Gigaba interfered in SAA over Gupta-linked airline, Cheryl Carolus says

Malusi Gigaba got involved in the operation of the Joburg-Mumbai route in order to give it to Jet Airways, Carolus says.

Former public enterprise ministers Malusi Gigaba interfered in the operation of SAA in relation to its Johannesburg to Mumbai route in order to give it to Gupta-linked Jet Airways, the former board chair of the state-owned airline, Cheryl Carolus, said on Thursday. 

It was a Jet Airways carrier that flew Gupta guests to the Waterkloof Air Base in 2013 for the lavish Sun City wedding. This was one of the first incidents to reveal the extent of the Guptas’ involvement in state capture. 

Carolus was testifying at the state capture inquiry on Thursday about the pressure SAA endured from Jet Airways, with the help of Gigaba, to cancel the airline’s route to Mumbai, India.

Carolus was SAA board chair from 2009 until 2012 when she and a number of the airline’s board of directors resigned. 

Former public enterprises minister Barbara Hogan testified to the commission earlier in November that she was confused when she heard SAA was looking at canceling the India route because it was actually the ‘‘least loss-making’’ route. 

She contacted Carolus, who told her, via a text message, that this was not true and that Jet Airways would be in SA for a meeting and was ‘‘lobbying hard’’ for SAA to end the Mumbai flight. The board, however, was not having that.

Gigaba replaced Hogan as public enterprise minister in late 2010. Hogan was axed by then president Jacob Zuma.

Gigaba resigned from President Cyril Ramaphosa's cabinet earlier in November following damning findings by the courts and public protector that he had lied under oath in the Fireblade Aviation matter. 

Carolus testified on Thursday that within weeks of his appointment as public enterprises minister, Gigaba had called SAA to a meeting.

Carolus was unable to attend and sent CEO Siza Mzimela and another board member to the meeting. She was then given a report about what transpired.

According to Carolus, when the SAA officials arrived at the meeting with Gigaba, they were told to wait for another three gentlemen to join them. After a three-hour wait, the president of Jet Airways and two others arrived.

The Jet Airways president took over the meeting while Gigaba sat back saying nothing, and insisted that SAA cancel its Mumbai route, she said. 

Gigaba did nothing as the Mzimela tried to explain why SAA would not get off the route. Eventually, Gigaba's deputy Ben Martins had to intervene.

Carolus said SAA made it clear that it would consider reasonable proposals from Jet Airways that made business sense and followed due processes.

When asked by commission chair deputy chief justice Raymond Zondo if this was strange, Carolus said: “Yes it is very strange. And there the shareholder minister [Gigaba] was sitting”. 

In April 2011, Carolus was again called to a meeting with Gigaba in Cape Town. Again Carolus could not attend and sent Mzimela, accompanied by a board member.

On arrival, the SAA officials were told the minister wanted to discuss the Mumbai route, among other things. Gigaba once again took a back seat at this meeting and allowed his legal adviser, Siyabonga Mahlangu, to lead, Carolus said.

“Then Mahlangu proceeded to berate Mzimela for SAA’s refusal to close the Mumbai route and among other things [said] to her SAA is wasting government money, which could be spent on RDP houses,” she said. 

Gigaba then said other people would be joining the meeting, and the Jet Airways president appeared once again.

Carolus said that at the conclusion of the meeting, Gigaba asked that SAA and Jet Airways “please find each other”.

“We found it quite peculiar at the time. The minister is our shareholder, and he seemed to be quite persistent to assist SAA and Jet Airways to find one another. As a shareholder, you are not about … [helping] the other side, and it was clear he was in discussions with Jet Airways in a way that he wasn’t with us,” she said.

“The appropriate way it would have happened is one business approaching the other — it shouldn’t have gone to the department because the department is not the trading partner.”

Carolus said SAA did not get any proper proposals to close the route.

She said SAA had four flights a week to Mumbai, and Jet Airways put in seven flights, and as a consequence, both airlines suffered losses because of the competition.

In the end, Jet Airways abandoned the route and so did SAA, but Carolus said she did not know what eventually led to the national carrier doing this.

