News in South Africa 16th February:
1. SA Express to be funded:
Fly SAX, a worker owned entity, has suspended its bid to raise seed funding to buy cash-strapped regional airline SA Express through crowdfunding platform Uprise Africa.
The seed funding will instead be raised by an anchor investor who will recapitalise SA Express and take full ownership of the airline to get it off the ground, according to the group’s spokesperson Thabsile Sikakane.
“Crowdfunding is not completely off the table. It’s just that for now in order to recapitalise the business, we needed immediate cash which the [new] anchor investor is more than willing to put up,” says Sikakane.
Sikakane is keeping mum on the name of the new anchor investor but says it is a “reputable South African company”.
The entity was given the green light in October last year to buy the distressed airline.
Initially, Fly SAX has estimated that it would require R250 million as start-up capital for the airline, with R200 million to be sourced from the anchor investor and through equity crowdfunding.
That plan has now been put on hold and the anchor investor is in full control of the deal, Sikakane says, adding that the public offering will only reopen once the airline resumes operations.
The remaining R50 million would be payable in the form of a bank guarantee and from the sale of the airline’s assets. So far, the sale of the airline’s assets has raised roughly R24 million, leaving an outstanding balance of R26 million.
2. Deloitte paying compensation to Steinhoff:
Steinhoff International Holdings says its former auditor Deloitte has agreed to pay up to R1.3 billion in compensation to claimants who are suing the Stellenbosch-headquartered conglomerate.
Steinhoff is facing over 90 separate legal claims in South Africa, Germany and the Netherlands stemming from the precipitous drop in its share price in December 2017.
Last year, the group proposed what it termed a “global settlement” to settle these claims once and for all, albeit with no admission of liability or wrongdoing.
According to its latest term sheet, Steinhoff has proposed to pay out a total of roughly €900 million (about R16 billion) to settle all the claims it is facing. Settling would also give claimants “certainty of outcome”.
In a market update on Monday, Steinhoff said that it had reached an agreement with Deloitte in the Netherlands and South Africa to “make additional compensation available to certain Steinhoff claimants”.
3. Provincial government must care for citizens:
Western Cape premier Alan Winde says it is the provincial government’s duty to look after its citizens, even if that means having to find many plan Bs and diverging from national government when it comes to procuring resources.
He said the province has done so by trying to leave Eskom and load shedding behind through sourcing independent power; running feeding and nutrition programmes; and now most recently trying to secure more Covid-19 vaccines.
“Our Department of Social Development has had to undertake the provision of food and meals, and our Department of Agriculture has been providing food gardens to address the growing humanitarian need in communities, at a time when the South African Social Security Agency and the National Department of Social Development are missing in action.” said Winde.
“We are working with municipalities through our Municipal Energy Resilience Programme to reduce this province’s reliance on Eskom, which continues to cripple our economy when we can least afford it.”
“This is why we have also made contingencies to allow us to procure our own vaccines – because we know that the national government has not procured enough, and because we must fight for the lives of the people of this province.”
He said the province isn’t opposing national government, just filling gaps left by them.
4. Zuma reprimands the courts:
Former president Jacob Zuma appears resigned to his fate, saying that he was waiting to “face the sentence” from the Constitutional Court after his defiance of its order to appear before the state capture commission.
In a scathing statement on Monday night — in which he also launched a volley of attacks on commission chair, deputy chief justice Raymond Zondo, and broadsided President Cyril Ramaphosa by saying some judges helped him hide “what on the face of it seem to be bribes obtained to win an internal ANC election” — Zuma said that the highest court in the land had stripped him of his constitutional rights.
He said many in the judiciary had “long left their constitutional station to join political battles”, and his stance was not undermining the constitution — but “rather to vindicate it”.
“Now that it seems that my role in the Commission has come to an end, I wait to face the sentence to be issued by the Constitutional Court.
“No amount of intimidation or blackmail will change my position as I firmly believe that we should never allow for the establishment of a judiciary in which justice, fairness and due process are discretionary and are exclusively preserved for certain litigants and not others,” he said.
5. KPMG not consulting JSE companies:
KPMG South Africa has announced that it will not be taking up any other work for JSE-listed companies, save for auditing contracts.
The auditing firm which is still cleaning up its image after the state capture and the VBS scandals said it will cease all future non-audit-related services to its listed audit clients from 31 March 2021.
The fact that firms have been providing consulting services to the same clients they are supposed to audit has largely been blamed for the recent scandals accounting, not just in South Africa.
In the UK, the Financial Reporting Council ordered the big four accounting firms – KPMG, Deloitte, Ernst & Young, and PricewaterhouseCoopers to break up their audit and non-audit operations to enhance transparency and to make audit operations truly independent from the rest of the firm.
In SA, providing non-audit-related services to audit clients is still permitted under current laws. KPMG is the first firm to voluntary follow the UK developments.