R200m for SAA's ex-CEO

2001-05-31 11:59

Johannesburg - Coleman Andrews, former CEO and president of SA Airways (SAA), was paid out as much as R200 million, tax free, during his two-and-a-half year tenure at the airline, in what is one of the most rapid accumulations of wealth in SA's business history.

Business Day on Wednesday unveiled the story behind Andrews' departure from SAA 14 months ahead of the end of his contract.

His tenure at SAA was a lot more turbulent than outsiders have so far been told. There was significant tension between Andrews on one hand and top officials in Transnet and the public enterprises department on the other, the newspaper said.

In the middle was former Transnet MD Saki Macozoma, who brought Andrews into SAA in June 1998. Macozoma himself left the transport utility several months before his contract ended, amid speculation of tension with the public enterprises ministry and Public Enterprises Minister Jeff Radebe.

One of the main problem areas was the employment contract, forged by Andrews and Macozoma in 1998, which one top government official said "broke every corporate governance rule in the book". There was much concern about the cost to Transnet of Andrews and the consultants - such as Bain & Company and McKinsey - whom he employed at SAA.

The cost of his total package, coupled with payments of about R310 million to consultants in the past 12 months, amounted to more than half-a-billion rand. Against this, SAA made a net profit of R350 million in the year ended March 2000.

Endorsed by the previous public enterprises ministry, the contract allowed for Andrews to be paid an annual bonus based on SAA's operating profit.

According to Business Day, the contract is also understood to have included an annual salary of R1-1.2 million, a generous share option scheme as well as other incentives and a severance cheque of R60 million, paid to him when he left on March 31 this year.

Due to confidentiality agreements, neither Transnet, which owns 80% of SAA, nor Andrews is prepared to comment on the size of the pay package.

Macozoma said on Wednesday that while Andrews' package tended to be exaggerated, Transnet had to compensate him for moving to South Africa when the country was receiving bad publicity for its high crime levels. He said the key issue was what value Andrews had produced. "(In terms of SAA's financial turnaround), this is indisputable," he said.

Andrews was employed by Macozoma after an international search. At the time, SAA was heading for a loss of up to R500 million and Andrews helped the airline stage a dramatic turnaround.

As a result of SAA's improved financial fortunes, the Swiss-based SAirGroup, now called Swissair, paid R1.4 billion for 20% of SAA in 1999. This significantly increased SAA's value.

However, serious doubts have been raised in government and transport circles about the sustainability of SAA's recovery, Andrews' aggressive way of doing business and concerns over corporate governance at SAA, says Business Day.

Several events brought Andrews into conflict with the public enterprises ministry. Key were concerns around the process leading up to SAA's choice last year of Seattle-based Boeing for the replacement of its regional fleet, rather than the European Airbus.

Relations were further strained by SAA's role in the 1999 demise of Sun Air, government's privatised black empowerment vehicle, and by its decision to set up an e-commerce travel agency,, in New York.