Load-shedding has begun and will be with us for 10 hours

The power cuts follow Wednesday's release of Eskom’s interim results, which showed a dire state of affairs both financially and operationally.

From my perspective, Eskom is reverting to their classic playbook. Publish a set of results that show a dire need for a bailout as well as the need for a massive increase in the price of electricity. Then immediately cut power supply so that the public can be scammed into higher prices just to keep the lights on. This scam is not new, we can all remember how Enron used the same strategy to create massive revenue shortly before management skimmed the cash flow and they crashed out of business.

Eskom has announced 10 hours of load-shedding on Thursday, as the embattled utility’s operations and finances continue to worsen.

SA’s largest state-owned entity announced on Thursday that stage 1 rotational load-shedding would be implemented from 12pm until 10pm, as a result of “increased generation plant being out for planned maintenance and unplanned outages”.

Stage 1 rotational load-shedding requires 1,000MW to be load shed nationwide. “Load-shedding is conducted as a measure of last resort to protect the power system from a total collapse or blackout,” Eskom said in a statement.

In a tweet on Thursday, Eskom spokesperson Khulu Phasiwe said: “Besides the high unplanned outages (breakdowns), Eskom is also investigating the cause of the collapse of the power lines that carry imports from Cahora Bassa [a hydroelectric power plant] in Mozambique. As a result of the damaged lines, imports have been reduced to about 400MW, down from the usual 1,500MW.”

The load-shedding follows Wednesday's release of Eskom’s interim results, which showed a dire state of affairs both financially and operationally.

The cost of servicing its debt had doubled to R45bn for the six months ended in September, while cash from operations was less than R27bn.

Eskom said its energy availability factor — which shows how well generation plants are running —  dropped to 74.2% in October, below its target of 78%.

Ten of its 15 coal-fired power stations are facing severe coal shortages.  

Emergency open-cycle gas turbines are now in use, and Eskom said it expected to spend as much as R1bn on diesel to run the turbines and keep the lights on while getting up to date on maintenance over the next four months.

Although costly, the diesel option is seen as a better alternative to load-shedding, given load-shedding's negative effect on the SA economy.

However, Eskom has said load-shedding would remain a risk for the remainder of the year.

‘Bold steps’ needed to save Eskom, Jabu Mabuza says, as more load-shedding looms

Mabuza says the way in which the company is operating now ‘is not sustainable’

Eskom, which is facing dire financial woes, has seen a steady decline in plant performance and coal supply, which could threaten its ability to keep the lights on, chair Jabu Mabuza said on Wednesday. 

Mabuza said at the release of the state-owned power producer's 2018-2019 interim results that the way the company was operating now “is not sustainable”. 

“We are locked in a permanent loss-making position,” he said. “We need bold steps to save Eskom.”

Mabuza said they were engaging stakeholders to find financial alignment, with the aim of about R30bn in savings over the next five years. 

He also confirmed the permanent appointment of Calib Cassim as CFO. 

The interim results showed that most financial ratios deteriorated, and that arrears from municipalities continued to worsen — jumping from R13.6bn earlier in the year, to R17bn in September.

Eskom CEO Phakamani Hadebe said that despite a recovery programme, load-shedding could not be ruled out for the remainder of 2018.

“We will do our best but South Africans need to know it’s a risk that is existing,” he said. 

Meanwhile, the final report of parliament’s inquiry into Eskom was adopted on Wednesday with the unanimous support of all political parties.

The public enterprises committee, which conducted the inquiry, found that former ministers of public enterprises — Malusi Gigaba and Lynne Brown — were “grossly negligent” in carrying out their responsibilities. 

The committee found that there had been corruption of procurement processes at Eskom and that there was a corrupt relationship between the Gupta family, their associates and key state functionaries.

Lynne Brown and Malusi Gigaba were ‘grossly negligent’, final Eskom report finds

The public enterprises committee recommended to parliament that its report be given to the state capture inquiry

The final report of parliament’s inquiry into Eskom has found that former ministers of public enterprises — Malusi Gigaba and Lynne Brown — were “grossly negligent” in carrying out their responsibilities.

The public enterprises committee, which conducted the inquiry, adopted its report on Wednesday with the unanimous support of all political parties present.

