Aviation: Support for SAA board is vital to ensure that tourism- “the new gold” grows
Maybe I am the ultimate optimist, but I acknowledge that times of crisis are times pregnant with opportunity. The Minister of Finance announced during his Budget Speech that there is an intention to merge South African Airways and South African Express under a strengthened board.
Before the Cabinet in consultation with Treasury appointed this board, it was common knowledge that SAA experienced governance and management challenges. The outgoing board was a skeleton of its former self, as the majority of board members had resigned. In addition, there was a paucity of senior management stability which impacted on the ability of SAA to fulfil its mandate.
SAA remains a strategic state asset and is central to delivering a fast transport system that has improved the quality-of-life and improved business efficiency. The Treasury headed by the Minister of Finance has oversight of SAA, and the Minister of Finance has met the new SAA board on 09 September 2016 to engage on the mandate of the board which includes tabling the financials, recruitment of a CEO and CFO and returning the airline to financial stability.
The partial privatisation of SAA through a strategic partner could be an opportunity to bring in much needed innovation to SAA so that it remains globally competitive. SAA provides public transportation, and must it live up to its full potential by operating on commercial business principles. This means that the R4,7 billion loss suffered by SAA must be the last, as the board working with the management team, must return the organisation to profitability.
SAA can use Telkom as a case study of how a State Owned Enterprise (SOE) can be nursed to health by appointing a strong board and strong management team. It is a delicate balance between ensuring their board is a strong institution by making ‘’strong men’’ appointments on the board and the management team.
Respected financial journalist, Bruce Whitfield in an article titled “Telkom shows the way to trim a bloated state” noted that ‘’the improvements seen at Telkom in its full-year results to March netted the government a juicy half-a-million rands in dividends-the first time shareholders have received a payout since 2011…The only conclusion to draw is that Mabuza and Maseko’s turnaround is being tested as a model for other parastatals.’’
Telkom has been one of the best performing shares on the Johannesburg Stock Exchange. The turnaround is an indication to the privatisation evangelists that 100% privatisation is not a panacea. Considering the monopolies that define various industries in South Africa, aviation prices could possibly have been higher had there been no state airline. One needs only look at the rampant collusion that occurs in sectors of the economy where the state does not have a stake. Therefore SOEs continue to have a developmental role to play as long as they comply with management and governance principles.
The appointment of the SAA board has been overshadowed by the re-appointment of Dudu Myeni as SAA board chairwoman. This has taken media attention from the competent and fit and proper board members that have skills and experience that is beyond reproach.
The plethora of bad press against SAA has led to reputational damage for SAA to the extent that the announcement that the SAA will take receipt of the first of the five new Airbus A330-300s in November, became oblivious to media attention. Media attention has been focused on the R5 billion guarantee that Treasury was able to extend to SAA to allow it to table financials.
I am of the firm view that the SAA board must be given its 100 days, with limited public and media scrutiny. This will enable the SAA board to focus on the critical task of reversing the fortunes of the airline and after 100 days the board will again be put to public scrutiny as to what they have done in the first 100 days.
This will be a vote of confidence with responsibility, instead of having a board whose daily distraction is responding to a perennial state of crisis. SAA is important to ensure that SA Tourism reaches its objective of being one of the top 20 international destinations by the year 2020 in line with the National Tourism Sector Strategy (NTSS).
Aviation is vital to ensure that tourism – ‘’the new gold’’ – continues to save South Africa from economic crisis. Maybe the South African economy needs its own 100 days!