NEWS & ANALYSIS

Our proposal can save SAA - NUMSA and SACCA

Union and Association reject opportunistic comments made by DPE

NUMSA and SACCA reject opportunistic comments made by DPE

3 December 2019

The National Union of Metalworkers of South Africa (NUMSA) and the South Africa Cabin Crew Association (SACCA) reject the statement issued by the Department of Public Enterprises where it states that, “the strike initiated by NUMSA and SACCA caused immense damage to the reputation, operations and the deterioration of finances at SAA”.  This is an opportunistic attempt to deflect attention away from the reality that the board and the senior management created this environment.

Prior to the strike, this was the reality. In fact, the current board and the senior management of SAA should take full responsibility for forcing workers and the unions to embark on the strike.

Airline management was aware as early as June this year that there was not enough money for operational costs from November onwards. In the same week that we announced our plans to embark on strike action, on Monday the 11th of November 2019 the Acting CFO Deon Fredericks again confirmed that there was no money for salaries for the remainder of the year. Therefore, it is absurd in the extreme to blame the cash crisis on the strike when both the board and executive management were aware of the situation 6 months ago, but chose to do nothing.

It is opportunistic for Minister Pravin Gordhan to apportion the challenges confronting the airline to NUMSA and SACCA when he is directly responsible for tarnishing the airlines reputation with his reckless statements. Gordhan and Minister Tito Mboweni have gone out of their way to undermine and devalue the brand and reputation of SAA. Minister Gordhan went to New York and made a statement that SAA is not too big to fail, thus leaving global trade partners and creditors speculating about the future existence of SAA. It is both the Minister of Finance and Minister Pravin Gordhan who consistently repeated publicly that there will be no more bailouts. As for the decision taken by commercial ticketing partners and insurance underwriters, government must take full responsibility for the reckless statements made by Ministers Gordhan and Mboweni on international platforms. Minister Mboweni went to the extent of saying that there is nothing that can be done to save the airline, in fact, it should be shut down, to an audience of international investors.

Strikes take place at airlines all over the world. The notice issued by Flight Centre to stop selling SAA ticket did not mention the strike action as a threat. Instead it cites governments wishy washy position on SAA’s future as the biggest problem. It says: “Following mixed messages from the government about whether the airline will be bailed out and the decision from insurance companies to exclude SAA from their insolvency cover, we have had to make an immediate move to mitigate the risk to ourselves and our clients,” DPE is clearly not being honest when it hides behind the strike as a reason for the crisis.

Former deputy finance minister MondliGungubele confirmed last April before Parliaments Standing Committee on Appropriations that ‘shutting down’ SAA would cost the airline R60 billion compared to the R20 to R21 billion which it needs to break even over three years if the turnaround strategy is implemented. In other words, it is cheaper to turn around the airline, than it is to liquidate and collapse it. It is very suspicious therefore as to why Minister Pravin Gordhan, the board and some in the executive management are hell-bent on acting in ways that makes us believe that they intend to shut down the airline despite these facts.

The Department of Public Enterprises, the board and the executive management of the airline have to date, refused to deal decisively with the R25 billion per year procurement spend on SAA, and this is the biggest cost driver at the airline. Instead of dealing with this problem, they want to dismiss 944 workers to save R700 million! That is senseless.

As unions, we have consistently engaged the current board and the Minister registering the following issues:

1. We rejected their role in frustrating the former GCEO, Vuyani Jarana while he was in the process of turning around the airline.

2.Secondly, all systemic issues raised by Vuyani Jarana upon exiting are the very same issues that continue to plague the airline including:

- Uncertainty around funding

- Slow decision-making at DPE and Treasury

- Blurred lines around accountability

- Restrictive procurement policies e.g. PFMA, treasury instruction notes, PPPFA, etc. For instance, SAA needs to re-negotiate better deals on evergreen contracts, but the PFMA restricts that.

Long before the strike, NUMSA and SACCA have consistently raised the fact that the board must take the bull by its horns to negotiate expensive evergreen contracts which are haemorrhaging SAA. This includes confronting the huge cost of leasing aircrafts. Jarana had devised a plan which involved a strategic commercial Joint Venture with Ethiopian airlines. It is also important to state that under his leadership banks had committed to fund the turnaround plan subject to specific actions by the shareholder (government) which were not implemented. Instead of supporting this bold initiative to make SAA viable and successful, they sabotaged it by withholding their support, thus causing him to resign in frustration.

