Why South African Airways’ CEO resigned amid bleak future

The leadership instability rocking Africa’s foremost airline, South African Airways (SAA) is yet to abate as the airline’s Chief Executive Officer, Vuyani Jarana has resigned from his post, which brings to two the number of resignations from state-owned companies in as many weeks.

Jarana was frustrated by the red tape that accompanies the top job. He had previously complained of a three-tier referral system for issues that required urgent action and wasn’t happy with SAA’s ability to compete in the market.

In a resignation letter he personally addressed to the chairman of the Board of Director of the carrier, Mr. JB. Magwaza dated May 29 with caption, ‘Resignation from the position of Group Chief Executive Officer-South African Airways SOC Limited’,

Jarana listed three occasions in which the company was not able to pay workers’ salaries due to lack of funding, adding that, ‘Uncertainty about funding creates challenges in both operations and market environment.

He further stated that the carrier lost leverage over its suppliers’ demand aggressive credit payment terms.

He equally decried the lack of funding by the government, stressing that whereas government inject R5B of funding in 2018/2019 financial year, a big chunk of that he said was used to fund creditors up to the end of March 2018.

‘We have not been able to obtain any other funding commitment from government making it very difficult to focus on the execution of the strategy.

I spend most of my time dealing with liquidity and solvency issue. Lack of the commitment to fund SAA, is systematically undermining the implementation of the strategy making it increasingly difficult to succeed’.

‘One of the areas of concern is speed of decision. It is impossible to succeed in the turnaround with the current level of bureaucracy we have to through to implement the strategy.

Currently SAA must obtain approval of DPE and National Treasury to implement some of the key decisions, whilst this in itself is not a problem as a principle; it takes away the agility required as an entity in financial distress, an ICU case’.

He lamented that decision making takes too long in a number of key areas of strategy execution to getting approval for loss making route remedial plans Hong Kong route remedial plan is a case in mind.

He further stated that trust level are very low, thus impacting way of working, noting that implementing a turnaround strategy for a company in crisis as SAA, clarity of command structure, alignment of purpose and high level of trust are critical elements of success.

He recalled that as far back as 2018, they initiated the process of refinancing the airline’s debt, adding that they obtained approvals of lifting of foreign borrowing limits after the appointed Deutsche Bank to assist with raising capital.

‘When government embarked in BASA process, the foreign borrowing approval limits was revoked and we had to cancel the agreement with Deutsche Bank.

When the BASA process failed, we were informed in the last hour to find own funding as BASA had failed. We were able to secure R3.5b of emergency funding from local Bank as a bridge facility.

This is what helped us to be able to operate from December 2018 to date. The R3.5 billion will be depleted in June 2019