from the ed­i­tor

Finweek English Edition - - Contents - JANA MARAIS

few things fas­ci­nate me more about busi­ness than watch­ing the dif­fer­ence a man­age­ment team can make to the for­tunes of a com­pany and its stake­hold­ers. Though the CEO of­ten gets most of the praise (or flak), the board and con­trol­ling share­holder have an equally im­por­tant role to play. What to make then of the mess at South African Air­ways (SAA), on which the state has al­ready spent R23.8bn in guar­an­tees and bailouts since 2008? No­body dis­agrees that there are eas­ier ways to make money than run­ning an air­line, but there are plenty of ex­am­ples of com­pa­nies where man­age­ment does get it right. Comair is the ob­vi­ous lo­cal ex­am­ple; Ethiopian Air­lines, an­other state-owned en­ter­prise (SOE), the shin­ing light on the con­ti­nent.

In the 2016 fi­nan­cial year, the lat­est avail­able, SAA re­ported a loss of R1.47bn for the year based on rev­enue of R30.4bn, com­pared with Ethiopian Air­lines’ profit of 6.13bn Birr (roughly R4.1bn at the time), on rev­enue of 54.4bn Birr. SAA’s man­age­ment can use the Ethiopi­ans as a bench­mark to find room for im­prove­ment in many areas. Staff costs pro­vide a start­ing point – SAA spent more than R5.8bn on its 10 706 em­ploy­ees in the past fi­nan­cial year (an av­er­age of R541 752 per em­ployee); Ethiopian Air­lines’ staff com­ple­ment of about 12 000 cost an av­er­age of roughly R236 543 .

At the time of writ­ing on 27 Septem­ber, SAA ur­gently re­quired R6.8bn to pay cred­i­tors who re­fused to roll over debt by the end of Septem­ber. I have no doubt that the Pub­lic In­vest­ment Cor­po­ra­tion (PIC), which invests mainly govern­ment em­ploy­ees’ pen­sion money, will even­tu­ally be strong-armed into pro­vid­ing at least some of the re­lief re­quired.

An­other com­pany to watch come 30 Septem­ber is plat­inum miner Lon­min, which faces its own bat­tles with cred­i­tors. It will be in a world of trou­ble if debt covenants are breached at month-end. Here an­other PIC “bailout” will prob­a­bly not be as forth­com­ing as it was in De­cem­ber 2015. Lon­min has world-class ore bod­ies, but the com­pany has been mis­man­aged for years, and Ben Ma­gara, ap­pointed as CEO af­ter the Marikana tragedy in 2012, has few op­tions but to try and keep bank­ruptcy at bay.

Con­trast this with Northam Plat­inum (see page 36), which hardly any­one’s been pay­ing at­ten­tion to. Fly­ing un­der the radar, man­age­ment has been ex­pand­ing the busi­ness, snap­ping up new as­sets at bar­gain prices with­out over­stretch­ing the bal­ance sheet – as you ex­pect listed com­pa­nies’ bosses to do at the bot­tom of the mar­ket.

Mat­ter of fact

In the ar­ti­cle Mis­sion-based so­cial and eth­i­cal in­vest­ing, pub­lished in our 21 Septem­ber - 4 Oc­to­ber is­sue, two sen­tences were ac­ci­den­tally com­bined and an im­por­tant sec­tion left out. The sec­tion should have read: “The Old Mu­tual Al­baraka Bal­anced Fund is a Reg­u­la­tion 28 com­pli­ant fund. It is suit­able as a stand­alone re­tire­ment in­vest­ment.” We re­gret the er­ror.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.