Finance Minister Malusi Gigaba has cracked the whip with the new South African Airways board, to ensure that directors are no longer able to arrange cosy deals for their own profit.
After meeting the airline’s new CEO Vuyani Jarana and the board, Gigaba made it clear that the bad practices of the past will cease. “It is important that we have a clear delineation of roles between the shareholder (government), the board and the executive management of the airline, led by the CEO. The CEO runs the airline,” said Gigaba.
She was not mentioned by name, but this was a clear reference to the overbearing way in which former SAA Chairman Dudu Myeni had presided over the near-bankrupt national carrier. “We must re-establish confidence that the airline is being run properly,” Gigaba pledged.
“We have a very solid and strong board. Today was an official handover from me to the CEO.”
SAA’s new chairman JB Magwaza agreed with concerns about his predecessor.
He said: “A problem was there were not clear relatioships between the shareholder, the board and executives. This was a serious formula for chaos. We are at the brink. We either fall over, or we take steps back from the brink.”
Gigaba said he had raised a number of challenges,”including cost containment and proper communication with stakeholders. “I expect board and shareholders will support the CEO. Top of agenda is the implementation of the turnaround plan to bring airline back to financial stability.”
“I want a report by December on cost-containment measures. I want the optimal corporate structure, with the consolidation of SAA, Mango and SA Express. An inter-ministerial committee is being established. We must optimise our resources and assets.”
He said that government will “in the coming few months continue to address the funding requirements for the airline”.
There was a R10bn commitment in the mini-budget to continue to bail out SAA, of which R5.2bn has already been paid over. A R1bn sum owing to SAA also needs to be repatriated from Angola. Meanwhile, some international banks to which SAA owed money have been paid off.
Gigaba said government “will continue to discuss a strategic equity partner for SAA. The airline will need a new fleet. This will not be paid for by the fiscus or by meagre revenues during the turnaround. We need a strategic equity partner to provide capital.”
He said details of how the new investor would be brought on board, and what stake would be sold, were still to be decided by the new SAA Board.
“There are many people who have shown an interest,” said the minister. “Even long before we made this announcement, there were discussions.” He said interested parties ranged from other airlines to financial institutions, to what be termed “other investors”.
He said: “There are varied interests. Nobody has been spoken to yet. Once we start the process formally, we will announce we are seeking a Strategic Equity Partner for SAA. We will do it properly. There will be no underhand engagements.”
The new chairman added: “You need to decide what kind of partner you need. What other than money will be brought in. The Board will have to apply its mind. The performance of SAA doesn’t create a sexy organisation. On what basis are you going to look at the price of this organisation? Price and earnings would not be appropriate. You need other ways to look at the size of the equity you need.”
Gigaba said the sale of state assets to help fund SAA – on top of the dusposal of a stake in Telkom – is still being considered.
“We will identify assets in all the SOEs that can be disposed of,” he said, adding that the new SAA Board has been asked to look at “immediate assets within the airline, to be sold to strengthen the balance sheet of airline.”