Business Day reported earlier in November that the draft report found that Brown and Gigaba were on the list of suspected “captured” individuals and companies that should be criminally investigated. 

The approved report recommends that appropriate remedial action for wrongdoing be pursued by the relevant authorities against all implicated individuals and companies. Lifestyle audits of implicated individuals must be conducted.

The committee has recommended that the Treasury review and strengthen the regulations on procurement by state-owned companies and criminal investigations into possible fraud, corruption and other unlawful conduct must be pursued.

The committee also recommended to parliament that its report, together with all documentation and the record of evidence, be given to the commission of inquiry into state capture headed up by deputy chief justice Raymond Zondo.

The committee found that there had been corruption of procurement processes at Eskom and that there was a corrupt relationship between the Gupta family, their associates and key state functionaries.

There was “overwhelming” evidence of external interference and noncompliance with legislation by Eskom.

The committee heard evidence on Eskom’s coal contracts with the Gupta owned Tegeta Exploration and Resources, its relationship with Trillian Capital and The New Age, and the resignation of former CEO Brian Molefe.

“Various gratifications were provided and accepted in order to influence Eskom board members and employees to act unlawfully and to induce Eskom to enter into a number of business contracts,” the report said.

With regard to Brown, the report notes that “in spite of there being ample evidence of wrongdoing being raised frequently about Eskom in Parliament and in the public domain, [former] minister Brown often failed to take appropriate action, responsibility or accountability for a large set of impugned decisions taken by the board and management of Eskom.”

The committee noted that Brown’s oversight of the executive and nonexecutive directors “was inadequate, leading to gross breaches in fiduciary duty and potentially illegal acts”.

Gigaba’s overhaul of the Eskom board introduced patterns of instability.

“It is not apparent that the board appointed by [now former] minister Gigaba had been sufficiently vetted in terms of integrity, collective skills and experience to govern Eskom and execute their fiduciary responsibility.”

The same observation was made in the report about successive boards appointed by Brown.

“While the two former ministers pleaded ignorance regarding the irregular and possibly criminal acts committed by the executive and nonexecutive board members they appointed, the King Code stipulates clearly that while ministers and officials within the department may not be directly responsible for acts of wrongdoing, they may still be accountable for these acts.”

The committee found that it was “patently clear that there was undue influence by private individuals and companies over the appointment of Eskom board members as well as some procurement decisions”.

The report noted that many examples of institutional and oversight failure had emerged during the inquiry. These allowed private interests to benefit unduly from business with Eskom.

The committee found that the legislation and policies that regulate the shareholder’s relationship with Eskom may have left room for interpretation, that led to inconsistencies.

The evidence presented to the committee corroborated many of the findings and observations of former public protector Thuli Madonsela’s State of Capture report.

“The committee has uncovered substantial and compelling evidence that a number of corporate entities amassed substantial illicit private gains many of which have reportedly been funneled out of SA through shell companies and private accounts in Dubai and Hong Kong.

“It is disconcerting that it seems the relevant authorities have not yet acted in light of the allegations.”

It has also recommended that the department of public enterprises and the cabinet review the legislative and regulatory framework governing state-owned enterprises.

NPA to drop Gupta-linked Estina dairy case

The National Prosecuting Authority (NPA) is dropping its hallmark “state capture” case against Gupta family members and business associates accused of involvement in the alleged Estina dairy project scam in the Free State.

The NPA sent a letter to lawyers for the Guptas and their associates on Wednesday, informing them that it “has not received information regarding the mutual legal assistance requests made to India and the United Arab Emirates, as a result, the investigations are not finalised”.

“The state intends to provisionally withdraw charges against the accused on December 4,” it said. 

However, the NPA, speaking to Business Day on Wednesday, stressed that that did not mean the Estina case was dead.

“We can reinstate the prosecution once our investigation has been finalised, and all outstanding information [is] obtained,” spokesperson Luvuyo Mfaku said.

The NPA had until Friday to hand over the finalised docket and indictment in the case, in which it alleged that R250m intended for the upliftment of poor black farmers was siphoned to Gupta companies.

