SAA did not stand a chance
17
One of the reasons the airline’s business rescue practitioners, Les Matuson and Siviwe Dongwana, have not applied to change the business rescue attempt to liquidation is it would leave most of the airline’s approximately 10 000 employees in a worse position than if at least half were to be retrenched. It appears that retrenchment and restructuring would have seen subsidiaries such as SAA Technical, SAA Cargo and Air Chefs sold off, whilst about 2 268 of the 4 708 employees at SAA itself being retrenched. This is according to a warning sent to unions late last month. The application for liquidation would make SAA the second state-owned airline to ‘throw in the towel,’ because SA Express also went into liquidation when the Covid-19 pandemic took off. Matuson and Dongwana’s spokesperson Louise Brugman, said: “business rescue is ongoing and we are working hard on consultations with labour unions, as required by the Labour Relations Act’s section 189, which sets out the process for retrenchments.
The decision to not provide SAA with a further R10-billion means the airline is yet again on the brink of collapse. It cannot raise more money from overseas, with Gordhan also declining its request for an extension of foreign borrowing limits. The business rescue practitioner’s request for more money is on top of the R5.5-billion, from private lenders and the Development Bank of Southern Africa, in post business rescue commencement funding received at the start of the business rescue process.
Political meddling
Covid-19 implications aside, the SAA business rescue saga has been anything but smooth and the same political meddling and indecisiveness that saw the airline land here in the first place continue to hamper progress. In the five months of business rescue, the government has failed twice to live up to its end of the bargain. First in February when R2-billion promised as part of business rescue post commencement funding did not materialise and saw SAA cancel flights to save money and again when no announcement was made about further required funding. The only way lenders, in the form of commercial banks led by Nedbank, would advance funding for SAA’s business rescue was if Matuson was appointed practitioner for the biggest business rescue in South Africa’s history.
Although the government initially agreed to this, it could not truly ‘let go’ of its hold on the airline and within a week of Matuson’s appointment he was joined by the former public works’ director general, Dongwana. The question of whether the government would truly be able to ‘let go’ would soon be answered. Within eight weeks of taking over, Matuson and Dongwana issued a statement that SAA would cut all domestic routes except between Johannesburg and Cape Town in an effort to address costs. This was met with outrage at the highest levels of government and President Ramaphosa issued a statement that the government was not convinced of this decision and would meet the business rescue practitioners for them to make representations.
The Zuma-Myeni years
There is not any doubt that much of the recent damage to SAA dates back to the appointment of Dudu Myeni as chairperson of the airline by the then President Jaco Zuma. Myeni was known for her close relationship with Zuma and she was ultimately accused of corruption. It was this relationship that saw Myeni receive political cover from Zuma. However, in fact the demise of SAA goes back many years to the time when SAA Chairman Coleman Andrews sold off many of SAA’s assets in the late 1990s, but that is another story.
I met her several times when SAA had a glimmer of hope at the time when Nico Bezuidenhout was appointed into the acting CEO’s position. Bezuidenhout had been the most successful CEO of Mango Airlines, a SAA subsidy, but it was clear to the media that Myeni was in a position to undermine numerous opportunities to transform the airline’s trajectory.
Case studies that easily come to mind include scuppering a codeshare deal with Emirates Airlines that would have added R2-billion to SAA’s revenue and seen it make a profit in 2015, as well as meddling in a proposed aircraft swap deal with manufacturer Airbus that saw the treasury warn SAA that it was threatening the fiscus. It is interesting to note that Bezuidenhout made the proposal to defer the acquisition of 10 A320s in favour of five A330s, which was agreed to by Airbus. Myeni was also accused of attempting to insert people linked to her in a R15-billion debt consolidation transaction that would have earned them R256-million.
Under Myeni’s chairmanship, SAA entered into a codeshare deal with Etihad Airways that saw it lose R100-million in a month. The deal, which was signed despite forecasts saying it would lose the airline up to R70-million in the first year, was subject to investigations by the treasury and the auditor general. From late 2012, when Myeni was appointed chairperson of SAA, to 2017, when she left, the airline had six chief executive officers and paid for several turnaround strategies, most of which indicated that staff reduction was critical without a single one being fully implemented.
Lessons not learned
What this period shows is that lessons from the Zuma and Myeni era about political interference in operations and placing political considerations over the needs of the airline have not been learned. We all need to understand this situation also applies to nearly all State-Owned Enterprises (SOEs). SAA’s last chief executive, Vuyani Jarana, resigned from his position citing shareholder interference and lack of support for his endeavours to save SAA. Jarana’s frustrations were with the government not coming to the party in terms of funding, despite accepting his turnaround plan and knowing the financial costs involved.
In the government’s defence and probably its political suicide right now, if it was to provide SAA with the cash required to turn the airline around, whilst ignoring more urgent needs for the economy exacerbated by Covid-19, would attract public outrage. However, the shareholder has failed dismally to be honest with the public and SAA. Organisational strategy consultant, Thabang Motsohi, who has decades of experience in aviation and consulted at SAA in Jarana’s office, said business rescue was bound to fail because of the same issues that led Jarana to resign i.e. meddling and no real commitment from the state. Also, the fact that BBBEE allowed for the unnecessary employment of many of SAA’s incompetent and unmotivated staff members, has clearly shown that the system is a complete failure. It has been quoted by Democratic Alliance politicians ‘that BBBEE has made about one million Africans very rich, whilst at the same time this evil system has impoverished between 30 and 40 million African people.’
“As a schoolteacher, Myeni should never have been allowed to serve on a school governing body let alone
on the board of an airline”