Cape Town – Embattled airline SA Express has found itself facing financial challenges because of people who were looking for opportunities to steal instead of running the airline properly, said Public Enterprises Minister Pravin Gordhan.
He was speaking at an early morning briefing at Parliament on Thursday where he announced sweeping changes at state-owned enterprises (SOEs) in his portfolio.
He also spoke about the challenges plaguing SA Express, which is having trouble raising funding, Fin24 reported previously.
"If you have the right boards and the right kind of experience inside but also courage and boldness to do the right thing and effective management – many of these entities, and SA Express, can pull themselves out of trouble," he said.
"Entities like SA Express find themselves where they are because of the fact that the focus became the question: 'How can I steal rather than how can I make this airline run properly?'"
Gordhan said that when individuals "lose focus" and try to extract value for their friends, themselves and their business associates to earn kickbacks through deals, then SOEs find themselves in trouble.
"SA Express has been in dire straits for some time, it is an indication of the malfeasance at SA Express."
Near the end of the briefing Gordhan said that recently a probe into contracts awarded by SA Express revealed that a R5.7m contract was awarded to Gupta-link Trillian, for consultancy services in capital raising. Gordhan said the contract was irregularly awarded and it appears no capital was raised.
Further the airline also irregularly awarded a contract to a company for R67m per month, which has been stopped. He said that he believes more is yet to be uncovered as the investigation continues.
He said there are talks with Treasury to provide short-term cash for the airline. "If you need to buy tyres then you need to buy tyres. And if you don’t have the cash at the moment then you need a bit of cash facilities to get aeroplanes off the ground."
SA Express had lost a number of executives, some of which were suspended due to allegations of corruption against them, according to the DPE.
The position of CEO and CFO remains vacant and the department of public enterprises seconded its senior officials to the airline while executive positions are being finalised.
Gordhan said that the new board was approved by Cabinet and includes individuals with a mix of aviation experience, auditing and accountancy backgrounds and human resources backgrounds as well as engineering. Apart from new board appointments, Gordhan has decided to appoint an intervention team to support the executive team.
During his address Gordhan said there are plans to merge SA Express, Mango and SAA.
“We have a situation where SA Express, Mango and SAA fly the same destinations,” Gordhan said it is important to rationalise the routes as well as the type of aircraft flying at particular times of the day in order to create “synergy and savings”. He admitted that the transition may have difficulties.
Gordhan also defended decisions not to sell the airlines.
“Closing down something is far more expensive than operating it and taking it on a more survivalistic mode or more successful mode at a later point in time.
“Secondly if you have something dysfunctional and try sell it, you will get little for it.”
The real challenge for us is to put the right people in the right places on a business and technical level on boards and management teams and to have the right oversight and accountability over them, said Gordhan.
He added that people in departments must also have an understanding of the work entities are doing.
Meet the SA Express Board
Ms Mmakeaya Magoro Tryphosa Ramano as chairperson. Ramano is a chartered accountant and currently the chief financial officer of PPC. She previously worked as CFO of and executive director at Whiphold. She offers her skills in economics and financial services.
Mr Ronald Ozzy Lamola who has an LLM in corporate law and extractive law. He is currently the director of Ndobela and Lamola Incorporated Attorney. He was previously the acting spokesperson of the premier of Mpumalanga. He offers skills in legal, politics, corporate governance, public relations and public policy.
Mr Thulani Makiti Norman Kgomo, who has a B. Proc degree and is currently the Managing Director of TMN Kgomo and Associates Incorporated. He was previously the director at Nomatiki Trading Enterprise Property Development Company and his legal and corporate governance kills are expected to add value to the board.
Mrs Thandiwe January-McLean who has a master of arts from Carleton University, Ottowa Canada was recently appointed as chairperson of the Valuator Group Board. She serves as the executive director of MaxiTrade and also holds positions on various boards. She has skills in public policy, business administration, tourism, leadership, and corporate governance which will add value to the Board.
Mr Kugan Harikrishna Thaver, a chartered accountant who has been seconded as the CFO of ADC Cables. He was previously the head of PICC Support Unit from April 2015 to February 2016. He offers leadership, financial management, audit, risk, human resources and remuneration policies skills.
Mr Bongiwe Mpondo who has a BSc in Town and Regional Planning is currently the managing director of SAFARI and formerly a non-executive director of SAA and Cross Border Roads. He was also the CFO of Pitseng Resource. He offers skills in transport planning, development planning, strategy development corporate governance, aviation and leadership.
Ms Hlengiwe Thandeka Mkhathini is a chartered accountant who is employed at the National Empowerment Fund as a divisional executive. She has had roles as non-executive director at Air Traffic and Navigation Services, Road Traffic Infringement Agency, Dube Trade Port Corporation and Karsten Group.
Economist Dr Thabi Leoka is currently affiliated with Boston Consulting Group as an Independent Economist. She was previously an economic strategist at Argon Asset Management. She offers her skills in economics, financial management, investment and research.
Mr Ahmed Ismail Bassa who has a BA in political science was the non-executive director of SAA until November 2017. He was previously executive director at Aerodromes to Contrails. He offers skills in politics, research, aviation, financial management, asset management and air strategy development.
Of Bassa’s appointment Gordhan said there is “cross fertilisation” between SAA and SA Express contributing to the idea of a merger.