The Department of Public Enterprises is deliberately misleading the public on the facts and below is detailed breakdown why:

1. Firstly, it is important to explain to the public how the strike came about. SAA Board and Management under the counsel of Pravin Gordhan, decided to increase salaries of Pilots by 5,9 % and offered poorly-paid workers a 0% increase.

2In the middle of the wage dispute, the SAA board and management took the worst provocative act by announcing that they intend to retrench 944 workers. Even before the strike resumed, it was the decision of the board and management to suspend and cancel flights for 3 days.

It is our considered view that the current SAA board is incompetent as any other board could have easily avoided the strike. We are also convinced that Minister Pravin Gordhan remote controls the board and our honest view is that he is meddling in the affairs of the airline. There is nothing which demonstrates this better than when he appointed Thandeka Mgoduso who is currently the acting Chairperson of the board, to the position of Executive Chairperson. At Eskom he appointed Jabu Mabuza, the Chairman of the Eskom board to the position of acting GCEO at the power utility. This is a blatant disregard for good corporate governance principles.

Mgoduso has not been cleared of corruption allegations in relation to the 21st Century tender. An internal audit report raises serious questions about the flouting of Supply Chain Management policy as well as possible violation of the principles of transparency, and that corporate governance guidelines in relation to this tender against her, and fellow board member Jeff Rothschild were not followed.  Neither of them went through a disciplinary process in order to clear their names. Mgoduso was appointed against the backdrop of such serious allegations. We keep being told that State Capture occurred only under former President Jacob Zuma, but we can confirm that at SAA it is alive and well under the ‘New Dawn’, and the looting continues unabated.

Instead of Minister Pravin Gordhan obsessing over NUMSA and SACCA, he should be working on an effective implementation of turnaround strategy and rooting out corruption. It does seem to us that the Board of SAA and the Minister have run out of ideas with regards to effectively turning around SAA, all we hear are words and blaming everyone else without taking responsibility for their inappropriate decisions and lack of action.

We have always maintained that to effectively turnaround SAA, there should be No Holy cows and everything must be put under consideration. This means we need a board which is fit-for-purpose, which is independent, and whose members are not proxies of the Minister. They must demonstrate a genuine effort to tackle corruption at SAA, and tackle some of the big procurement contracts which are costing SAA more than prevailing market prices. We need clear intervention to tackle operating losses in the international business.

SAA has been restructured many times in the past with workers ending up being casualties in the end, and yet SAA’s performance worsened. A case in point is the 2013 restructuring of SAA Technical where workers were dismissed, and the retrenchments which took place in 2015. We want to make sure that all these areas are being addressed uncompromisingly, before any job shedding can take place. It is too easy to retrench workers in this country.

We view the fact that SAA has no vibrant turnaround strategy as a failure by the board. It is extremely irritating that the SAA board has not released its financial statements for the past two years which is a reflection of the competence of the board (or a lack thereof). The board should focus on the recapitalisation of the airline as well as renegotiating the maturity dates of the current debt to bring the airline’s assets and liabilities in line. 

OUR PROPOSAL CAN SAVE SAA!

From the moment that workers went on strike it was clear that the goal was not simply to achieve a wage a demand. We also wanted to force change in the behaviour of the SOE and for it to be focused on long term sustainability. This is why we presented a turnaround strategy to DPE which included the establishment of an empowered Task Team whose role is to analyse the bloated procurement spend in order to renegotiate, cancel or insource some of the contracts in order to help the airline to realize savings. We also said that if we manage to save the airline money, that money would be used to top up the 5.9% wage demand, so that workers can receive 8% wage increase.

We also negotiated for the implementation of the Training Layoff scheme which would give financial relief to the airline. Instead of retrenching 944 workers, SAA sends them for training at any recognized institution of higher learning, and 75% of their salaries are paid for by the DOL and the SETA’s. SAA would only need to contribute the remaining 25% and continue to make contributions for their benefits.

It is clear that DPE is not interested in seeing this strategy through, and to date, not a single turnaround strategy has been implemented. Minister Pravin Gordhan should stop communicating with us through the media, and instead come to engage with us as unions on what government’s plans and commitment is to turn around the airline.

In light of the conflicting and wishy-washy position of Minister Gordhan on his plan and commitment to turn around the airline and bolster confidence in the airline and its trading partners, NUMSA and SACCA are left with no option but to sharply raise with the President Cyril Ramaphosa that unless the Department of Public Enterprises takes extraordinary steps to save the airline, we will be left with no option but to join Solidarity in the application for Business Rescue.

To this effect, we are sending a correspondence to the President and initiating bi-laterals with Solidarity.

Issued by Phakamile Hlubi-Majola, NUMSA National Spokesperson, 3 December 2019