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Vuyani Jarana resigning from SAA – the cost of a breakdown in trust

According to ENCA the SAA board has accepted Vuyani Jarana’s resignation.

Jarana will be leaving his office on 31 August, having announced his resignation over this past weekend.

He was appointed to the post in November of 2017. According to Times LIVE When Jarana was appointed he made a bet with Free Market Foundation executive director Leon Louw – if his turnaround strategy didn’t work, he’d pay R100,000 to charity.

If it did, Louw would pay the money.

So what went wrong? Basically the airline is out of money. According to Jarana, things got so bad that there were three points at which cash had run so short that it struggled to meet salaries.

Most of what Jarana said he was doing was organising liquidity for the company – which meant he couldn’t focus on a proper turnaround strategy.

Now the Treasury had given SAA R5 billion in the last budget, but Finance Minister Tito Mboweni wasn’t terribly keen to spend more on it – in fact he said he favoured shutting the airline down.

At the end of April Bloomberg (Link via News24) reported that SAA was nearing a R9.2 billion debt rollover agreement with its lenders, in order to try and buy the airline more time to get back on its feet and reduce its reliance on Treasury.

Jarana in his resignation pointed out that the degree of oversight he had to work under just to get the money he needed to implement his turnaround strategy, meant that decisions were slowed down to the point where he couldn’t effectively run the company.

My Take

SAA was always going to be a challenge. It had suffered decades of mismanagement. During the inquiry into state capture for example, former SAA chairperson Cheryl Carolus testified that the airline was pressured into advertising in the Gupta-owned New Age Newspaper according to Times LIVE.

In fact according to Africa Check, SAA hasn’t made a profit since 2011.

Here’s the table Africa Check put together on this:

Summary of SAA Group Annual Financial Statements Since 2010/11
Financial Year Profit/Loss
2010/11 R782 million profit
2011/12 R843 million loss
2012/13 R1.2 billion loss
2013/14 R2.6 billion loss
2014/15 R5.6 billion loss
2015/16 R1.5 billion loss
2016/17 R5.6 billion loss
2017/18 R5.7 billion loss*

Further, there was already strike action going on at SAA in 2017, which spilled over into 2018. You can imagine how well workers were going to take almost not getting paid on three different occasions.

When you implement internal controls, one of the things that is important to remember is that there is a trade-off between security and practicality. Stopping corruption also slows down the ability to work.

For SAA and other state-owned enterprises, this puts the new management in an incredibly difficult and stressful position because their lenders have every reason not to trust them.

These entities have been avenues of looting for years, and not just at the top level because the fish rots from the head – which means corruption had filtered down the chain of command.

So treasury and the department of trade and industry want to be very careful whenever there is more money going into the SOEs, because that’s more money that can be stolen.

And that means if you’re put in charge of them, you’re going to have to factor in that degree of oversight going into the job.

This is part of why I was against the ANC in the last elections, because to be able to turn around our government, there needs to be some ability to trust that the people appointed to do those jobs are there to do those jobs not just steal the money.

Otherwise you end up in a situation like Jarana’s where he may well have had every intention of doing what he was appointed to do, but the degree of bureaucracy over him made it all but impossible.

This also illustrates the insidious legacy of Jacob Zuma. Zuma didn’t just sell South Africa out to the highest bidder, he also violated us as a country.

We have lost a lot of our ability to trust, which makes undoing the damage he did that much more difficult because decisions now have to operate under multiple very suspicious eyes, slowing everything to a crawl when urgent action is needed.

I am not sure that the ANC is in a position right now where it can fix the country, because I look at what Jarana was complaining about, and I look at the government’s side of this, and both sides have a very strong case for their decisions.

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