In a letter to trade union Solidarity, which was released by the union at a recent media briefing, South African Airways (SAA) CEO Vuyani Jarana has given a number of assurances about the plans for the future of the beleaguered State-own national flag carrier. The letter followed a meeting between teams from Solidarity and SAA early last month, a meeting described by Jarana in his letter as “fruitful”. As a consequence, the union has decided to suspend its application for business rescue for the airline. (The union also released a letter its CEO, Dr Dirk Hermann, had previously sent to Jarana.)
One of the key assurances, in the eyes of the union, is that the partial privatisation of the airline is being considered. Further, Jarana agreed with Solidarity that it was “desirable” for a future strategic equity partner (SEP) to bear most of the responsibility for the recapitalisation of the airline, although he cautioned this would depend on the share of the airline that was sold, the value put on that stake, and the structure and timing of the transaction.
“The government of South Africa has pronounced that there must be private-sector participation in the ownership structure of SAA,” wrote Jarana. “The shareholder and the board of SAA have agreed to commence the process of an SEP for SAA . . . We can project the start of the process; however, we cannot guarantee whether there will be appetite in the market. We therefore would not be able to commit to [a] deadline for completion of the SEP process; it depends on the market . . . It is the belief of management that getting SAA into shape first is an important step in making SAA attractive to potential SEPs. However, given the pressure to fund SAA, the shareholder, the board of SAA and management have agreed to commence the process immediately.”
At the media conference, Solidarity Research Institute head Connie Mulder particularly highlighted the last statement in the above quote from Jarana. He affirmed that, even if only 20% of SAA was sold, it would bring into the company business accountability, transparency and discipline. “We’ve got [privatised] Telkom as an example.” He expressed the hope that one of the Middle Eastern “megacarrier” airlines would take a stake in SAA, or a major African carrier like Ethiopian Airlines or Kenya Airways. But, he admitted, no one could be forced to buy into SAA. He did caution that any SEP should be in the aviation sector. Selling a stake to the Public Investment Corporation would not help SAA, which needed expertise as well as investment.
Solidarity is also concerned that government, as sole shareholder, might not have the political will to implement even partial privatisation of the airline. “The African National Congress has . . . a really strong stance against privatisation,” pointed out Mulder. Because of this, in his letter, Hermann had urged that “SAA be made free of government interference in toto”.
In his reply to this, Jarana wrote: “Whilst we note the concern from Solidarity, we also accept that government remains a sole shareholder of SAA. This means that, [as] any shareholder would . . . government will set the direction for the airline, including performance objectives and governance protocols through the shareholder’s compact and other legal instruments. To date, we have not identified any reason to be concerned with regard to this matter and we are comfortable that the ways of working between government and the SAA board are optimal.”
Jarana also assured that the board and executives of SAA were committed to balancing employment equity and broad-based black economic empowerment with achieving the turnaround of the airline. “We now have a commitment that SAA will recruit the best skills,” observed Mulder. “If Mr Jarana keeps on this path, we will have businessmen doing business [at SAA], not bureaucrats.”
But while Hermann expressed “great confidence” in Jarana, he expressed little confidence in government. “We are not naive . . . we are very sceptical about [government allowing the] implementation of these undertakings . . . We want to see if the shareholder has the political will to implement it,” he said to the media. If the undertakings are not fulfilled, the union would reinstate its business rescue application for SAA.