The Department of Defence might have to pay hundreds of millions of rands to a company that won a controversial VVIP air travel contract seven years ago, even though no work was ever done after the award.
The department has been locked in litigation with Adonai Aviation over the controversial contract — a five year bid to lease two aircraft to ferry dignitaries, starting in 2012. At the time, the contract was for R827 975 162.
In today’s terms, the contract, which was dollar denominated, is worth billions of rands.
The aircraft were meant to be used for travel for former president Jacob Zuma and his then deputy Kgalema Motlanthe.
Adonai Aviation itself seems to be embroiled in a complex misrepresentation and conflict of interest case, involving Adonai’s legal representatives.
However, no contract was ever signed between the two parties as the then new Secretary of Defence, Dr Sam Gulube, raised a number of issues with the process leading to the contract being awarded to Adonai. These included the company not having black economic empowerment scoring; the tender not being advertised; the company did not have a single jet; and the price was too high.
He also said that the department had wanted to advertise the contract.
The Mail & Guardian has further learned that one of the directors of Adonai, Masizi Masiza, was an employee of the South African Air Force at the time of the bid, and that this was never declared.
Neither the department nor Adonai’s attorneys responded to questions on this. Masiza could not be reached for comment.
Last May, Adonai won a court case in the Johannesburg high court, which ordered that the award constituted an agreement between the department and Adonai. This would mean that the department sign an agreement with Adonai or settle.
In his judgment Judge Norman Davies criticised the government for entering into expensive chartering contracts instead of signing an agreement. He also said he was not convinced by Gulube’s assertions that the award did not meet Public Finance Management Act requirements.
Earlier this year, the department launched a new application — at the same court — which sought to get the agreement cancelled, and have it declared unenforceable. But this was dismissed with costs.
On Monday, Gulube confirmed that he was in discussion with the National Treasury over the contract because the department no longer has a need for it.
In 2015, he wrote to parliament’s joint committee on defence for direction on how to proceed with a proposed settlement of just over R200-million. This settlement would otherwise be seen as unauthorised and wasteful expenditure, because no work was done. Gulube also had concerns about the procurement process that saw Adonai awarded the contract. The proposed settlement was never carried out and the matter went to court.
Gulube confirmed engagements with treasury, but would not give further details. “I cannot say any more about the engagements with treasury because I am told there is a contempt of court application against the department.”
The M&G has learnt that fresh settlement negotiations between the department and Adonai will happen today (November 19).
The M&G has seen correspondence between Adonai and the department, in which the company asks for R500-million payments as settlement, or, alternatively, a ten year lease for one aircraft at R100-million per year. The department has offered to reimburse for costs incurred or any damages ordered by the court.
Two senior government sources have said that Gulube’s approach to treasury was a last resort after pressure from Defence and Military Veterans Minister Nosiviwe Mapisa-Nqakula to pay the R500-million settlement.
One of the sources said: “He fears that he could be held responsible for fruitless and wasteful expenditure.”
Gulube dismissed claims of pressure, saying Mapisa had not offered a view on the matter as it is still being dealt with by the department.
What is Adonai?
One of the government sources said the defence department was also concerned about possible misrepresentation within Adonai, and a possible conflict of interest on the part of the lawyers Lesley Cohen and advocate Richard Solomon.
This is after the company’s majority shareholders — Shamima Olulade and her husband Ade Olulade — were removed as directors and their shareholding was diluted to accommodate Elioworx, a company that came in to fund the litigation just months before it was concluded.
A copy of the funding agreement, concluded in February 2018, stipulated that Elioworx would provide funding for the case — which sources with knowledge of the litigation say is close to R2-million — in return for 50% of the award.
The agreement also said that Elioworx, as the new entity driving the case, would appoint Cohen and Solomon as the new legal representatives on the case. This is despite the two already being involved in the litigation since 2015.
This critical misrepresentation, and the fact that the two lawyers advised both Adonai and Elioworx in the signing of the funding has left them in potentially a conflicted position.
A Companies and Intellectual Property Commission search for the entity revealed only one director, 26 year-old Zesimdumise Nxumalo, who this week said he was introduced to the deal by the two lawyers.
“I saw a legal and ethical opportunity to resolve a conflict that made commercial sense and I invested in it. I was guided by court rulings and felt I was on the side of law. I am still open to any discussion that’s legal, ethical and makes business sense … I hope this matter is resolved in the most amicable manner possible.”
The senior government source said: “We’re told there is now a fight between the people involved in Adonai because it seems the lawyers have taken it over. They were involved in this matter for years but introduced a funder just months before this thing went to court.”
Cohen on Monday dismissed allegations of conflict, saying Nxumalo’s involvement and Elioworx was done at an “arm’s-length basis”, and that he was introduced with the full knowledge of Adonai Aviation. “We are accordingly uncertain what conflict of interest you allege in this firm’s role as legal representative of Adonai Aviation.”
He added: “There are numerous far-ranging statement and innuendos in your email which seem calculated to raise some spectre of impropriety, which is rejected out of hand. We resist having to respond to speculative innuendos and decline from doing so. We remind you that the high court dealt with all issues in our client’s favour.”
Treasury and the Department of Defence did not respond to detailed questions on the impasse.