SAA could yet emulate Telkom
Will the government do a Telkom at South African Airways? That’s what all South Africans should be hoping for after Dudu Myeni’s iron grip at SAA has at last been loosened, with Finance Minister Malusi Gigaba removing her as the airline’s chairwoman, along with deputy chairman Tryphosa Ramano and five other board members.
Crucially, the new incumbents are credible and experienced businesspeople, not Gigaba or Jacob Zuma lackeys. Not that Gigaba had much choice in the matter. The banks had him over a barrel. They had refused to roll over billions of rand worth of maturing loans to SAA if governance and management at the airline was not fixed.
The new SAA chairman, JB Magwaza, his deputy, Nolitha Fakude, and the other new directors are people of stature, with reputations to lose. They surely would not have agreed to put their names forward without at least some assurance that the new board would have the freedom to do whatever needs to be done to save SAA.
That raises the prospect that this time round, finally, SAA could be left alone to restructure and turn itself around just as Telkom eventually was more than four years ago, after the bottom fell out of its profits and its share price and even the Public Investment Corporation insisted that Telkom’s governance be fixed.
Telkom had seen a string of chairpeople and CEOs come and go, amid various scandals. The government’s constant interference had undermined any serious efforts to reposition Telkom and cut its bloated cost structure. The company, which had been listed on the stock exchange in 2003, was failing to compete in a rapidly changing telecoms market. The control that the government continued to exercise by virtue of its remaining 39.8% stake in Telkom was the chief culprit.
That all changed after Jabu Mabuza was appointed as chairman in 2012, Sipho Maseko took over as CEO and a new board and executive team launched a turnaround programme that transformed Telkom in little more than three years.
The government did not interfere as the new team implemented retrenchments and other previously unpalatable measures that by 2016 enabled Maseko to call a successful end to the turnaround and to put Telkom on a new growth path. The company has experienced huge increases in profitability and in its share price.
Fixing Telkom wasn’t easy, but repairing the profound damage at SAA could be much harder. The state-owned airline has been in bad shape for a long time — going back much further than Myeni’s catastrophic eight-year reign. It is insolvent and illiquid and has for years been kept aloft only by frequent and large cash infusions from the government.
It operates in a highly competitive market, domestically and globally, in which margins are wafer-thin — yet it has a cost base that is multiples of the size of successful competitors such as Comair. Privatisation is unlikely to be an option because no one in their right mind would buy the airline. But stemming the bleeding at SAA would require the kind of savage restructuring that the government and unions would no doubt baulk at.
The big question now is whether Gigaba and his colleagues have the stomach to give the new board, and new management, the space to do what needs to be done. One disturbing sign is that instead of just doing what’s best for SAA, the minister seems also to have taken the chance to get rid of some political opponents on the SAA board, such as Ramano, who was by all accounts doing a good job.
But the departure of Myeni, and the arrival of good new board members, is a welcome sign, which we trust will be followed by the requisite action to start turning SAA around.
And while it’s about it, the government should also think of selling its Telkom shares into the market, instead of trying to do behind-the-scenes deals to cling to control.
THE GOVERNMENT DID NOT INTERFERE AS THE NEW TEAM IMPLEMENTED RETRENCHMENTS