NEWS & ANALYSIS

Hands off SAA, DA and OUTA – NUMSA & SACCA

Organisations welcome decision govt has taken to inject capital into airline

NUMSA and SACCA say to the DA and OUTA #handsoffSAA

2 November 2020

The National Union of Metalworkers of South Africa (NUMSA) and the South Africa Cabin Crew Association (SACCA) welcome the announcement by Treasury to allocate R10.5 billion to South African Airways (SAA). The Finance minister presented the Medium Term Budget Policy Statement (MTBPS) and confirmed that a further R10.5 billion would be allocated to SAA to fund its restructuring and the implementation of the Business Rescue Plan.

We welcome the decision that the government has taken to inject much-needed capital into SAA. We had hoped that the capital injection had been injected sooner to limit the untold suffering which workers and their families’ have endured in the process. This funding came at great cost to workers at SAA.

They have lost out on at least eight months of their income because of the long drawn out business rescue process, which government initiated voluntarily. They are also paying for it with their jobs. The Business Rescue plan which is to pave the way for a restructured SAA, will result in three thousand two hundred workers losing their jobs in the process. SAA is expected to restart with a staff complement of only one thousand three hundred employees. So far, workers and their families’ have paid the highest price for a restructured airline.

We note the outcry from the liberals, the right-wing opposition parties and their NGO’s, including the DA and OUTA decrying the funding for SAA. Whilst we appreciate that theirs is an ideological position against the participation of the state in the economy, we want to point out that there is nothing wrong with an enterprise being state-owned both at ideological and commercial level. There a countless example of countries, China included, with the state owning some of the key enterprises in the economy.

There are 124 Chines companies listed on the Fortune Global 500 and the majority of these are Chinese state owned entities. We have seen how swiftly the Chinese government responded to the Covid-19 pandemic through accelerated investment in public infrastructure, by building hospitals in days, largely using its state-owned companies to mobilize and respond to the crisis. This is clearly a validation that there is nothing wrong in being state owned. What matters is how government as a shareholder manages the asset. 

This is why we reject both the DA and OUTA’s flimsy right-wing argument with the contempt it deserves. Their mission and task is to attack the role of the state in the economy. They have conveniently forgotten that these SOE’s were built by the Apartheid Nationalist Party regime, which was intervening in the economy on behalf of its constituency – the Afrikaners.

Government has been a delinquent shareholder at SAA

In the case of SAA government has over the years been a delinquent shareholder, which has undercapitalized SAA, and restricted SAA’s operations with laws meant to run government departments and not a commercial entity. Government has appointed incompetent people to the SAA boards. It has also appointed weak executives and watched in awe as rampant corruption continued unabated at SAA, whilst at the same time, ministers aggressively interfered with SAA decision making.

From an ideological, commercial and logical standpoint, we strongly disagree with those who say that SAA must cease to exist. SAA is not just an airline, it is a SOE whose purpose is to grow the tourism and aviation sectors in the country. As a result of its existence, it contributes thirty-four thousand jobs along the value chain, and its collapse is being felt in all companies which trade with it and its subsidiaries. Stats SA has done research which confirms that the average worker in South Africa supports five to seven extended family members.

In simple terms, the collapse of SAA means that at least one hundred and seventy thousand people are directly affected.  Therefore, it is grossly irresponsible to support a proposal which will result in swathes of the working class losing their jobs, at a time when our economy is in recession and we are facing a job loss bloodbath in the manufacturing sector.

It is also absurd to propose that workers who contributed many years to SAA should just walk away from the airline with nothing, without even their provident fund, which is money which is owed to them. It is shocking and disgraceful that after all the suffering that workers at SAA have gone through, the DA and OUTA are calling for them to suffer even more.  We are not surprised by the attitude of the DA. They have always been anti-black and anti-working class and they have repeatedly called for the collapse of the airline, and they do not care at all about the welfare of workers and their families.

We condemn both DA and OUTA with the contempt they deserve for their cold-hearted recklessness. Every job is worth saving in South Africa, and that should be the attitude of all progressive people who care about the future of this country. We want to remind the DA and OUTA that the government has a legal responsibility as the shareholder to ensure that these entities are well run and funded as they were formed through the Companies’ Act.

Treasury is attempting cover up for its failures at SAA

It is outrageous that finance minister Tito Mboweni seeks to suggest that the allocation of monies to SAA, was done at the expense of other national departments. In the budget speech he says the allocation is “funded through reductions to the baselines of national departments, public entities and conditional grants.”

We condemn minister Tito Mboweni for this deliberate attempt to divide the working class, and for his attempts to re-write history. Treasury is trying to cover up for its failures through this statement. Had Treasury supported the turnaround strategy for the airline way back in 2018, devised by the former CEO Vuyani Jarana, SAA would not have collapsed. Had Treasury intervened in the corruption which was bloating the procurement expenditure, and which was exposed through various forensic reports which they received, SAA would not be in a crisis today. Treasury must not mislead the public, it has a legal responsibility to fund and provide capital to our SOE’s and this includes SAA.

Eskom and Denel have also suffered similarly due to the negligence of the Department of Public Enterprises (DPE) and Treasury. Eskom energy provision is being privatised for the benefit of the Renewable Energy Independent Power Producers and the political elite that is connected to them. They are sacrificing Eskom and they are capturing energy provision in the country for a money-making scheme at the expense of the country’s economy.

