Novick quits due to lack of transparency about SAA deal

RYK VAN NIEKERK: Gidon Novick resigned from the board of the Takatso Consortium yesterday [Monday]. This is the consortium that is set to acquire 51% of South African Airways.

Now, Novick is a legend in the South African aviation industry. He was the [joint] CEO of Comair for many years, and he was also the founder of Kulula.com. He is also the founder of Lift airline, which is currently operating in South Africa, and he was once also destined to become the CEO of SAA. Novick represented minority shareholders on the Takatso board, most notably Global Aviation. The majority shareholder is Harith General Partners.

Gidon, thank you so much for joining me today. Why did you resign?

GIDON NOVICK: In short, I really had no access to information around the consortium. What’s happening with the deal – which many people are asking, not just me. Has the capital been raised for the deal to go ahead? What are the roles and responsibilities of the various parties going forward? It was just really a black hole in terms of any visibility [around] what’s going on in the consortium. And as a director of a company one needs to know what’s going on.

RYK VAN NIEKERK: But why were you not informed of what’s happening and what the issues are, because I assume you would have regular board meetings and other directors should have raised the same concerns?

GIDON NOVICK: Yes, no meetings [took place], even after requests for meetings, and [there was] no information even after several requests for information.

It’s an unfortunate situation when one joins an entity in good faith, and has an aspiration to build something very special in South Africa, which sorely needs some good news and public and private partnerships working well. It was all good intent.

We remain as shareholders of the consortium and we’ll hold on to our shares, and hopefully something will come of it. But one can’t have the fiduciary responsibility that comes with being a director of a company if you don’t have access to information.

RYK VAN NIEKERK: That is a very interesting statement. Did you resign in your personal capacity, or as a representative of the minority shareholders – in this case Global Aviation?

GIDON NOVICK: Board directorship is a personal thing. One has a fiduciary responsibility, as you well know, to the stakeholders of that company. Alongside that we are shareholders in the consortium, and that will remain – both Global Aviation, our partners in Lift, and our own airline management company.

RYK VAN NIEKERK: Will the minority shareholders replace you with another representative on the board?

GIDON NOVICK: No. I think that’s unlikely, and certainly given the experience that I’ve had I don’t think it would be an appealing prospect to be on a board without really being consulted on what’s going on.

RYK VAN NIEKERK: There has been mention made – and this comes from Harith as well as the Minister of Public Enterprises Pravin Gordhan – that there’s a conflict because you are involved with Lift and sensitive information from SAA could put you in a competitively advantaged position.

Do you think there is a conflict of interest, and that is why the information was withheld from you?

GIDON NOVICK: Well firstly my Lift involvement was there from the start, so it’s nothing new. Secondly, the information that I would’ve required as a director was information as to the progress of the transaction. Is this transaction going ahead? What are the hurdles? Has the capital been raised, and what are the roles and responsibilities? So nothing to do at all with anything commercially sensitive to SAA and we certainly never would’ve requested that information, nor do we actually want to see that information. I think that distinction needs to be made quite clearly.

RYK VAN NIEKERK: Takatso needs to raise R3 billion to invest in SAA over a period of time. Is there a problem raising this cash?

GIDON NOVICK: Good question.

RYK VAN NIEKERK: Surely it shouldn’t be that difficult to give a yes or a no?

GIDON NOVICK: [Laughing] I wish I could give you a yes or no. I don’t know.

Part of the problem, Ryk, is basic questions like: Do we have funding as a consortium? Have we raised the funding? Have we got the committed funding? [These are things] one needs to know.

If you are a director of a company, you want to know that the company’s got the necessary capital to deliver on what it has promised, and I don’t know the answer to that question.

RYK VAN NIEKERK: One of the other conditions for the deal is that government needs to pay off all SAA’s remaining debt, and that amounts to around R3.5 billion. But the current Minister of Finance Enoch Godongwana did not make an allocation for this amount in his recent Medium-Term Budget Policy Statement. Are there concerns that government won’t pay off that debt?

GIDON NOVICK: Again, Ryk, I’m in the dark. I read what you read. I did see that obviously there was no money allocated. What does that mean in terms of the deal? Again, a question regarding the future funding and a question that I would’ve loved to have [had] answered by the parties that are close to the transaction.

RYK VAN NIEKERK: That suggests the total breakdown of trust between partners within the Takatso Consortium. So what does that mean for this potential SAA deal?

GIDON NOVICK: I don’t know the answer to that. All I can say is that we got involved in this thing with an intention to do something very special in the country, using skills that exist in the country in this particular industry. We have incredible skills, we have incredible talent, we have incredible managers, we have incredible customer-service staff to build a great airline.

We don’t need to go internationally to find skills, to find people to come and run organisations in this country. I certainly don’t believe that – and certainly not in the airline industry.

We remain committed, we’ve offered our help even post this resignation.

We’ve offered to be of assistance wherever we can. We’ve had discussions with SAA directly in terms of how we could cooperate with them and how we could assist them and how they could assist us. So those will continue – and how that unfolds I guess time will tell.

RYK VAN NIEKERK: So what you’re saying is that you, as a representative of Global Aviation, have resigned because there’s a lack of communication. But following your resignation, the minority shareholders will remain on board and stay committed to make this deal happen. That doesn’t sound like a healthy situation.

GIDON NOVICK: We’re minority shareholders. We put in a lot of time and effort and energy into this transaction, as you know.

For that we got an initial stake in the company. That will remain.

In terms of any active involvement in the decision making of the company and the direction of the company, we will not have any [say] because we are not represented on the board any longer and we will be bystanders in terms of that process.

RYK VAN NIEKERK: Was it an option to walk away?

GIDON NOVICK: Well, what does ‘walk away’ mean? Walk away from a responsibility most certainly, because one wasn’t able to discharge that responsibility properly without information. Walk away from a shareholding? I don’t think anybody in their right mind would give up a shareholding of something that could have value in the future. Who knows if it will, but it may well have value in the future. So there’s no reason to give up those shares.

RYK VAN NIEKERK: Just from your perspective, SAA has been flying now for a while, even though the deal hasn’t been signed yet and there are several regulatory approvals that still need to be obtained for the deal to go ahead, in addition to the R3 billion that needs to be raised. What are your impressions of the SAA operations at the moment? Do you think they’re doing a good job?

GIDON NOVICK: I see what you see. We do talk to them. I think they’ve got some very competent people there, and I think in many respects they have done a good job. I actually flew with them recently and had a very good experience. So hard to tell financially because, again, we don’t have and do not really want to access any of that financial information. But yes, they’re up and running. They are fairly small, but SAA is flying.

RYK VAN NIEKERK: You were once destined to be the CEO of SAA. Now obviously things have gone very, very pear-shaped. How are you feeling with the way things have transpired now?

GIDON NOVICK: Well, I was never offered that job, and even if I was I most likely wouldn’t take it. I’m not the best CEO in the world, by any means. I’ve got some experience and some value to add – but I don’t believe as a chief executive of a company. So I don’t know where that went to, and I’m certainly not disappointed if that prospect is more remote.

RYK VAN NIEKERK: That was Gidon Novick. He resigned from the board of the Takatso Consortium [on Monday].