Government fights Acsa share payout

● Transport Minister Blade Nzimande has approached the Johannesburg high court to have an order that bound the Airports Company SA (Acsa) to pay R700m to its minority shareholders in a share buyback declared unlawful and set aside.

Nzimande, through the affidavit of Rejoice Edith Phewa, acting deputy director-general of civil aviation in the transport department, has argued that the settlement will “not only have a devastating impact on Acsa’s financial reserves, it will also have a direct and negative impact on the national fiscus and public interest”. Finance minister Nhlanhla Nene has also been cited as a respondent although he is not expected to oppose the application.

The settlement agreement was sanctioned by judge Keoagile Elias Matojane in the Johannesburg high court in August last year and paved the way for an independent valuator jointly appointed by Acsa and its minority shareholders to value the shares. A report was concluded early this year and, according to Phewa’s statement, Nzimande learnt of the settlement when minorities recently applied to the court to sanction the valuator’s report.

The minorities are African Harvest Strategic Investments and Up-Front Investments, which are the main respondents, and four other empowerment partners that collectively hold 4.21% of Acsa.

Phewa argued that the agreement was entered into without obtaining approval of Acsa’s board. It violated the Public Finance Management Act (PFMA), Companies Act and Memorandum of Incorporation, which governs the relationship between Acsa shareholders.

“It is not merely a ‘run of the mill’ financial commitment that is necessary for the daily functioning of the company. By entering into the settlement agreement, Acsa bound itself to a future financial commitment without approval of the board before doing so,” she said.

The agreement prevented the government from exercising its rights and duties as a majority shareholder. “This is not only unlawful … but it is also prejudicial to the government,” she added.

Nzimande was “seriously concerned”. He was reinstated as transport minister by President Cyril Ramaphosa after a cabinet reshuffle in February .

“The government is especially concerned that the order imperils public finances. In addition the order imperils the governance of Acsa by weakening the board,” Phewa said.

Furthermore, the state found itself in circumstances where its hands were tied. It may not defend itself against allegations of oppressive conduct and is required to permit the share buyback. The minorities failed to prove that the government’s conduct towards them was oppressive and even if proved the relief sought was not appropriate, just or equitable.

The matter dates back to 2015 when the empowerment partners approached the court claiming that the state failed to uphold an agreement to list Acsa within five years after they took up shares in the company in 1998. The listing would have enabled them to sell and realise value for their shares.

The push to exit in recent years has also been motivated by their claims that Acsa’s management made poor investment decisions. Acsa CEO Bongani Maseko also faces allegations of corruption, which he has disputed.

Acsa’s new board will consider the outcomes of two forensic investigations of the allegations.

On January 16 2016 former transport minister Dipuo Peters supported the buyback at a limit of R22 a share and permitted Acsa to withhold dividends to the government for two years. But the minorities disagreed with the valuation and turned to the courts, which approved the appointment of a joint valuator — RisCura — last year.

Acsa’s minority shareholders are in the process of completing a response to the minister’s application.