Gordhan approves R5bn guarantee for SAA

Cape Town - Finance Minister Pravin Gordhan approved SAA’s application for a going concern guarantee with conditions after meeting with the new board on Friday.

This will now allow the embattled airline to file its much-delayed annual financial results for 2014/15 as well as the 2015/16 results.

Cabinet announced the new board last week amid an uproar that Myeni was retained as chairperson for another year. Tryphosa Ramano, a former chief financial officer (CFO) at SAA and currently CFO of cement company PPC, was appointed deputy chairperson and non-executive director.

The 10 other non-executive directors, include Investec Asset Management economist and strategist, Nazmeera Moola, and Thandeka Mgoduso, who has also served on the Reserve Bank’s board.Gordhan stressed that it will not be “business as usual” for the airline which is currently going through serious challenges including governance and financial difficulties, among other things.

"National Treasury outlined the mandate of the board. The primary focus is to return the airline to financial sustainability whilst also delivering on other important government objectives," he said.

It highlighted the importance of complying with the procurement framework and outlined the Protocol on Corporate Governance which applies to all public sector institutions the roles and responsibilities and the separation of powers between non-executive directors and executives.

"The executive were encouraged to cooperate fully with the Board to furnish it with all the information it needs to fulfill its fiduciary duties," said Gordhan.

The conditions for the going concern guarantee include:

- The board is required to start a new process of appointing the CEO, CFO and other key executives in consultation with the minister;

- SAA must implement more aggressive cost-cutting initiatives as in areas of fuel; aircraft ownership; labour; maintenance, repair and overhaul and procurement;

- The airline must work with National Treasury and the Department of Public Enterprises in giving consideration to the possible merger of SAA with South African Express (SAX) airlines and the potential introduction of a strategic equity partner;

- Funding must be secured to meet the airline’s liquidity requirements; and

- SAA must close routes that have been making losses for longer than one year.

National Treasury also wants the airline to report progress on a regular basis.

The Myeni factor

There is widespread speculation that Myeni, who also chairs the Jacob Zuma Foundation, is allegedly sheltered by President Jacob Zuma and therefore Gordhan was forced to keep her at the helm.

However, Gordhan said in Parliament this week that he didn’t see the chairperson of the board as someone who can do what they like.

"I do not see the SAA chair as an all-powerful person who can do what he or she likes," he said. “Board decisions are made on a democratic basis.”

He emphasised that the shareholder (National Treasury in SAA’s case) would keep a close eye on the board to see if matters are executed in accordance with corporate governance rules. “We’ll also make sure that the board works as a team and in the interest of the airline.”

Gordhan reiterated this at the Open Book Festival in Cape Town on Thursday, adding that Myeni's appointment was to ensure continuity before starting the process of hiring a "competent" and "experienced" replacement.

He said there is now a much stronger balance on the board and the chair will have to work with that team.

"Any notion that the chair can carry on doing things with the new board that might have been done in the past must be seen in the context of the board's memorandum of understanding and the script that has to be followed as well as government rules," said Gordhan.

'I can’t be blamed for SAA’s mess' - Myeni

Meanwhile, Myeni has hit back at claims that she is driving SAA into the ground, saying that she inherited the financial challenges being experienced by the national carrier.

SAA was paying for the actions of the previous board, she said on Thursday in a public meeting with Black First Land First leader Andile Mngxitama and others, including the Progressive Professionals Forum’s President Mzwanele (Jimmy) Manyi.

“We never came to a company that had a healthy balance sheet, our balance sheet was depleted, it’s still depleted today.”

She said that under her leadership a turnaround strategy was created within SAA, which included a forensic investigation to establish why it was in financial trouble; she also claimed progress has been made.

DA is contesting Myeni's reappointment

The DA plans to file an application to the Western Cape High Court to have Myeni's reappointment set aside.

“[Myeni’s] reappointment not only reeks of nepotism and cronyism so common under the administration of President Jacob Zuma,” said DA leader Mmusi Maimane, “but also flies in the face of the need for good governance at state-owned enterprises.”

The party will specifically focus on the “rationality” aspect of Myeni’s reappointment. The DA has won similar court cases, such as that of Former National Prosecuting Authority (NPA) head Menzi Simelane when the Supreme Court of Appeal ruled his appointment was invalid in 2011.The party said during Myeni’s time as SAA board chairperson, the national carrier stumbled from one disaster to another. Despite the SAA not publishing annual financial statements, the DA claimed the airline is running at an apparent R1.3bn loss for the first quarter of 2016/17, a R4bn loss for 2015/16 and R4.7bn for 2014/15.

Fin24

This article first appeared on News24.