We still have time, says SA Express’s Matsietsi Mokholo
Merger with SAA, Mango seen as offering best chance of stability
● Matsietsi Mokholo, the acting CEO of crisis-ridden state-owned regional airline SA Express, says its grounding by the Civil Aviation Authority will be costly and it will have to “claw back” lost market share.
This comes less than a year after it failed to satisfy the auditor-general that it could continue as a going concern, even with its planes in the air. And five months after Mokholo admitted that the airline wasn’t able to increase fares because it wasn’t offering passengers a reliable service.
“We’re still quantifying the financial costs of the grounding, but I can tell you it is going to be costly,” she says.
The CAA grounded SA Express after finding its planes were not being properly maintained and were unsafe.
Mokholo says its brand has taken a hammering and it will lose market share to competitors. Airlink has wasted no time filling the gap.
“Competitors are beginning to claw into that space,” she says. SA Express is going to have to “claw back” its market share from them.
“We’re going to have to work very hard to attract back our customers. The impact of this cannot be overestimated.”
While the CAA said it could be months before SA Express is allowed back in the air, Mokholo says the necessary corrective action will take 10 days.
The airline certainly knows the procedure; it was grounded last year.
It committed to a plan to ensure its planes would be kept properly maintained and safe, but failed to follow through.
This time, executives will be held accountable for sticking to the plan, Mokholo says. A lawyer by training, she was parachuted into the stricken airline from the Department of Public Enterprises five months ago. She refuses to accept any responsibility for the grounding.
“The CAA said these were legacy issues. Issues that had arisen over a period of time when unfortunately I was not there.”
She was sent in too late to stop its planes being grounded, but not too late to save the airline, she says.
“The airline still has time.”
Less than a year ago, it couldn’t satisfy the auditor-general that it was still a going concern, and the chairman of the standing committee on public accounts said it was “as good as gone”.
So how can it be saved when it has been stopped from operating?
“We have learnt from this incident,” she says.
What?
“That you need to take swift action when you see things going wrong. You can’t talk and not act.”
Swift action is something she and the Department of Public Enterprises conspicuously failed to take when they saw things going badly wrong six years ago.
She was deputy director-general of legal and governance in the department, and told parliament in February 2012 that it was worried about SA Express’s noncompliance, lapses of governance and mismanagement.
She said the department was concerned about qualified audits, lack of internal controls, fruitless and wasteful expenditure, irregular procurement practices, poor contract management, deficient management structures, and “incoherencies” at board and management level.
“We started realising that this airline is really challenged in around 2012,” she says. “By 2013 we realised it is in serious trouble.” What did they do?
Insisted on “consequence management” and that executives be held to their performance agreements, she says.
Meanwhile, its disastrous CEO, Inati Ntshanga, who was appointed in 2010, was allowed to keep his job until March 2017, and then was paid R700 000 to go.
Shouldn’t the department, as the shareholder, and she herself as the person in charge of governance at state-owned entities, have done something more decisive? “We had challenges,” she says.
Mokholo blames a “fragmented shareholder-management model”, which Public Enterprises Minister Pravin Gordhan is now looking into. In terms of the Public Finance Management Act, Companies Act and SA Express’s memorandum of incorporation, there’s a delineation of roles between the minister as shareholder, the board and the executives.
This prevents the department from directly intervening, she says. And it slows up decision-making. “When you’re operating an airline in a competitive space, swift decision-making is required.”
So it wasn’t her fault or the department’s fault that they sat by and watched as SA Express nose-dived into the ground?
“The model of managing state entities is challenged,” she says.
After finally paying off one dud CEO, the department approved the appointment as acting CEO of Victor Xaba, an executive from arms company Denel with no airline experience.
When the appointment was criticised, then minister Lynne Brown said: “Xaba is well aware of the challenges SA Express faces, and is well-equipped with the technical and strategic management skills to help the airline achieve its strategic goals for sustainability.”
Seven months later, he was out — “all good things come to an end”, announced the airline — and SA Express was in ruins.
Mokholo denies she had anything to do with his appointment.
“It was done at the director-general and minister’s level.”
She, also without aviation experience, was sent to take his place.
She supports a merger with SAA. “A merger is the first part of resolving the bigger challenge of state airlines because there are a lot of synergies, a lot of duplication, a lot of services we can share.”
If it’s such a no-brainer, why has it taken so long? A year ago, Brown told parliament that merger talks were “gaining traction”.
“Both the ministers of finance and public enterprises are seized with this now and looking into it,” Mokholo says.
Isn’t it wishful thinking to believe that by merging three collapsed companies (SA Express, SAA and Mango) you’ll get one successful company?
“They have not collapsed totally. This will give us an opportunity to let go and eradicate what have been the root causes that have led to the current status of the airlines,” she says.
“An inadequate business model, issues around people in leadership, governance and accountability.”
Most of this was flagged in 2012.
We’re still quantifying the financial costs of the grounding, but . . . it is going to be costly Matsietsi Mokholo Acting CEO of SA Express