SAA may get a strategic partner

2014-10-26 16:00

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Public Enterprises Minister Lynne Brown believes the national carrier can no longer rely on bailouts and must be able to sustain itself

The government is thinking of bringing in a “strategic partner” from the private sector to help it run troubled national carrier SAA.

Public Enterprises Minister Lynne Brown told City Press in an interview that this was one of the options being considered to help turn around SAA.

“There is a possibility of bringing in a strategic partner. That must be investigated because we have to check whether there’s appetite in the market for a portion of the airline,” she said.

However, she could not divulge more details about the kind of partner and exactly how much of the airline could be sold. Brown also said the idea of bringing in a strategic partner to help run the airline did not mean that government was changing its policy on the privatisation of state owned companies.

“It’s not our policy to privatise. If you look at case studies of countries where privatisation has happened and look at the airlines ... in New Zealand and Australia they eventually came back to the country.

“It’s not as viable,” she said.

But given the current financial crunch in government, SAA could not continue to rely on bailouts and must at some point be able to sustain itself off its balance sheet.

Brown said she was horrified and was forced to act when SAA failed to produce its annual financial statements, a move that led to Finance Minister Nhlanhla Nene declining its request for further financial guarantees.

“There are inefficiencies within the system and that’s why when they had to go to the AGM and still didn’t have an annual financial statement, I thought, that’s it; and a couple of days later the minister of finance wouldn’t grant them a guarantee. That was it for me,” she said.

An interministerial committee consisting of Brown and Nene is now in place to review the SAA model and draw up a turnaround strategy, of which there have been many. Officials from Public Enterprises and the National Treasury meet once a week to share ideas and draw up plans to try to save SAA.

The minister conceded that for SAA to be turned around, it would have to review all its routes and dump those that are not profitable, including some of those considered by the state to be strategic routes.

“We must relook every single route we have. I think you need to review every route and if it’s a developmental route, we have to make a decision as the state [on keeping the route],” she said.

On Thursday Brown moved to save the board from collapsing after six board members resigned following clashes with chairperson Dudu Myeni. The minister trimmed the board, reducing it to six members – four non-executive directors and two executive directors.

Brown said the previous board was wrought with factions and after being inundated daily with letters of accusations and counter accusations from SAA board members, she had reached the conclusion that their relationship had irretrievably broken down and action had to be taken.

“The board has been factionalised. It has incredibly intellectually astute, hard-working, bright members. Individually they were great people, but collectively they just did not gel. It’s a factional thing.”

She defended her decision to retain Myeni as chairperson and Yakhe Kwinana as chairperson of the audit committee, despite other board members blaming them for the woes of the board. Brown said they had vast institutional memory.

She denied that her decision to keep Myeni was influenced by her closeness to President Jacob Zuma. Myeni is the chairperson of the Jacob Zuma foundation.

“I feel damned if I do, damned if I don’t. If I chose to [retain] anybody on that board I think it would have come with a lot of questions. Of course people are saying I’m factional but I’m making a decision based on institutional memory.”

In January six board members made representations to Brown’s predecessor, Malusi Gigaba, about poor governance at the airline.

They accused Myeni of undermining the board with regard to the procurement of a fleet of narrow body aircraft, conducting secret investigations into board members and CEO Monwabisi Kalawe, and interfering in the work of board committees.

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