But, as it has not finalised that investigation, it will provisionally withdraw charges against former Oakbay CEO Nazeem Howa,  nephew of the Gupta brothers Varun Gupta, former Sahara Computers CEO Ashu Chawla, Estina director Kamal Vasram and three Free State provincial government officials Peter Thabethe, Sylvia Dlamini and Takisi Masiteng.

They faced charges of fraud, theft, conspiracy to commit fraud and theft, contravening the Public Finance Management Act, contravening the Companies Act and contravening sections of the Prevention of Organised Crime Act.

Earlier in 2018, the high court in Bloemfontein ruled that it wasn’t satisfied that there was adequate evidence connecting R250m in Gupta assets to the alleged scam.

Judge Phillip Loubser stated that the evidence that the state relied on was “unreliable” and showed “many shortcomings that remain unexplained at this point”.

The NPA did not attempt to appeal against that ruling.

In August, Hawks head Lt-Gen Godfrey Lebeya told parliament’s portfolio committee on police that the unit was investigating cases where more than R40bn had been plundered from state coffers as a result of alleged “state capture”.

Speaking about the Estina investigation, he said the Hawks had obtained 302 bank account reports, as well as the statements of 139 witnesses.

Lebeya added that two search and seizure operations had been conducted and an auditing company was procured to analyse the flow of funds linked to the alleged scam.

ANC calls on SABC to reconsider extensive retrenchments

The ANC has supported the call by communications minister Nomvula Mokonyane that the financially ailing SABC reconsider its plan to retrench staff.

On Monday, the SABC announced that it would proceed with retrenchments in a bid to cut costs. It is looking at cutting 981 of its 3,376 permanent employees and 1,200 of its 2,400 freelancers.

CEO Madoda Mxakwe said on Wednesday that the SABC’s wage bill was R3.1bn, and its total expenditure R3.5bn, noting, ‘‘This is not sustainable.’’ 

The ANC said it did not believe Mokonyane was undermining the SABC board’s independence and authority by making the call.

‘‘The government, like any other stakeholder or actor in South African society, has a right to express an opinion,’’ spokesperson Pule Mabe said. ‘‘The government does not lose that right because they appoint a board.’’

He said expression of an opinion is not an instruction, but a request for the view to be noted and factored in, and that an opinion is not an attack on its independence.

‘‘We call on comrade Mokonyane, as a representative of the shareholder and the SABC board, as well as labour, to urgently enter into a dialogue to discuss ways and means to avoid retrenchments, especially during this difficult economic period in our country,’’ Mabe said.

‘‘The retrenchment plan will have adverse effects on the country’s objective of creating decent jobs and fighting unemployment.’’

The EFF has called the looming retrenchments ‘‘disgusting’’. It said the state of the SABC’s finances had to be put squarely in the hands of the ANC.

‘‘It is the ANC which imposed, sustained and guided [former COO] Hlaudi Motsoeneng’s [looting] of the SABC. It is also the ANC’s Treasury that is refusing to give SABC a guarantee letter so it can go and get help from commercial lenders,’’ the EFF said.

The party called on finance minister Tito Mboweni to urgently intervene, by giving the SABC a guarantee letter so it can find the funds and not retrench thousands of workers.

SAA tells MPs it needs nearly R17bn by March

The airline has also pushed back its break-even date to 2021

SAA will require another R16.7bn from the government, either in the form of capital or loan guarantees by March 2019, the airline's executives told MPs on Tuesday.

The R16.7bn is made up of R3.5bn that is required by December, R4bn that is needed by March, and the refinancing or repayment of another R9.2bn in debt that matures in March 2019.

Together with the R5bn that was allocated in October’s medium-term budget policy statement, this makes up the R21.7bn that SAA had previously stated made up its working capital requirements.

SAA CEO Vuyani Jarana also told MPs that the airline had pushed back the expectation of its break-even point from 2020 to 2021. 

CFO Deon Fredericks said that the R3.5bn was urgently required as “negotiating for the R3.5bn loan is not possible anymore as banks require additional commitments from the shareholder”.

The government is the sole shareholder of SAA.

The break-even date had been pushed back due to higher-than-expected oil prices.

The strategy had assumed an oil price of $45 a barrel when the real price over the past year was closer to $75 a barrel.