The airline said it welcomed Ramaphosas assurances that it would remain in business. (Getty)
Controversial SAA chairperson Dudu Myeni is on her way out but the incoming board of directors has a mammoth task ahead if it is to right the troubled airline.
Observers and experts have cautioned that, if the overhauled SAA leadership lacks the autonomy to make hard decisions to save the national carrier, any hope of a rescue risks floundering.
On Thursday, Finance Minister Malusi Gigaba announced sweeping changes to the board, including the departure of Myeni, who is to be replaced by businessperson Johannes Bhekumuzi (JB) Magwaza.
Nolitha Fakude, currently a board member of mining giant Anglo American, has been appointed SAA’s deputy chairperson and a nonexecutive director, replacing outgoing deputy Tryphosa Ramano.
New nonexecutive directors include Geoff Rothschild, a former JSE chairperson; Ahmed Bassa, an aviation industry professional; Tinyiko Mhlari, a chartered accountant and Armscor board member; and Martin Kingston, chief executive in South Africa for financial services firm Rothschild & Co and vice-president of Business Unity South Africa (Busa).
Five current nonexecutive directors have been retained and six, including Myeni and Ramano, will no longer serve on the board.
Gigaba asked the new board members to “ignore the political noise and focus on the business of strengthening SAA”.
The hope is that normal corporate governance practices will return, transport economist Joachim Vermooten said about the changes. But the airline faces major difficulties because of its current financial state, he warned.
The treasury must find the money in next week’s adjustments budget to cover the R5.2-billion already paid to SAA to cover outstanding debts and meet working capital requirements, according the Democratic Alliance’s Alf Lees, and another R4.8‑billion is needed to keep the airline trading until the end of this financial year.
But, according to Vermooten, the airline has already incurred losses estimated at R16‑billion over the years, a formidable problem that the government will have to find a way to address. This is before factoring in the costs of implementing a turnaround plan, which often requires an entity to break off some contracts and pay penalties, he said.
Lees said there appears to be a raft of new expertise on the board but much will depend on whether Magwaza will be “allowed to steer the board on the road to recovery, or whether he will be hamstrung by the political and ideological issues that Dudu Myeni drove so strongly”.
Gigaba announced that the changes would come into effect on November 3, when he would hold a special meeting of the board.
Formal processes to appoint the board have yet to be completed.
Newly named board member Kingston said SAA is a critical institution in determining the health of the South African financial system and “it is essential that [SAA] is governed responsibly and objectively, without interference, in order for it to achieve a viable outcome with the support of all stakeholders”.
This includes the banks that are currently supporting it and the government, which will have to continue to provide financial backing.
“The board, going forward, has to navigate and oversee a very complex set of circumstances. I am joining on the basis that it will be given the mandate and the authority to do exactly that,” Kingston said.
The state’s repeated cash injections for the airline this year have drawn strong criticism, but the treasury has maintained that it cannot risk SAA defaulting on its loans and triggering cross-default clauses on the airline’s government-guaranteed debt.
It has total guarantees of just over R19‑billion, of which R16.4‑billion has been used. If the airline defaults, other lenders can also call on their guarantees, posing a much bigger problem for the fiscus.
The treasury has also warned of the possible contagion risk to other state-owned enterprises, many of which have substantial government guarantees, if one parastatal is allowed to default.
The state has more than R445‑billion in guarantees to various parastatals, including almost R220‑billion provided to Eskom and more than R30‑billion to the South African National Roads Agency.
SAA Pilots’ Association spokesperson Jimmy Conroy said the union is relieved that the chairperson will be replaced but did not want to comment on the new board members, as the association needed to see “how they get to grips with the business”.
But Conroy said he hopes the new board is “fit for purpose” and that the incoming chief executive, Vuyani Jarana, will be “allowed to appoint a fit-for-purpose executive management team”.
With these two structures in place, SAA could be restored, he said. But, he added, the association will not drop its case against Myeni. The pilots’ association and the Organisation Undoing Tax Abuse (Outa) launched court action in March to have Myeni declared a delinquent director.
Welcoming her departure, Outa said that, if Myeni is declared a delinquent director, she will not be able to act as a director or serve on any board of any company for up to seven years.
“Such a sanction will send a message to the government that competent, skilled and experienced individuals should be appointed to lead our [state-owned enterprises],” it said.
Myeni has previously denied the criticisms levelled at her. She did not respond to a request for comment.