Knives out for Ngqula

Man­age­ment si­phoned R72m from its cof­fers un­der guise of re­ten­tion pre­mi­ums

Finweek English Edition - - Openers - CHIMWEMWE MWANZA chimwemwem@fin­week.co.za

IF SOUTH AFRICAN AIR­WAYS’ loss of R883m for its fi­nan­cial year 2006/2007 is a proxy of the na­tional car­rier’s failed re­struc­tur­ing strat­egy, com­pany CE Khaya Ngqula will have an even tougher time ex­plain­ing the con­trast be­tween right­siz­ing the busi­ness and the ap­par­ently hefty “re­ten­tion pre­mi­ums” al­legedly doled out to its se­nior man­agers.

A re­cent as­sess­ment of SAA’s gov­er­nance stan­dards by the South African Trans­port & Al­lied Work­ers’ Union (Satawu) re­vealed among other things that while the air­line’s key tech­ni­cal em­ploy­ees have been forced to for­feit a num­ber of ben­e­fits as part of a broader shake-up to sta­bilise its bot­tom line, se­nior man­agers – in­clud­ing Ngqula – have re­ceived bonus pay­ments dis­guised as “re­ten­tion pre­mi­ums”.

“Satawu can con­firm that 128 SAA se­nior ex­ec­u­tive man­agers – in­clud­ing the CEO, chief fi­nan­cial of­fi­cer and the GM of hu­man re­sources, among oth­ers – have been paid ‘re­ten­tion pre­mi­ums’ ef­fec­tive De­cem­ber 2007. The to­tal amount to be paid over a three-year pe­riod is R72m spread among agreed cat­e­gories of man­agers un­der the guise of be­ing re­tained,” Satawu sec­re­tary gen­eral Ran­dall Howard al­leges.

The con­trast re­flects – to the ex­tent it can be ex­plained – the in­con­gruity of a turn­around plan that’s seen Ngqula re­quest three con­sec­u­tive hand­outs from Gov­ern­ment since he took over the con­trols, the most re­cent be­ing a R5,7bn cap­i­tal in­jec­tion to give SAA a less geared 35:65 debt to eq­uity ra­tio (See Fin­week, 24 July 2008).

It’s un­clear at this stage whether the board, SAA’s ex­ec­u­tive and the De­part­ment of Pub­lic En­ter­prises (DPE) are aware of – or were party to – the de­ci­sion. Howard says that’s the sub­ject of an­other probe. Mean­while, Satawu has called for Gov­ern­ment to re­move Ngqula. Howard cites as Satawu’s rea­son the re­sults of the union’s as­sess­ment of SAA, which paints a damn­ing pic­ture of an or­gan­i­sa­tion torn apart by sloppy gov­er­nance stan­dards, un­eth­i­cal busi­ness prac­tices and mis­man­age­ment.

Though he side­steps the is­sue of “re­ten­tion pre­mi­ums” Ngqula – who is an­gling for an­other bonus – in­sists he won’t bow to any pres­sures. “My board hasn’t com­mu­ni­cated any­thing to that ef­fect. I in­tend to serve the rest of my con­tract, which runs through to 2010. It may seem easy to crit­i­cise but the truth is that the air­line in­dus­try’s be­come a chal­leng­ing in­dus­try. More than 50 car­ri­ers folded over the past year.”

Ngqula has in­stead blamed the spi­ralling crude oil price – which wiped out around R950m in un­bud­geted costs from SAA’s bot­tom line – for its fi­nan­cial woes. That may be true. How­ever, Satawu blames man­age­ment for a failed re­struc­tur­ing ex­er­cise, which in turn led to an ex­o­dus of key tech­ni­cal skills – mostly pi­lots.

Howard says re­struc­tur­ing has sim­ply meant di­min­ished ca­pac­ity to fly SAA back into the black. “This kind of greed, dou­ble stan­dards and ar­ro­gance on the part of man­age­ment to a large ex­tent ex­plains the com­pany’s pre­car­i­ous fi­nan­cial po­si­tion. While we ac­cept the ar­gu­ment re­gard­ing crude oil prices, should em­ploy­ees al­ways bear the brunt of those pro­cesses while man­age­ment lines their pock­ets?”

Since adopt­ing its re­struc­tur­ing plan 18 months ago, SAA has lost al­most 60 pi­lots to com­peti­tors. As part of their sac­ri­fice to help the air­line re­turn to prof­itabil­ity, Cathy Bill, man­ager of the SAA Pi­lots’ As­so­ci­a­tion, a staff as­so­ci­a­tion rep­re­sent­ing their in­ter­ests, says air­crew made ma­jor wage con­ces­sions that may have po­ten­tially shaved R150m off the air­line’s costs. Those in­clude a R1 000 drop in uni­form al­lowance, a 5% pro­duc­tiv­ity rise and hav­ing their sick leave slashed. The pi­lots also agreed to the sus­pen­sion of a par­ity agree­ment for three years, ef­fec­tive April last year. Their rates for over­time were also re­duced from 1,5% to 1,25% times over­all in­come. Bill adds that the ma­jor­ity of de­parted pi­lots cited dis­il­lu­sion­ment with the re­struc­tur­ing process as the key rea­son for quit­ting SAA.

Al­though ac­knowl­edg­ing that poor work­ing con­di­tions have thrown its pi­lots into ter­rain vul­ner­a­ble to poach­ing, SAA GM for hu­man re­sources Bhab­ha­lazi Bu­lunga is quick to dis­miss the re­struc­tur­ing ar­gu­ment. “We don’t have any proof to sug­gest that re­struc­tur­ing was the prime rea­son for pi­lots leav­ing SAA. As far as we’re con­cerned we of­fered sev­er­ance pack­ages to all SAA staff. And our records show that a num­ber of the de­parted em­ploy­ees (in­clud­ing some pi­lots) ac­cepted the sev­er­ance pack­ages on of­fer.”

Yet Bill in­sists only five of the pi­lots who left ac­cepted man­age­ment’s of­fer of sev­er­ance pack­ages. But SAA Tech­ni­cal (SAAT) – a di­vi­sion re­spon­si­ble for the main­te­nance, re­pair and over­haul of all SAA’s air­craft, plus en­gi­neer­ing work on other air­lines’ air­craft – has been the hard­est hit by the skills ex­o­dus. SAAT lost around 372 tech­ni­cians, ac­count­ing for more than 25% of its 1 405 over­all head­count.

Re­ceived a dis­guised bonus. Khaya Ngqula

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