King Shaka International – an airport in desperate search of passengers

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Noseweek.

First costed at R3.15 billion, by the time Durban’s King Shaka International Airport was completed in 2010, it had cost anything between R7.6bn and R9bn. This kind of cost overrun is chicken feed when stacked against Eskom’s Medupi and Kusile power stations, but it set in motion a chain of events that helps explain some of the bizarre decisions coming out of Airports Company of SA (ACSA). King Shaka is one of the nine airports managed by ACSA. In February, Minister of Transport Dipuo Peters fired half the board of ACSA, ostensibly to strengthen it, but left in place CEO Bongani Maseko who was fingered last year in a forensic report that detailed several instances of procurement irregularities.

This is just one instance of political interference in the running of ACSA. A far graver interference was the decision in 2006 to force ACSA to build the King Shaka International Airport without a feasibility study having been carried out and in defiance of all commercial logic. This decision lumbered ACSA with crippling debt which it has been forced to service ever since.

In March this year, minority BEE (Black Economic Empowerment) shareholders in ACSA brought an application before the High Court in Pretoria challenging the “commercially illogical” decision by the airports regulator to lower tariffs by 35.5%, which would cut revenue by R1.8 billion by 2018 and remove all prospect of the company’s being able to declare a dividend to shareholders.

The tariffs went into effect on 1 April, but the matter has now been placed under judicial review. These tariffs benefit airline operators and passengers, but not ACSA shareholders, who long ago gave up hoping for a decent return on their investment.

Just a few years ago, in 2011, when ACSA had completed a massive airport upgrade programme, it was granted a staggering 133% increase in tariffs by the regulator. Why would ACSA now apply for a reduction in tariffs? None of this makes much sense unless, as minority shareholders have argued, one understands that ACSA has abandoned its commercial mandate due to political meddling. Minorities want nothing more than to sell their shares back to the state and have been trying for years to do so at something approaching fair value. Instead they have been offered 40% of net asset value.

The only buyer for these shares is the government which, nearly 20 years ago, lured investors into ACSA with promises of privatisation and an eventual listing on the stock exchange. Based on these promises, it got Aeroporti di Roma (ADR) to purchase 20% of the company for about R890m in 1998, or R8.19 a share. This valued ACSA at about R4bn at the time. When it became clear the government had no intention of listing ACSA, ADR sold its shares to the Public Investment Corporation (PIC) for R16.75 a share, making a decent return on its investment. No such luck for the minorities, who have now turned to the courts for relief.

Dudu Myeni’s time at SAA may be up

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

Dudu+Myeni+XXXHistory was made this week when the SAA Pilots Association (SAAPA) and Organisation Undoing Tax Abuse (Outa) brought an action to have SAA chairperson Dudu Myeni declared a delinquent director.

As far as is known, this is the first time legal action of this nature has been brought against a director of a state-owned company. Dudu Myeni’s time at SAA may soon be up.

Last year finance minister Pravin Gordhan demanded a reshuffle of the SAA board as a precondition for extending a R15 billion guarantee to the technically bankrupt airline, but mysteriously left Dudu Myeni untouched. Her tenure as chairperson at SAA is up for review in September this year, so she may have vacated the chair by the time the legal case is argued in court. But SAAPA and Outa say they will pursue legal action against her regardless.

Should SAAPA and Outa win their case, Myeni will be barred from holding an executive or director position in any South African organisation for at least seven years. That would mean she would have to resign as chair of the Jacob Zuma Foundation and the SA Association for Water Utilities. In December last year the Kwazulu-Natal High Court ordered her to step down as chair of the Mhlathuze Water Authority for unlawfully extending the board’s tenure by six months.

We now know from Outa’s revelations surrounding SAA and the court case brought by Mhlathuze Water Authority’s suspended CEO, Sibusiso Makhanya, that Myeni has a habit of purging management and board members who get in her way. She’s done the same at SAA. The airline has had more than half a dozen CEOs in as many years, including Vuyisile Kona and Nico Bezuidenhout, virtually all of them departing in acrimonious circumstances. Meanwhile, the losses continued to mount.

The latest court case is likely to be a drawn out bare knuckle fight to the death. Myeni will argue – as she has done already – that reactionary forces within the airline are opposed to transformation, of which she is the champion. It’s always someone else’s fault. She went so far as to publicly attack her own pilots as spendthrifts living high on the hog in foreign destinations.

