The chequered ride of SAA's chief
South African Airways (SAA) is profitable again after several years of massive losses, but questions over the leadership of its new CEO, Khaya Ngqula, refuse to die down.
People within government, the corporate finance community and the Industrial Development Corporation (IDC) have told the Mail & Guardian that they believe Ngqula is replicating the approach he took as CEO of the development finance body precisely — right down to cutting the tea and coffee budget.
The hallmarks of his approach, they say, include:
- Refusing to countenance any dissent from senior management, and using disciplinary procedures to purge anyone who challenges him: he is currently attempting to oust SAA human resources chief Nolwazi Qata, a battle prefigured by the departure of numerous senior managers from the IDC.
- Sailing close to the wind on corporate governance issues: The Sunday Times reports that he took a holiday in the Indian resort of Goa courtesy of Jet Airlines chairperson Naresh Goyal, shortly before awarding Jet the lease of three Airbuses, despite a bid by a rival airline that was worth R110-million more.
- At the IDC he was briefly suspended over a delivery of furniture to his house that he had not paid for; there was controversy over the generous terms the corporation afforded to Worldwide, an investment holding company in which he holds a large stake; and major ructions over his attempts to cut a lucrative deal between the Mozal aluminium plant and secretive commodities trader Glencore.
- Short-term cost cutting rather than long-term strategy: At SAA, as at the IDC, Ngqula has focused on reducing expenses, pruning in areas that alienate staff while racking enormous charges in his own office.
Reports in the Sunday Times that he regularly travels by helicopter to meetings within Gauteng do not surprise IDC staff who saw him arrive at more than one of the corporation’s golf days in a chopper.
It is the Glencore incident that many close to the IDC say sums up their concerns about Ngqula’s approach.
Mozal is the hugely successful aluminium smelter outside Maputo, set up with joint finance from the IDC and BHP-Billiton.
Ngqula accused all of the IDC managers who worked on the deal of misconduct, sparking a prolonged dispute.
Independent sources have confirmed that in terms of the contract establishing Mozal, BHP-Billiton — the biggest shareholder in the plant — is guaranteed a portion of its production. Access to aluminium at the factory gate is enormously valuable, particularly in the current booming commodities market and Ngqula wanted to cut a deal to grant those guarantees to Glencore.
Furious that his hands were tied by the existing contract, he accused some of the IDC’s top managers of colluding with BHP-Billiton. An investigation was launched, counter claims about Ngqula’s relationship with Glencore were floated and the department of trade and industry was brought in to manage the stand-off.
Ultimately the staff were exonerated when the investigation found that the contract had been designed to protect the interests of the IDC.
“It got very, very rough, and a lot of people are still angry,” says one close observer of the process.
“You can see he is the same thing at SAA, he wants to be in control of HR, although he has a terrible record at it.”
One executive, hired to act as Ngqula’s right-hand man, got a written warning after challenging him at the first executive committee meeting he attended. He was gone within six months. The head of internal audit was eased out after reporting concerns about governance and growing bad debt directly to the board and several other top managers quit under similar circumstances.
Ngqula certainly seems to be cutting a swathe through senior management at SAA, where most of the executive team has resigned.
The atmosphere further down the corporate structure is equally sour.
“Relations between staff and management are at an all-time low,” says Piet Taljaard, who heads the pilot’s union. Rumours of swingeing job cuts are now beginning to do the rounds, further ratcheting up the tension among employees.
Ngqula’s backers at SAA argue that he has tightened up management processes, instituting more thorough control of decision-making, and better performance management, but critics say he presented himself as a turnaround artist at the IDC too. His restructuring of corporation into specialised business units built expertise at the cost of efficiency, they say, and combined with bad business decisions to hurt its long-term prospects.
“It looked good in the short term, but the IDC group made an R803-million operating loss in 2004, and more than a billion rand in cash was burned. The profit reported was only possible because of share sales, in other words, the numbers were heavily massaged,” says one person familiar with corporation’s finances.
Some in the government say their patience with Ngqula is wearing thin and Transnet officials are privately delighted that the airline will be off their balance sheet early next year. But Minister of Public Enterprises Alec Erwin has remained sanguine as the turbulence builds, describing the current round of problems at SAA as “operational issues”.
Ngqula did not respond to requests for comment.