief financial officer Phumeza Nhantsi and former acting chief executive Musa Zwane for their actions in the aborted BNP Capital tender.

In a scathing report Cassim said the pair ought to have done more to resist pressure from former SAA chairperson Dudu Myeni to appoint an unknown boutique financial services firm, BNP Capital, to source R15-billion in debt consolidation funds at a fee of R256-million.

At the time the fee was R171-million more than normal rates, former SAA treasurer Cynthia Stimpel said in internal advice.

Zwane and Nhantsi — by not properly interrogating BNP after Myeni had tried to get funding from a group of Russian investors via another small firm and a state-owned entity from the Free State — failed to live up to what is required of leaders at SAA, Cassim said.

“South Africa can do better. Ordinary South Africans expect better from the rulers of the day. We cannot afford CEOs and CFOs who look after their own interests and not that of the citizens,” he said.

“From a labour law perspective … “This is a serious misconduct and, on the facts of this case, dishonesty which destroys the employment relationship.”

He found them guilty on three of four charges, which include not acting in the best interests of SAA by approving a R256-million success fee for the transaction and also recommending a R49-million cancellation fee when the deal did not succeed. Cassim recommended summary dismissal.

Cassim added that he could not make any pronouncement on the second charge of failing to report fraud committed by BNP — which did not have an FSB license — to the authorities. This was because SAA itself had not made a efforts to do so.

At the time Zwane, who is chief executive of SAA Technical, was acting as the airline’s chief executive, while Nhantsi was acting CFO.

Both have been on suspension since March. At the time of their suspension, several insiders — including former SAA board members who were part of the board which appointed Nhantsi permanent CFO — said the suspensions were a “witch-hunt” designed to hound the two out.

SAA dismissed the claims saying despite the previous investigation’s findings, it was “satisfied” there was a basis for disciplinary proceedings.

Nhantsi, as SAA’s interim CFO, and Zwane as acting chief executive Zwane had signed a board recommendation to appoint little-known BNP Capital to a R256-million debt consolidation contract despite the fact that SAA could have done the deal for R85-million.

The deal was cancelled after media reports blew the whistle on the deal as well as the fact that BNP’s Financial Services Board (FSB) license had expired.

Media reports also revealed how former board chair Dudu Myeni pressured executives — including Nhantsi and Zwane at the airline — to ensure that BNP be paid the cancellation fee and that this be R49.9-million.

The suspensions came as a surprise to one former SAA leader, who said that no less than three independent probes, including one by former public protector Thuli Madonsela and the Auditor General, had cleared the pair of any wrongdoing. This was in 2017 just before SAA’s board appointed Nhantsi as permanent CFO.

“I suspect there is an invisible hand at play here because this issue was looked at by the public protector — who found that SAA did not suffer any prejudice, the Auditor General, and a law firm appointed by SAA’s board which said she should be given a warning. This was necessary because it would not have been approved by treasury,” said the source who did not want to be named because of proximity to SAA.

Both Nhantsi and Zwane argued at the hearing they were placed under considerable pressure by Myeni at the time.

Even BNP’s demand for a R49-million cancellation fee came after Myeni found out the executive threshold for signing off payments was R50-million, they said.

Myeni was the only board member to vote in favour of the fee, while Zwane voted against and Nhantsi and rest of SAA’s board abstained.