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SAA must be Stabilised, Professionalised and Sold Off

The crisis at South African Airways (SAA) is fast reaching boiling point with debt repayments totaling R6.9 billion due this Saturday, 30 September. Despite this urgent situation, National Treasury has yet to reveal where this enormous amount of money will come from.
Our national carrier has become a bottomless pit into which government continues to pour precious public resources that should be spent on lifting 30 million South Africans out of poverty. It is hard to believe that any government hoping to be re-elected would take money from the poor to subsidize travel for the rich.
SAA’s fortunes will not change if we continue done the current tried, tested and failed path. For almost two decades, the airline has relied on government bailouts and guarantees for its survival. The cumulative total of bailouts since 1999 is R14.4 billion, and National Treasury is currently trying to source another R10 billion for the airline in the next 48 hours. Government has already extended R19.1 billion in guarantees – meaning that nearly R35 billion of ordinary South Africans’ hard-earned money has been dedicated to keeping SAA in ‘business’.
In addition to these bailouts and guarantees, and under the control of Board Chairperson Dudu Myeni, SAA has made a cumulative loss of R15.7 billion over the past five years. The DA has been clear and unwavering in our contention that Ms Myeni is both unfit and unsuitable to be at the helm. It is clear for all to see that this government continues to retain and protect Myeni in her position, in spite of this cash hemorrhage, because of her close political affiliations, including President Zuma himself.
The R10 billion that government is saying SAA needs will only pay off the bank loans of R 6.9 billion due by the 30th of September, the Standard Charted bail out of R2.2 billion at the end of June 2017, and R750 million to pay suppliers who were not fully paid in July and August 2017. The R10 billion will not provide working capital to fund the losses that National Treasury and the latest turn-around plan indicate will continue for the next two years. This requires a further R13 billion in cash injections or what National Treasury euphemistically refer to as “re-capitalization”.
The reality is that SAA is insolvent and bankrupt. It must be stabilized, and sold off as soon as practically possible.
Recovery plans have followed turnaround strategies, all yielding further losses. It is clear that national government is hell-bent on hanging onto the beleaguered airline – no matter the cost to the country and its people. SAA is not a strategic state-owned asset and it plays no role in the developmental agenda of government. On the contrary, over the last two decades it has cost our country dearly and delivered no tangible benefits to ordinary South Africans.
Getting to the bottom of the problem
Despite Finance Minister Malusi Gigaba’s best efforts, rumours of an impending raid on the Public Investment Corporation (PIC) refuse to go away. With just 48 hours to go before the R6.9 billion is due, we still do not know how Minister Gigaba intends to fund the bailout, and where additional funds will be found to pay suppliers.
The PIC, which administers the pensions of teachers, nurses, police officers and other public servants, has confirmed that they were approached for a R6 billion bailout for SAA. That our government would even consider risking pension funds of public servants is deplorable.
Significantly, the PIC has serious reservations about SAA’s suitability for a loan. At the media briefing on the 26th of September, PIC CEO, Dan Matjila, revealed that a due diligence investigation had been conducted into SAA. This report found SAA to be below the minimum investment standards required by the PIC. Matjila conceded that the outcome was “not favourable” in terms of “the minimum requirements of our client mandate”.
The contents of this report may be the clearest indication yet of the true state of SAA and the DA believes the report should be released for public scrutiny. We will therefore be submitting an application in terms of the Promotion of Access to information Act (PAIA) to obtain a copy of the SAA due diligence report conducted by the PIC.
Holding Myeni and Gigaba accountable
The Constitution sets out the basic values and principles of public administration in Section 195, which states that:
“Public Administration must be governed by the democratic values and principles enshrined in the Constitution, including … [e]fficient, economic and effective use of resources … The above principles apply to … Public Enterprises.”
The national carrier is deemed a public entity in terms of Schedule 2 of the Public Finance Management Act (No. 1 of 1999) and in terms of the South African Airways Act (No. 5 of 2007). Accordingly, SAA is subject to this section.
Sadly, the management of SAA has become the very antithesis of the requirements set out in the Constitution. It is our belief that Malusi Gigaba and Dudu Myeni, in their respective official capacities, have breached Section 195 of the Constitution by not acting in accordance the principals established therein.
Therefore, the DA will be writing to the Public Protector, Adv. Busisiwe Mkhwebane, requesting an investigation into this matter. Specifically, the Public Protector must investigate the role played by Ms Myeni in the institutional decay and poor governance of SAA, since 2009, and Mr Gigaba in his former and current role as minister of Public Enterprises and Finance, respectively. Myeni and Gigaba’s careers are intimately entwined with SAA’s demise and they must not be allowed to escape accountability.
The way forward for SAA
SAA can be profitable and a company worthy of being called South African. However, immediate and urgent action is required.
The DA’s solution to the SAA crisis would consist of the following interventions:

