Pressure mounts on Acsa boss
Two things happened at majority state-owned airports operator Acsa over the past week that matter way beyond business as usual.
Two things happened at majority state-owned Airports Company SA (Acsa) over the past week that matter way beyond business as usual.
The board asked transport minister Blade Nzimande, as Acsa shareholder representative, to endorse its termination of CEO Bongani Maseko’s tenure.
Almost simultaneously, Acsa learnt that African Harvest Strategic Investments, a 1.4% minority shareholder, is seeking a hearing about the company at the Zondo commission of inquiry into state capture.
There has long been concern over corporate governance at Acsa (as expressed in a memorandum by Nzimande to Acsa’s board) and this places its embattled CEO at the centre of an investigation into the adversarial relationship with its minorities. In such an investigation, Maseko is also likely to face scrutiny over corporate governance failures at the entity.
Acsa is profitable, which is exceptional for a state-owned entity (SOE). At its financial results presentation in September, it reported a healthy, if substantially lower, profit for the year to end-March. This it blamed mainly on the government for imposing a retroactive 35% cut in the airport tariff it could levy as a condition of its operating permission.
The government took its time in granting the operating permission and Acsa had to delay infrastructure spending, which raised repair and maintenance costs. The weakening domestic economy and an oversupply of seats for air travel further contributed to the plunge in profit, down 58% to R843m from R2bn a year earlier on a 20% decline in revenue to R6.9bn.
These numbers rile African Harvest. Lower earnings decrease what may be adjudicated as fair value for Acsa shares, says minority representative Alun Frost.
This is important to minorities, because they want out, but they also want fair value.
Acsa is SA’s only SOE with a private-sector ownership component. With African Harvest’s 1.4%, other minorities’ holdings bring the total private-sector shareholding to 4.2%. The Public Investment Corporation (PIC) owns 20%, staff incentive schemes have 1.2% and the state the balance of 74.6%.
The minorities acquired their stakes in July 1998 in an offering to empowerment investors as a precursor to the full privatisation of Acsa that would culminate in an initial public offering (IPO) and its listing on the JSE.
The IPO never took place, the state did not divest from Acsa and the National Empowerment Fund did not get its stake all of which had been promised by the government.
The minorities escalated their efforts to get out in 2012, but were “frustrated” by Acsa and the transport department’s “oppression of minorities” under the Companies Act, says African Harvest in its submission to the Zondo commission.
It says there is no record of either the government or Acsa advising minorities of the state’s change of heart. This left them with little option but to litigate in 2015 to recover its investment, and in August 2017 the court ordered a settlement agreement and an independent valuation of the minorities’ shares.
The parties agreed to the terms, but a year later Acsa was contesting the evaluation and the transport department was seeking a rescission of the court-ordered settlement.
Frost says the cumulative behaviour constitutes the capture of Acsa, not by an outside party, but a “kind of selfcapture”. He says someone, or some entity, has benefited from the government’s inaction at the expense of the fiscus and African Harvest wants the Zondo commission to discover who that is.
African Harvest enumerates several governance issues which, together, increase the risk of value destruction and further “oppression of minorities”. Prominent among the issues is its complaint about a R17bn upgrade of airport infrastructure and the construction of King Shaka International Airport. It wants the commission to investigate the role of SA’s large construction companies that were implicated by the Competition Tribunal over uncompetitive behaviour.
But perhaps most telling about corporate governance at Acsa are the findings of forensic investigations into its affairs, chiefly involving supply-chain management. African Harvest counts seven such investigations, each of which implicates Maseko. Most concerning for African Harvest is that Maseko has not faced disciplinary action over these matters, despite a board resolution of February 2017 to take steps against him.
African Harvest says events at Acsa are an example of the challenges faced by the SOE boards, and the consequences of government neglect and inappropriate interference by the government in the functioning of those boards.
“These factors contribute towards diluted governance and tangible commercial losses at [the entities],” African Harvest’s submission reads.
Neither Acsa nor the transport department have given reasons for not acting against Maseko, despite the board being frequently dysfunctional during his tenure.
Neither have they commented on African Harvest’s charges, which were made known to them last week.
This is likely to change if and when the Zondo commission summonses them to appear before it.
R843m is how much Acsa lost as a result of delays by the government to approve the entity’s infrastructure spending in 2017