South Africa’s great road swindle

Written by Ciaran Ryan. Posted in Journalism

Joburg highwaysThis article first appeared in Noseweek (March 2017).

It’s long been known that South African motorists have been fleeced when it comes to road construction costs, but by how much has always been a matter of speculation.

Now we have a better idea. The Gauteng Freeway Improvement Project (GFIP) to upgrade the highways between Joburg and Pretoria, originally costed at R4,6bn in the mid-2000s for a 340km upgrade, ended up costing just shy of R18bn for 193kms. After a year-long study involving whistleblowers, road engineers and quantity surveyors, Organisation Undoing Tax Abuse (Outa) concluded that the 193km freeway improvement project should have cost no more than R8bn, even allowing for cost escalations and other contingencies. That’s a R10bn overcharge, enough to build 40 Nkandlas (the name of President Jacob Zuma’s taxpayer-funded private residence in Kwazulu-Natal).

The client in this case was none other than SA National Roads Agency (Sanral), which paid an average of R86.6m per kilometre, between two and three times what comparable roads in Africa (and SA) would cost.

If the R10bn cost overrun is correct – and several industry insiders claim it is – how did the construction companies pull it off? And why are no construction executives in jail for this swindle?

In 2006 there was a secretive road contractors meeting attended by Basil Read, Concor (part of Murray & Roberts), Haw & Inglis, Grinaker LTA and Raubex where the colluders agreed to allocate tenders for the construction of roads. At this meeting it was also agreed that those firms not interested in winning tenders would nevertheless submit “cover bids”, which are sham bids intended to lose while lending legitimacy to the tender process. The losers would receive compensation, or “loser’s fees”, from the winners.

How we miss Mbeki and Manuel

Written by Ciaran Ryan. Posted in Journalism

Their economic record beats anything that came before or after

This article first appeared in Moneyweb

Former SA President Thabo Mbeki

Former SA President Thabo Mbeki

If we are to measure our political leaders on economic performance alone, Thabo Mbeki was our best president in the last 30 years, and Trevor Manuel our best finance minister.

As the accompanying graph shows, President Jacob Zuma has been bad for growth, but arguably better than FW De Klerk, who had to contend with the tail end of apartheid and international sanctions – which deprived SA of the capital it needed for growth and investment.

President Nelson Mandela had a mixed performance, with economic growth veering between -2% and +2%, for many of the same reasons confronted by De Klerk. Foreign investors remained wary of SA’s democratic experiment, as shown by the sluggish growth in foreign direct investment (FDI), until Mandela ventured overseas and exercised his considerable charm in enticing investors to these shores. But it was Mbeki who reaped the benefit of Mandela’s international outreach. Under President Zuma, FDI growth has come to a virtual stall.

Mbeki delivered the most consistent economic growth – admittedly helped by a commodity boom which ended abruptly as his term of office came to a close in 2008 – and Trevor Manuel as finance minister for 13 years, until 2009 delivered the lowest budget deficits. Manuel’s steady hand on the fiscus was likewise aided by the aforementioned commodity boom, which fattened tax receipts and reduced the need for large budget deficits.

The Joburg township where outlaws make the rules

Written by Ciaran Ryan. Posted in Journalism


A sign above a disused shaft warns miners not to enter

Illegal gold mining sustains Lindelane

A slightly modified version of this article first appeared in Groundup and Times Live.

It’s dangerous, often fatal, but illegal underground gold mining is pretty much all that sustains the economy of Lindelane, a sprawling favela of tin shacks and shebeens near Benoni, to the east of Johannesburg. Try as they might, the police are powerless to combat an industry that government, mining houses, trade unions and other respectable voices want stamped out.

In Lindelane, and neighbouring Kingsway, each morning thousands of young men squeeze through tiny openings into abandoned underground mines, armed with chisels, hammers and battery-powered torches. Underneath Johannesburg, from Springs in the east to Roodepoort in the west, a network of disused mine tunnels probably several thousand kilometres in length stands as a monument to the city’s former glory years as the gold centre of the world. The golden years are gone, leaving a rabbit warren of subterranean passages now occupied by these men and the gangs to which they owe fealty.

