SAA recovery plan loses direction

Crashed: SAA board chair JB Magwaza (left) received a letter of complaint from former SAA group chief executive Vuyani Jarana saying trust had frayed with three board members, including Martin Kingston. (Paul Botes/M&G)

Crashed: SAA board chair JB Magwaza (left) received a letter of complaint from former SAA group chief executive Vuyani Jarana saying trust had frayed with three board members, including Martin Kingston. (Paul Botes/M&G)

NEWS ANALYSIS

Instability and clashes right at the top of SAA seem to be pulling the troubled airline further off course. This is despite its board assuring anyone who will listen that its long-term turnaround strategy is on track.

In his May 30 resignation letter former group chief executive Vuyani Jarana said he was no longer comfortable that the plan,which was set to be fully implemented and lead SAA to profitability by 2021,was still achievable.

In contradiction, SAA’s board —addressing the media last Friday — said its turnaround was well under way and would be funded.

But, internal sources at the airline said the extent to which its turnaround plan is troubled is indicated bythe fact that, besides Jarana, three other executives in his office have resigned since the beginning of the year.

The stress of the job also saw SAA’s chief restructuring officer, Peter Davies, have a heart attack at work last October. This was at the time that he was meant to deliver his network plan — a document setting out which destinations the airline flies to and how often it flies to different places.

The plan is critical to the airline’s recovery strategy. Where airplanes go, and how often, determines how many planes it needs, the size of cabin crew required, how many spare parts are bought and the planning for SAA Technical and Air Chefs, which service the airline.

The rift between Jarana and his board seems to have been widening for months.

Several flashpoints have exacerbated the tension, including the lack of clear commitment of financial support from the government, frustration with staff performance and resistance to board-dictated executive appointments.

Another source at the airline said: “Vuyani was very upset about the fact that he spent so much money on consultants for Peter’s [Davies] office, but he was unable to provide this document. He felt like he was powerless to act against him because Peter, who had applied for his job, had been appointed by the board and reported to them.”

The Mail &Guardian has established that three new members of the team of 17 executives and consultants Jarana brought in have left.

The three form part of the team Jarana referred to as “black belts” and whose appointments added R16-million to the airline’s salary cost. Of this, R10-million was for those on six-month contracts.

The source went on to say that the airline’s chief information officer left in May, but there is no record of an interview that got him the job in 2018.

“HR officials shake whenever auditors ask for it because his appointment was unlawful. He got millions and he is now rumoured to have emigrated to Egypt,” the source said.

Another SAA source said: “Part of the reason everyone is so frustrated on the sixth floor [where management has its offices] is because so much money was spent on these skills, but in reality the airline has nothing to show for it.

SAA had no money and they spent millions on consultants but they [the consultants] have now pocketed the money and have left or are leaving and we have nothing to show for it.”

A source close to Jarana, who has gone to ground since his resignation two weeks ago, said Jarana felt strongly that he needed to resist the board’s instructions to hire United Kingdom-based asset manager Philip Saunders as SAA’s permanent chief financial officer (CFO).

A union leader also confirmed the fallout over Saunders, saying Jarana felt under “serious pressure” from the board, but was determined to resist the appointment.

This was because Saunders did not score the highest in panel interviews at SAA.

“What I understand is that the board was insisting that he [Saunders] be appointed CFO before any bailout funds can be released to SAA,” said the union leader.

The airline has been without a permanent chief financial officersince last year’s dismissal of Phumeza Nhantsi and SAA’s technical chief executive Musa Zwane for their role in the BnP Capital deal, a move that was seenby some at the airlineas a purge by Jarana.

In that 2015 deal, the airline went into a contract with BnP Capital —an unknown boutique financier —to raise R15-billion to consolidate its debt. In return, the financier would get R256-million.

The airline subsequently cancelled the deal.

 In April last year SAA brought in Robert Head as acting CFO on a controversial six-month and R5.5-million contract, which would later be criticised by politicians overseeing SAA in Parliament.

Head eventually left the airline at the end of September, after Jarana apparently refused to extend his contract over performance issues, another move that served to create tension between him and the board, because the latter wanted him retained. SAA then hired Deon Fredericks, Telkom’s chief investment officer, on a 12-month contract. Fredericks is the current acting CFO.

The M&G has seen an excerpt of a letter of complaint that Jarana, apparently unhappy at being unable to work without being questioned, sent to SAA board chair JB Magwaza in December last year. In this he alleges the relationship of trust between himself and three board members —Peter Tshisevhe, Martin Kingston and Thandeka Mgoduso —had broken down.

“As a result of the above issues, the working relationship has proven extremely difficult and if unattended could undermine the prospect of a successful turnaround of the airline as undertaken,” he said in his letter.

Jarana also previously told Magwaza that either the three board members be told to leaveor he would.

Last week, the M&G reported that Jarana’s resignation was preceded by a board audit sub-committee meeting where members expressed displeasure with the state of SAA’s finances, including losses that were worse than the projected R5-billion. It was also said the issues raised by auditors increased threefold.

READ MORE: Inside the SAA battle: Throwing toys and bugging boardrooms

SAA spokesperson Tlali Tlali said staff medical matters were confidential, and that Venter’s appointment followed processes.

“SAA has clear Performance management Policy; performance goals and objectives are agreed between the employer (line manager) and the employee.”

Sabelo Skiti

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