BNP Capital stood to rake in more than R300-million for a capital-raising deal with South African Airways and when that crashed amid a public outcry, former SAA chairperson Dudu Myeni single-handedly signed off on a R49.9-million cancellation fee to the company.
Grissag AG, a company belonging to Free State businessman Pieter Van der Merwe and a Russian financier, Sergey Pokusaev, was installed into three different bids to help SAA raise R15-billion to consolidate its debt portfolio under highly questionable and controversial circumstances in 2015/2016.
Testifying at the State Capture Commission on Friday, June 14, Van der Merwe explained how a BNP Capital representative contacted him to partner on the deal.
This was after two earlier bids involving Grissag were unsuccessful. Once because it had failed an SAA due diligence and a second time because National Treasury had blocked the Free State Development Corporation (FDC) from stepping outside its mandate to bail out SAA through a partnership with Grissag.
Van der Merwe took the Commission through each of the failed partnerships and then described as “false” claims by BNP Capital, a middleman, that the company had to pay Grissag $5-million as a result of SAA cancelling the deal.
SAA was forced to terminate the deal amid a threat of legal action by civic organisation Outa.
Van der Merwe testified about claims contained in letters that BNP’s then CEO, Daniel Mahlangu, had written to SAA as the deal was disintegrating.
Mahlangu had motivated for a 50% cancellation fee and told the airline that Grissag had incurred costs relating to the fund-raising deal that included efforts by Chinese, Brazilian and Abu Dhabi investors.
Not true, said Van der Merwe, adding that Grissag’s funders were not known to anyone, let alone BNP Capital.
“Our funders have never been disclosed to anyone, they’re definitely not Chinese or Brazilian.”
Asked about the multimillion-dollar cancellation fee that BNP had motivated for, Van der Merwe again said, not true.
“There was no contract so there was no basis for a cancellation fee.”
BNP had told SAA that the cancellation fee was to cover expenses such as flying Grissag executives around the world to drive the fund-raising bid.
Mahlangu, in his letters, had explained that four Grissag directors had been dispatched to Paris – they allegedly came from Brazil, Canada and Russia.
He also wrote that Grissag had to keep them in Paris from 1-8 June 2016 while waiting for word from SAA, thereby incurring flight and accommodation costs.
Said Van der Merwe: “Grissag only had two directors at the time.”
He told the Commission that he did not travel to Paris on 1 June and neither did his Russian partner, Pokusaev.
“I know that because I make all his travel arrangements.”
BNP’s cancellation demand also sought to include cover for “breakage costs” incurred by Grissag as a result of the company allegedly tapping into overseas investments for the deal that didn’t come to fruition.
Van der Merwe also poured cold water over this claim.
The Commission heard that Mahlangu sent SAA a second letter for the cancellation fee, this time revising the amount to R49.9-million.
When confronted with the request for board approval, Myeni merely said: “I approve,” the Commission heard.
Grissag AG was registered in 2015. The company had no real trade record or even a Google presence, but executives at SAA frantically pushed to install the unknown company as an arranger for the debt-consolidation package.
The deal eventually cost former SAA group treasurer Cynthia Stimpel her job after she sounded the alarm over a string of irregularities.
Van der Merwe said he had first met his Russian partner on a business trip to Zimbabwe in 2015. They decided to pursue funding deals in South Africa and set up Grissag AG.
Van der Merwe said he is a resident of the Free State and once the company started operating he met officials from the FDC because he was keen to get into the gap-housing market. He put together a proposal, but that didn’t work out.
Then a small-town lawyer called him out of the blue to introduce him to an entity called Seacrest Investments, the company that ended up being recommended for the SAA deal at the initial stage.
The Commission has heard that Seacrest was recommended for the deal subject to a full due diligence and conditions precedent, but the board rejected the company.
While the airline’s finance team wanted to go back to the market for new proposals, the SAA board suddenly introduced the FDC, allegedly instructing executives to urgently negotiate and conclude the deal.
This instruction, the Commission heard, was based only on a letter of offer from the FDC, one that contained no figures and which specifically stated that it was not a commitment letter.
Following internal push-back and questions about the legality of the FDC getting involved in the deal, BNP Capital emerged as the third option for the deal.
The State Capture Commission has heard extensive testimony by Stimpel about how former acting CFO Phumeza Nhantsi and others allegedly tried to conceal the presence of Grissag in the two subsequent bids.
In the end, Nhantsi signed off on a costly term sheet paving the way for BNP Capital and Grissag to be appointed – this took place during a meeting in her office that took no more than 10minutes, Van der Merwe testified.
*Nhantsi, who has applied to cross-examine Stimpel, is scheduled to appear at the Commission next week. DM
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