  • Remove Dudu Myeni from the board entirely and ensure that the board is made up of independent individuals with suitable aviation and business experience;
  • Initiate business rescue proceedings for SAA in terms of Chapter 6 of the Companies Act (No. 71 of 2008). This will temporarily place SAA in the hands of a capable business rescue practitioner charged with returning the entity to a healthy financial position. This will have to include:
    • The removal of political interference both in strategy and in the employment of skilled and experienced management and staff;
    • Aggressively pursuing profitable routes, some of which were foolishly abandoned over recent years;
    • Renegotiating supply contracts, particularly major supplies such as jet fuel on the basis of best price for the required service quality;
    • Adjustments to employee compliment numbers to bring the airline in line with international staffing norms.
  • Release government’s stranglehold over SAA by finding a buyer for SAA immediately. This ought to include an employee share scheme, making a portion of shares available to SAA employees in order to empower them and give them a real stake in the company’s future successes.

These initiatives will not only bring much needed public accountability to the airline’s governance, but will go a long way to making SAA profitable again. We thus call on Minister Gigaba to place SAA under business rescue before the next bailout payment deadline of 30 September.
Conclusion
South Africans cannot continue to fund a defunct and failing national carrier. In truth, the imminent R10 billion bailout will only be a short term solution and will not fix the underlying issues at SAA. It is time for urgent and immediate interventions that seek to stabilize, professionalize and sell off SAA.

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Myeni approached PIC for R6 billion for SAA

The DA has noted the media report that Ms Dudu Myeni has asked the Public Investment Corporation (PIC) for R6 billion to bail out beleaguered South African Airways (SAA), an airline that she has basically run into the ground.
While the PIC reportedly refused these requests this is yet another reason, to add to the mountain of reasons to remove Myeni. She now appears to be involved in the planned raid on pensioners’ money to prop up SAA and other bankrupt State-Owned Enterprises.
PIC boss, Dan Matjila, apparently had to answer to allegations against him that were mysteriously apparently leaked after he turned down Myeni’s request. It’s concerning that Matjila is apparently unable to do his job without political interference.
The Minister of Finance, Malusi Gigaba, is dead wrong. The presence of Ms Dudu Myeni on the SAA board at all, let alone as Chair, is neither a legal requirement nor is it prudent. In fact, it is downright irrational and completely irresponsible of Gigaba to try to find technical means to retain Myeni on the SAA board.
SAA has been in constant need of rescuing, facing a R10 billion funding crisis in a few days’ time. The setbacks for SAA continue to pile up:

  • Citibank has reportedly refused to extend their R 1.8 billion loan beyond the 30th of September 2017;
  • The balance of the lenders of the R 6.8 billion due for payment by the 30th of September 2017 has apparently indicated their reluctance to extend their loans particularly if Myeni remains on the SAA board;
  • The international ratings agencies are watching how Gigaba handles the SAA crisis very closely; and
  • There is no time left for any special appropriation bill to be passed by Parliament before the 30th of September 2017.

With Matjila facing an internal audit for doing his job, it’s difficult to have faith in the PIC when the politically connected seek access to the R1.9 trillion of pension money that Matjila manages to further enrich themselves. It’s unethical to use the citizens’ hard-earned pension funds to rescue the failing SAA, once again.
Despite all this, Gigaba is prepared to put the economic future of South Africa, and the 9.3 million unemployed South Africans, at risk in order to comply with the wishes of President Jacob Zuma to keep his close friend Dudu Myeni on the SAA board.

