The unspecified going concern guarantee given by government to ailing South African Airways (SAA) while President Jacob Zuma’s friend Dudu Myeni remains board chairwoman is an error of judgement, the Democratic Alliance said on Saturday.
The DA welcomed the conditions laid out for the SAA board by Finance Minister Pravin Gordhan at his meeting with the new directors on Friday, DA spokesman Alf Lees said.
However, the decision to grant SAA an unspecified going concern guarantee, which was believed to be in the range on R5 billion and would bring the total guarantee liability to the state to R20 billion, was a significant risk because the guarantee could not be revoked should the board be unable or unwilling to fulfil the conditions, he said.
“The fact is that Dudu Myeni has wrecked SAA and the Cabinet decision to reappoint her as chairperson of the board was irrational. That is why the DA is preparing its case for the reviewing of this appointment. With Dudu Myeni’s mismanagement of SAA, as well as her apparent protection from President Jacob Zuma, there is a high risk that the board will fail to meet the conditions announced by the finance minister.”
There could be no illusion that the sensible thing to have done to give the new SAA board a fighting chance of saving SAA from total collapse would have been to remove Myeni from the board. The DA remained resolute that the additional state guarantee should not have been granted as long as Myeni remained a member of the board, Lees said.
On Friday, Gordhan met the newly appointed board and warned that it was not business as usual.
“National Treasury outlined the mandate of the board. The primary focus is to return the airline to financial sustainability while also delivering on other important government objectives. In line with the protocol on corporate governance which applies to all public sector institutions the roles and responsibilities and the separation of powers between non-executive directors and executives were outlined,” his office said in a statement.
Gordhan said SAA’s application for a going concern guarantee by governmemnt had been approved with 11 conditions. These included that the board’s primary focus be on returning the airline to financial sustainability; SAA’s strategy had to be strengthened and alignment with other state-owned airlines ensured; and SAA had to implement more aggressive cost-cutting initiatives in areas of fuel, aircraft ownership, labour, maintenance, repairs and overhaul, and procurement.
The network and fleet plan had to be refined based on a sound business case so that the airline took advantage of opportunities to scale back operations to focus only on operating routes which positively contributed to profitability.
“The airline’s strategy must better differentiate the airline, enabling it to continue to compete effectively, inter alia through addressing the customer value proposition; the airline must work with National Treasury and the department of public enterprises in giving consideration to the possible merger of SAA with South African Express (SAX) airlines and the potential introduction of a strategic equity partner.
“The board is required to start a new process of appointing the chief executive officer, chief financial officer, and other key executives in consultation with the minister; funding must be secured to meet the airline’s liquidity requirements; the board is required to ensure that the AFS [annual financial statements] for both 2014/15 and 2015/16 are finalised; SAA is required to report progress on a regular basis to National Treasury; and a communication protocol was outlined for communicating progress as developments arise,” the statement said.
On September 2, Cabinet announced the re-appointment of the contentious Myeni. Former SAA CFO Tryphosa Ramano would serve as deputy chairwoman.
– African News Agency (ANA)