Minister of Public Enterprises Pravin Gordhan has been slammed over the SAA deal. Picture: David Ritchie/Independent Newspapers
Prof Bonke Dumisa
Give it to Pravin Gordhan, a proud Bachelor of Pharmacy graduate from the radical erstwhile University of Durban-Westville and a former political detainee during the apartheid era; he is a very astute street fighter and a successful strategist but he unfortunately mismanaged the Takatso Consortium deal matter.
The Minister of Public Enterprises can correctly be cited as an appropriate example of how your first university degree does not necessarily determine your ultimate career destination.
His Bachelor of Pharmacy degree from the erstwhile University of Durban-Westville in the early 1970s entitled him to do a pharmacy internship at King Edward VIII Hospital, in Durban. He was effectively fired from his pharmacy job at King Edward Hospital for his political activities, which included his political detention for struggling against apartheid. Fast forward to the post-apartheid era, Pravin Gordhan became a very successful Commissioner of the South African Revenue Services (Sars).
It was during this time that he made many enemies for himself when Sars successfully acted against many politicians and their politically connected cronies; this includes one opposition party politician who is the most outspoken against whatever Gordhan does.
It was precisely because of his effectiveness as a Sars Commissioner that Gordhan later became an ideal candidate for the positions of Minister of Finance and Minister of Public Enterprises. “ I don’t give in to political pressure”, he recently remarked in an interview with the media, responding to questions about the Takatso Consortium. It was precisely because of this political street-fighter mentality that he approached the Takatso Consortium deal. That became his sad undoing.
Looking at whatever is publicly available about some of the people involved in the Takatso Consortium, it looks clear that this was not just yet another Broad-Based Black Economic Empowerment, BBBEE, deal for the “usual suspects” Politically-Exposed Persons (PEPs) who don’t usually add much value to business operations. There were some people who clearly know and have extensive aviation industry expertise and experience involved here.
This consortium included Gidon Novick, a well-known expert in running successful airlines; he represented Global Airlines here. This was a great selling point for this consortium; this could have been a success factor for the South African Airways (SAA) if Gidon Novick remained part of this consortium.
Unfortunately for this Takatso Consortium deal, Gidon Novick was unfortunately at the same time also involved in other aviation transactions which could have posed serious actual conflict of interest for him in his involvement on the SAA deal. He founded a very successful Lift Airline, which was and is definitely a direct competitor to SAA.
It was precisely for this reason that the Competition Tribunal ruled that Novick had to be excluded from this deal.
Competition Law is quite clear on such actual conflicts of interest.
There are horses for courses. Gordhan relied too much on “confidentiality clauses” when refusing to divulge more details on this Takatso Consortium deal. His problem here was that he was using what is normal business practice in the private sector when dealing with a politically-charged business transaction. There is a legitimate expectation that there will be full disclosure and transparency when dealing with public entities than what normally happens in the private sector.
Whitey Basson’s Shoprite Group acquired the OK Bazaars Group from South African Breweries (SAB) on a mere “R1 deal”. This saved tens of thousands of jobs which could have been lost if the nearly bankrupt OK Bazaars Group had to close down. This helped create a full national footprint for the Shoprite Group which catapulted Shoprite Group to the Top South African Retailer position.
Huge public disgust and criticisms were directed at Gordhan when it was announced that Takatso Consortium had been selected to acquire SAA on a mere “R51 deal”. There were widespread rumours of corruption about how Takatso Consortium acquired SAA for a mere “R51”. There had to be more transparency on how such acquisition deals are concluded.
The “R51 deal” does not shout that the acquiring business takes over all the debts, billions of rand debts, of the nearly bankrupt entity. The South African taxpayers and the general public had and have a legitimate expectation to be given more explanations on these issues. Gordhan’s silence here became his political undoing.
It is said that there were serious disagreements between the government and the Takatso Consortium with regards to the “valuation of assets”. Many people who know more about the mergers and acquisitions know that issues of impairments and valuations of such is one of the most difficult parts of mergers and acquisitions. It is therefore understandable that most South African parliamentarians were not happy with being expected to sign “confidentiality forms” when Gordhan came to parliament to answer questions about this Takatso Consortium deal. I have been told that this unease was not confined to opposition benches only, but was spread across party lines, meaning even ANC members were equally uncomfortable about this deal.
It was definitely this lack of transparency that ultimately led to the collapse of the Takatso Consortium deal. Most of us do not know about what the former Director-General of the Public Enterprises Ministry, Kgathatso Tlhakudi, said particularly about Gordhan when the former labelled the Takatso Consortium deal “corrupt”. It is on these grounds I say the collapse of this Takatso Consortium deal had very little to do with Gordhan as a person; but everything to do with the lack of transparency on this matter.
*Prof. Dumisa is an independent economic analyst
**The views expressed do not necessarily reflect the views of Independent Media or IOL