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Gigaba has no choice but to fire Myeni

The DA wrote to the Commissioner of the Companies and Intellectual Properties Commission (CIPC) and received confirmation that Dudu Myeni’s continued appointment as SAA Board Chairperson and a Director is deemed to be illegal.
Finance Minister, Malusi Gigaba, therefore has no choice but to fire Myeni. We have written to Minister Gigaba to confirm what he has done to ensure that Ms Myeni no longer occupies these positions.
Point 2.3 of the CIPC Commissioner’s letter to Gigaba clearly states that ‘Ms Myeni’s continued occupation of the position of director and Chairperson of the Board of SAA is deemed to be illegal.’
This confirms our belief that Ms Myeni ceased to hold these roles at the end of August 2017 and that any decision taken by the SAA Board since then are null and void and may not be implemented.
Ms Myeni has managed SAA into bankruptcy and if there is any chance of saving the airline and the majority of the 9 398 jobs at SAA, she must be immediately removed from having anything more to do with the airline.
Every attempt must be made to save SAA but this cannot be at the cost of the massive bailouts, like we have seen in the past and are likely at the end of September 2017 when loans of R6.783 billion are due to be repaid. The airline must be put into business rescue to stabilise its operations, stop the losses and ultimately be privatised.

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Gigaba cannot ignore the facts any longer – Dudu must go

The DA welcomes the intervention of the Companies and Intellectual Property Commission (CIPC) which confirms our view that the Finance Minister, Malusi Gigaba’s, decision to extend Dudu Myeni’s term as Chair of South African Airways (SAA) board, was illegitimate.
Accordingly, we are also of the belief that Ms Myeni is technically no longer the chair of the board and that any board decisions taken since the 1st of September 2017 must be viewed as irregular and unenforceable.
Minister Gigaba has failed to take the robust action that is required to save SAA and stop the ongoing losses and consequent taxpayer bail outs. SAA is a complete shambles and the Minister’s failure to remove one of the main obstacles to progress at the airline shows that SAA is clearly not a priority for Minister Gigaba.
The intervention of the CIPC in the extended appointment of Ms Myeni will be useful to the Standing Committee on Finance in dealing with its resolution that requests that Minister Gigaba review his decision to extend the appointment and to provide the basis on which he made the decision.
When all is said and done, Minister Gigaba must be held accountable for the evidently illegal decision to extend the appointment of Ms Myeni as the SAA board chair and more importantly, for the billions in losses as well as that funding crisis that has been allowed to continue at SAA.

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It is time for Dudu to go

Media reports today that Chairperson of the South African Airways (SAA) Board, Dudu Myeni, will remain until her close friend “uBaba”, President Jacob Zuma, ends his term in 2019 is simply mind boggling.
I have written to Ms Myeni to request confirmation that these reports are true and if so, why she believes it is in the interest of the crumbling SAA for her to remain, despite commitments that her appointment would come to an end at the beginning of September.
It is clearly nonsensical for the Cabinet to once again capitulate to the wishes of a discredited President and to not instruct Malusi Gigaba, the Minister of Finance, to adhere to the commitment that was made that Ms Myeni would be appointed as SAA board chair for one year.
Ms Myeni must be fired with immediate effect to prevent her continued destruction of the little that is left of SAA.
SAA is bankrupt and near to liquidation. Suppliers have not been paid in full in July and August and the SAA cash flow indicates that they will also not be paid in full in September.
The airline has been running at losses of R350 million every month in the current financial year and if it can find benefactors to provided additional cash to pay its staff salaries and suppliers for the second six months of the 2017/18 financial year, is heading for a loss of R4 billion in the 2017/18 year.
Even if the banks were to miraculously extend their loans to SAA, this will not provide any cash and SAA will not be able to continue trading without a cash bail out from the South African taxpayer. It is certainly not a “going concern”.
There is R6,7 billion payable to banks by the 30th of September 2017. National Treasury has already been forced to pay Standard Chartered Bank R2,2 billion when they refused to extend the loans to SAA.
City Bank has apparently also refused to extend their loans to SAA beyond the 30th of September 2017 and today there are reports that Nedbank have informed SAA and National Treasury that they will not be able to extend the term of their loan beyond the 30th of September 2017 unless, possibly amongst other conditions, Ms Myeni is removed as SAA Board Chair and from the SAA Board.
It is clear that it is time for Ms Myeni to go. Keeping her on would be irresponsible and would essentially ensure SAA’s destruction.

