Whilst acknowledging the effects of State Capture on state-owned enterprises (SOEs), the Portfolio Committee on Public Enterprises last week advised executives and board members of the entities visited during their week-long oversight, to find alternative means of raising capital.

“Entities need to keep in mind that the country is experiencing serious financial difficulties,” said the Chairperson of the committee, Mr Khaya Magaxa, in response to the news that the South African Express Airlines (SAX) would be able to secure an overdraft facility of R300 million, provided that this is supported by a government guarantee.

Interim Chief Executive Officer (CEO), Ms Siza Mzimela, told the committee that the reason behind the recent nation-wide grounding of flights relates to SAX’s inability to repay the R71 million legacy debt owed to the Airports Company of South Africa (Acsa).

Questioning the use of the R1.2 billion recapitalisation received by SAX in February this year, the committee was told that these funds were ring-fenced to settle only government-guaranteed debt. Ultimately, it was not nearly enough to cover the operations amounting to R2.4 billion as envisaged in the G-POCH (Governance, Profitability, Operational Efficiency, Customer Value Proposition and Human Capital) strategy adopted by the new board.

Welcoming the news that SAX is currently involved in a number of court cases to recover lost funds from previous executives and individuals involved in corruption and malfeasance, the committee said that some of the issues do not have to wait for the Zondo Commission (Commission of Inquiry into Allegations of State Capture) to finalise its work, but immediate action should be taken against employees found to be involved in corruption.

During its week-long oversight aimed at familiarising itself with the operations and challenges of SOEs, the committee noted not only the financial challenges experienced by SOEs, but also the high number of vacancies at management level and the failure to attract new skills. A presentation by the South African Airways (SAA) for one, highlighted that “unlocking opportunities and turning around the airline is impeded by a lack of management capacity, bureaucratic processes and inadequate funding”.

Impediments to implementing the long-term turnaround strategy adopted by the airline in 2013 (revised in 2018) include “difficulty to attract and retain capable staff, limited culture of performance and accountability” and “breadth and depth of executive and senior management capacity to lead and drive the turnaround.

SAA is thus in desperate need of a CEO with aviation sector expertise, and an executive management team with deep knowledge and experience in aviation. Questioning the turnaround time for filling these critical vacancies, the committee was told that the process of filling these vacancies have started and the executive vacancies should be filled within the next three months.

The committee noted the vast number of challenges facing SOEs such as SAA, SAX, Denel and Eskom, and highlighted their commitment and determination to ensure, by performing robust oversight, that these SOEs are brought to a point where they are able to function optimally and not depend on government guarantees.

By Felicia Lombard
3 September 2019