We need a competitive electricity tariff which can only be guaranteed if Eskom was allowed to play its strategic role in the economy, and only if it remains publicly owned.  NUMSA rejects the costly, bloated unbundling of Eskom, and the privatisation of energy provision so that crony capitalists who are connected to the governing party, can enrich themselves, at the expense of the South African public.

We must prevent history repeating itself

We believe that there are key decisions that need to be undertaken in the governance framework for managing SAA. These key decisions need to be taken on an urgent basis in order to guarantee the long term success of the airline. SAA’s governance model must change immediately in order to safeguard its future. Workers have paid the supreme price for delinquency of the government as a shareholder, and as NUMSA and SACCA, we will not make the mistake of trusting the shareholder, the board and the executive to act in the interests of the airline. SAA currently is broken and we need a new governance framework that will set SAA free to fly in the African skies.

Our proposed governance framework is as follows: 

1.     A Competent Board: 

It is very important that the government appoints a competent board which is independent and will take decisions in the interest of SAA and not for self-preservation purposes. The challenge with SOE Boards is that they are nothing but proxies of the ministers who appoint them. Their proxy is derived from most of the individuals being serial SOE board members, or from trading with the government. In the case of SAA, some board members are directly implicated in corruption. A case in point is that of Thandeka Mgoduso the SAA board chairperson who resigned recently.

Last year NUMSA and SACCA called for her to be suspended because of allegations of corruption based on an SAA internal audit report which implicated Mgoduso, and fellow board remuneration committee (REMCO) member, Jeff Rothschild in the awarding of an irregular tender to 21st Century Consulting. The contract with 21st Century Consulting, was subsequently terminated, but no action was taken against the pair even though we raised this repeatedly with DPE. We also raised repeatedly the fact that Mgoduso would interfere in operational decision making at the airline, something that former board member Yakhe Kwinana confirmed at the Zondo Commission is a common practice at SAA, even though it is a flagrant violation of good corporate governance practices. DPE refused to take any steps to act against her.

Given our painful history at SAA, where workers perished at the hands of the shareholder and the boards, we shall no longer leave the fate of workers in the hands of the board and government. We insist that SAA get an entirely new board, and that trade unions must be represented, as well as representation from NGO/civil society. This is the only way to ensure that good governance practices are upheld and that the board is transparent. Board members which are handpicked by ministers are incapable of acting independently.

2. Legislative Enablement: 

SAA must be removed from the remit of Public Finance Management Act (PFMA) and be exempted. This simplifies its decision-making framework and will bring greater agility in line with its competitors. The combination of the PFMA, plus the onerous and sometimes irrational shareholder’s compact (SC), and the restrictive significance and materiality framework (SMF) create chains that tie a company like SAA down, and it is unable to compete effectively. SAA must have the agility to make decisions, the same way that other commercial airlines do.

It is competing on a global platform and its competitors have the freedom and flexibility to make strategic decisions on a daily basis, but SAA is hampered by the onerous legislative framework which it operates under. By exempting SAA from PFMA we simplify the shareholder representation from two ministries (Treasury and Public Enterprises) to one Ministry. The board gets greater freedom to make decisions and lead the company to greater sustainability and financial viability. 

3. SAA needs experienced and competent executives: 

We should exact greater scrutiny and appointment on the matter of executive appointments. Given our history, we cannot afford to repeat the mistakes of the past which is why we need an executive leadership which has no history at SAA. The current team has been an obstruction to the kind of changes we need to see at SAA. Part of the reason we went on strike last year was because the executive refused to take action to reduce, re-negotiate or cancel bloated evergreen contracts, which were choking the airline.

Even now, we are currently consulting as part of the section 189 consultations, and the executive management is trying to impose a bloated management structure for the new airline, which retains the current team, but also adds new positions. Even at this time, when the airline is enduring the worst crisis in history, Lourens Erasmus, (the Employee Relations manager) and the current SAA executive management are playing games and undermining genuine attempts to transform SAA. This is why they should not be allowed to play any role in the future of SAA. We need a qualified brand new executive team which can take the airline to greater heights and deliver results.

Government collapsed this once great SOE and workers have paid dearly for their failure. It is important to learn from the past and make these necessary changes, because if these critical issues are not addressed, then SAA will be facing the same crisis in a few months’ time.

The other lesson we have learnt is the bizarre nature of government extending guarantees to SOE’s instead of capitalising them when there is a need to do so. These government guarantees are bad practice and the only beneficiary is the untransformed banking system which charges extremely exorbitant interest rates that are way above the market rate. SAA, Denel and all other SOEs which are struggling, are victims of these government guarantees that have left them with huge debt from which the financial sector is printing money.

Indeed, these banks secure such deals without embarking on any transparent process of how they get extended government guarantees. The victims are workers across all SOEs, some of whom are being paid only 50% of their salaries, or less despite being at work and continuing to perform. We condemn this new onslaught against workers by government and the management of these SOE’s.

We remain firm that the DPE must make sure that SOE’s are capitalised and that all employees are paid their wages in full. We reject any view that suggest that workers must pay for the current crisis which confront the SOE’s. As such, NUMSA and SACCA will be requesting an urgent meeting with DPE Minister Pravin Gordhan to define a way forward for SAA and SA Express.

Our message to the DA and OUTA is #HandsOffSAA

Issued by NUMSA and SACCA, 2 November 2020