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DA calls on Gigaba to dismiss Myeni immediately

D-day has now arrived for Dudu Myeni to vacate the SAA Board Chair position.
Despite the evidence of her incompetence and the dire straits that the airline has been managed into under her watch, National Treasury has reportedly asked Myeni to remain as SAA Board Chair until the Annual General Meeting (AGM) probably sometime in November 2017.
The DA have therefore written to Finance Minister, Malusi Gigaba, to demand that he dismiss Myeni with immediate effect.
This extension of Myeni’s office term contradicts reassurances Gigaba gave that Myeni would not remain as the SAA Board Chair.
Former Finance Minister, Pravin Gordhan, unfortunately reappointed Myeni as the SAA Board Chair, on the proviso that her appointment was only for one year.
A statement by the Department of Government Communications on the 2nd of September last year stated that “Eleven new non-executive directors have been appointed to the Board of SAA for a three year period starting from 1 September 2016. Ms Duduzile Cynthia Myeni, the current Chairperson of the Board of SAA, has been reappointed for a period of one year.”
Since his appointment, Gigaba has indicated that Myeni’s term as SAA Board Chair would come to an end:
On the 15th of June 2017, Gigaba stated ‘At the upcoming AGM, we will attend to the matter of appointing her successor…’ and on the 4th of August 2017, Gigaba said that ‘We’ll start a process to replace the chairperson and a decision will be communicated later.’
Given the financial crisis at SAA, Gigaba should have foreseen that the AGM would be delayed. An SAA AGM is only likely to be called after the annual report has been finalised which is unlikely to happen until the Directors can convince the auditors that the airline is a going concern.
Despite the objections by her close friend, President Zuma, SAA is a financial disaster largely because of the disastrous tenure of Myeni as a Director and the Board Chair.
Gigaba must for once honour a commitment made by the ANC to South Africans and fire Myeni with immediate effect. There will be no improvement at SAA until Myeni is removed.

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SAA CEO may not have signed contract yet

Finance Minister, Malusi Gigaba, committed in his 14 point plan to appoint the SAA CEO by 31 July 2017. This was a key ‘action item’ in the plan and a condition imposed by some of SAA’s lenders.
Gigaba assured the country on numerous occasions that Mr Vuyani Jarana had been appointed as the CEO:
• On 3 August 2017, he said that ‘Vuyani Jarana has been appointed South African Airways Chief Executive Officer. He will commence his duties after his current employer has officially released him;’
• The next day, he said that ‘I think it is appropriate to start with an announcement that I am sure you all have heard that we have appointed the CEO of SAA yesterday;’ and
• On 25 August 2017, he said that ‘The good thing is that there is a new CEO who has been appointed. We are paying close attention to strengthening the board of SAA and appointing the requisite skills on the board.’
These assurances seem to have been contradicted by SAA Board Chair, Dudu Myeni, on 23 August 2017 when she informed Parliament’s Standing Committee on Public Accounts (SCOPA) that she did not have a date for when Jarana would take up the CEO position. Myeni told SCOPA that ‘He has accepted the offer’ and that ‘We are hoping that he will start on the first of September.’
It is quite astounding that the SAA Board Chair does not seem to have knowledge of any signed contract which leads us to believe that Mr Jarana may not have signed the contract yet.
The CEO’s appointment is important because if the CEO is not appointed, this could result in a default that would require all remaining R14.6 billion of bank loans to be repaid immediately.
SAA has not had a permanent CEO for more than two years and has run at massive losses amounting to R6.1 billion during that period. It is critical that a permanent CEO be put in place to take control and implement robust cost-cutting and revenue improvement measures.

