The real reason why SAA is in trouble

Former JSE CEO and SAA board member Russell Loubser said that giving contracts to politically-connected companies, rather than the ones which offer the best service or the best price, is killing SAA.

He said the Department of Public Enterprises’ (DPE) aviation section, which should give guidance on the airline, is arrogant, incompetent, and has a lack of business sense.

Speaking to Biznews’ Alec Hogg, Loubser said that buying the best product, or selecting the company able to deliver, did not happen at SAA.

“That doesn’t even feature in the thinking,” said Loubser.

“It’s more about which companies are politically connected or have politically-connected people that we can support. That’s the State’s objective.”

Loubser said it is impossible to run SAA profitably when you select politically-connected companies over the best one for the job.

“In fact, it’s just going to go one way – and that is downhill.”

A recent Ernst & Young forensic report supported Lousher’s view, stating that potentially 60% of the total procurement by SAA could be subject to weak business controls.

News24 reported that Ernst & Young selected 48 contracts across SAA, Air Chefs, Mango, and SAA Technical to study.

“The report shows that 28 of these 48 contracts (60%) were improperly negotiated, poorly contracted, or weakly managed, according to the statement by SAA,” stated News24.

Owning three airlines make no sense

Loubser said it makes no sense that South Africa has three wholly-owned airlines: SAA, Mango, and SA Express – which are owned by the DPE.

“Why do we have three that are all competing against each other, and cutting each other’s throats?”

He said that while he was an SAA board member, they could not “even get half an intelligent answer out of DPE on that issue”.

He said the DPE’s aviation section “does nothing”, and that they “never even bothered to come back to us”.

SAA is technically insolvent

Loubser said that soon after he joined the SAA board, he realised that SAA was technically insolvent, or was going to become insolvent.

He advised that the nominal shareholder, the DPE, discuss the issue with Treasury.

“You either sell the asset completely, which is not necessary, or you capitalize it properly and manage it properly.” However, they never heard back from the DPE.

Hogg summarised it, saying they knew how to address SAA’s problems, but they couldn’t action them because their shareholder (the government) was not prepared to talk about it.

The reason for the lack of feedback, said Loubser, was “arrogance, incompetence, and a lack of business sense”.

See the full interview on Biznews here

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The real reason why SAA is in trouble