Former South African finance minister Trevor Manuel said on Tuesday that government bailouts would not help the country’s state-owned airline to escape its troubles, insisting that South African Airlines (SAA) needed to get serious about its corporate governance.
This comes after the South African government on Friday approved the transfer of R3 billion in funds from the National Revenue Fund (NRF) to troubled carrier SAA to allow the airline to meet its debt obligations to Citibank and avoid a default.
SAA has to meet its repayment obligations on a Citibank loan amounting to R6.8 billion. Citibank demanded R1.8 billion by the end of September. This coincides with the prospect of SAA being unable to pay salaries because of a severe cash crunch.
The rest of the NRF sourced funds, R1.2 billion, would be given to SAA for working capital cost.
“I do not think that it is a money matrix, I think that you need to do other things. I’m sure there are other anticipated costs reflected in the annual report of SAA, such as their susceptibility to price fluctuation of aviation fuel. But unless you can go down and deal with the issues for what they are and ensure that decisions are efficiently taken, I cannot see it working,” Manuel said.
“There are some big decisions about management that you are not going to resolve by pouring more money into it. Perhaps the biggest problem that [SAA] faces is its cost structure. It employs too many people, the pay scales are way out of kilter for industry norms. Unless they can deal with that, nothing else will work, and you cannot sell it to anyone who wants to buy it.”
Manuel also said government had to be bold about the cost future of SAA, adding that some decisions at the airline had been deferred for too long.
“Just in the normal corporate governance when the chairperson of the board misses six consecutive meetings and remains a chairperson, there is something funny about that. So unless you deal with these issues in quite a normative way, it’s not about the sale of the airline,” Manuel said.
Manuel, who is now chairman of Old Mutual, was speaking at the Deloitte Risk Conference 2017 in Johannesburg. The conference was hosted in a bid to inform decision-makers on how to better understand the new environment of risk and how to manage it for improved business outcomes.
On the troubled audit firm KPMG, Manuel said it was not appropriate to comment at the moment because he had been served with a subpoena and the matter was thus subjudice.