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Myeni must go

The decision to reject, with costs, Dudu Myeni’s application today by the Companies Tribunal only reinforces the need for her to be removed as a director of South African Airways (SAA).
Ms Myeni applied to have the Companies and Intellectual Property Commission’s (CIPC) compliance notice removed from her record.
The CIPC found that Ms Myeni had misrepresented information to the then Minister of Public Enterprises, Malusi Gigaba, when she told him that the SAA board were financing two aircraft when they were, in fact, financing ten.
The costs involved in this case are likely to be high and the DA will submit parliamentary questions to the Minister of Finance for details of whether SAA has paid any of the costs of the Companies Tribunal hearing including the costs of Ms Myeni’s legal representation.
There are overwhelming and perfectly valid reasons why Ms Myeni should immediately be removed from the SAA board on which she sits, not only as a director but as the Chair of the board.

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Myeni failed to hand over reports on SAA corruption to Parliament

Yesterday, I was informed by the Chairperson of the SAA Board, Dudu Myeni, after the disastrous meeting of Parliament’s Finance Committee, that she had in her possession copies of forensic investigation reports into SAA, yet failed to table them before the committee.
The DA will today write to the Minister of Finance, Malusi Gigaba, and his Deputy, to demand that the investigation reports be tabled in Parliament immediately.
There can be no further delays particularly if the reports confirm the SA Cabin Crew Association’s (SACCA) allegations of widespread corruption at the national carrier.
For 7 months the DA has been requesting these reports. However, National Treasury has refused to hand them over. Last month, the Deputy Minister of Finance, Sfiso Buthelezi, promised to release these reports to the finance committee, he has failed to make good on this promise.
Given the accusations of corruption that Myeni has recently alluded to – which coincidently was highlighted by SACCA immediately after Myeni appeared before Parliament – the DA finds it surprising that Myeni did not inform the finance committee that she had, apparently in her briefcase, investigation reports which expose the corruption she referred to.
These reports include, but are not limited to:

  • An investigation into the sale of surplus materials such as rotables and consumables;
  • An investigation into SAA Technical with respect to Commercial aircraft leases between SAA and Mango;
  • Investigations into various allegations against primarily SAA’s former CEO, Mr Khaya Ngqula; and
  • An investigation into the alleged irregular awarding of a tender for dry snacks by Air Chefs.

If these accusations of corruption are true and are not just tactics to divert attention away from the failures of Myeni in her role as SAA Board Chair, they must be fully interrogated by Parliament.
SAA is on the brink of bankruptcy, with the South African taxpayer very close to having to meet the guarantees of some R 9,0 billion to pay off maturing loans to SAA. If this were to happen the consequences for South Africa’s sovereign ratings will be dire.
There is no longer a choice – SAA must be placed under Business Rescue now before it is too late.

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Myeni’s lies the last straw

Today’s reports that SAA Board Chair Dudu Myeni lied in an attempt to sabotage the appointment of a desperately needed CEO for SAA is the last straw.
When SAA appear before the Finance Committee in Parliament on Tuesday, the DA will press for corporate warlord Myeni to be fired as the SAA Board Chair.
SAA has been without a CEO for more than two years and during this time SAA has lost R6.3 billion through bad management, particularly by the Board of Directors and its Chair, Myeni.
Myeni’s apparent attempt to manipulate Finance Minister, Malusi Gigaba, to get the Board meeting that sat to consider the appointment of a CEO stopped, simply reinforces the delinquent director ruling against Myeni by the Companies and Intellectual Properties Commission (CIPC). Her attempt to have the Companies Tribunal to overturn this CIPC ruling must surely fail and Myeni must be barred from acting as a Director on the Board of any company.
SAA is on the brink of bankruptcy and yet Myeni has allegedly missed the last eight board meetings. SAA has already apparently defaulted on repayments of loans and is scrambling to find replacement funding for R9 billion of loans already overdue and becoming due for repayment in the current year.
In the face of bankruptcy, there are only two options that can be considered for SAA. The one will in all likelihood be yet another taxpayer bailout. However, the logical and sensible option would be to file for business rescue which would put SAA on the road towards recovery and privatisation.
Myeni’s blocking of the SAA CEO appointment shows that she is continuing to obstruct the recovery of SAA. The national carrier is already in a perilous state and she must be removed as Board Chair with immediate effect to stop her doing even more damage to SAA.