Soweto man’s house sold behind his back for R100

Written by Ciaran Ryan. Posted in Journalism

Solomon Nhlapo is accused of trespassing in his own house

This article first appeared in Groundup.

solomon-nhlapo-2Solomon Nhlapo, 65, is squatting in the Soweto house where his mother lived since 1965. Police have told him he is trespassing in his home which was sold in 2014 for a paltry R100. Nedbank apparently managed to obtain default judgment against him, even though he has written confirmation that his late mother’s loan is paid up.

Nhlapo turned up in the South Gauteng High Court in August last year with proof from Nedbank that his mother’s home was fully paid up. He was trying to defend himself, without legal representation, against an eviction order. To no avail. The court awarded the new owner an eviction order against him, which he is now fighting with the help of the Lungelo Lethu Human Rights Foundation, a group helping hundreds of people in similar situations across Gauteng.

The lucky buyer of this bargain R100 house at the sheriff’s auction is Nedbank itself, which offloaded it to a company called Pyramed for R51,000, which then sold it to a company called CC Trade 57 for R18,700, which then sold it to Company Unique Finance (CUF), which then sold the property to another buyer for R350,000.

Nano-technology could be a game changer for gold mines

Written by Ciaran Ryan. Posted in Journalism

Is this nano-technology breakthrough to gold mining what Google is to the internet?

gold-pourThis article first appeared in Mineweb.

Nano-technology could come to the rescue of ailing gold companies.  A new recovery method using nano-technology promises to improve gold recoveries by upwards of 40%, and in some tests has achieved improvements of an astonishing 90%. For marginal mine operators, this is could clearly be a game changer.

In August, the technology transitioned from pilot phase to full production at Nevada-based New Gold Recovery (NGR), and is already attracting interest from mining companies around the world. New York-based investment firm Unicore Group has taken a minority share in the company and sees this as one of the most exciting additions to its portfolio.

UniCore Group’s senior managing partner, Herve Ime, says the expansion possibilities for NGR, given the parlous state of gold mining worldwide, is huge. “We decided to back NGR when it was still in its embryonic phase and the technology had not been commercially applied. The gold mining industry is crying out for something like this. We see this as a killer technology, rather like what Google is to the internet.”

Sanral’s mysterious and wishful accounting

Written by Ciaran Ryan. Posted in Journalism

When will the roads agency admit that most of its e-tolls debt is unrecoverable?

This article first appeared in Moneyweb.

etoll-gantry-2Organisation Undoing Tax Abuse (Outa) raised some interesting questions about the South African National Road Agency’s (Sanral) 2016 annual report which came out recently, specifically Sanral’s lack of enthusiasm for writing off unpaid e-tolls, which many suspect will never be recovered.

The balance sheet shows trade receivables of R7.66 billion, up from R4.96 billion in 2015 and R1.15 billion in 2014. Is Sanral continuing to count unrecoverable e-tolls as an asset on its balance sheet?

“Had Sanral accounted prudently and honestly as regards these unrecoverable amounts, it would have been forced to report a far greater loss than the R954 milllion reported for the 2016 financial year,” says Outa.

Airports Company of SA minorities sue for fair value buyout

Written by Ciaran Ryan. Posted in Journalism


Minorities say they are economic hostages to the company

This article first appeared in Moneyweb.

It seems like a lifetime ago, but there was a time when the government seemed serious about privatising and listing the Airports Company of SA (ACSA), which manages SA’s nine airports. Private investors were encouraged to acquire shares at a pre-listing price, and many did, among them African Harvest Strategic Investments and empowerment shareholders who paid with debt.

Among the early investors was Aeroporti di Roma (ADR), which acquired 20% for about R890 million in 1998, or R8.19 a share. This valued ACSA at about R4 billion at the time. With no prospect of an IPO on the horizon, in 2005 ADR sold its shares to the Public Investment Corporation for R16.75 a share, more than doubling its initial investment.

But when minorities asked to be bought out, they were offered R12.87 a share – roughly 40% of ACSA’s net asset value (NAV), despite a 2014 valuation by Deloitte of R18 to R22 a share. In the same year ACSA did its own valuation exercise which valued the shares at just R10.36, less than half the R25.37 NAV a share disclosed in its own financial statements for 2014.