South African Airways (SAA) appointed its head of operations as acting chief executive on Friday and said it needs 4 billion rand ($265 million) from the government to survive the current financial year.
Zukisa Ramasia becomes interim CEO after Vuyani Jarana unexpectedly resigned last week after less than two years in the job, saying his turnaround strategy was being undermined by a lack of state funding and too much bureaucracy.
The revolving door at state-owned enterprises highlights the mammoth task South African President Cyril Ramaphosa faces to fulfil his promise of reforming state firms and weaning them off government support. They are regularly cited by ratings agencies as one of the main threats to the country’s economic growth.
It also does little to instil investor confidence in Africa’s most industrialised economy, which has for years struggled to grow.
Ramasia, who has more than 25-years experience in aviation, will start her new role on Monday after Jarana indicated that he will no longer serve a notice period.
SAA has started searching locally and globally for a permanent CEO to stabilise the airline and oversee the implementation of the long-term turnaround strategy, board member Thandeka Mgoduso told a news briefing at the airline’s headquarters.
SAA has not made a profit since 2011 and Jarana launched a revised five-year turnaround plan that includes slashing costs and cancelling unprofitable routes, requiring around 21.7 billion rand ($1.5 billion) in cash injections from the government.
Board member Martin Kingston said the new cash injection it seeks will enable the airline to finalise outstanding financial statements and enable it to continue operating until the 2021/22 financial year, when it expects to make a profit.
“We are currently operating at a loss.. and that is the background to the request we’ve made for 4 billion rand of support for the current financial year,” board member Martin Kingston said.
The airline is in advanced talks with lenders about repaying the 3.5 billion rand bridge loan due in July and extending the 9.2 billion rand long-term loan over a protracted period of time, on condition of the government’s ongoing financial support, Kingston said.
“They (government) are fully aware of the need to put in place not only short-term financing but in addition to that to ensure that we have a sustainable balance sheet to be able to support and underpin the turnaround strategy,” Kingston said.
“Repaying the 3.5 billion rand opens the door for us to access additional liquidity for the current financial year.”
Interim Chief Financial Officer Deon Fredericks added that the airline had also approached three additional lenders, which include international lenders, for short-term funding.
Jarana’s departure from SAA followed the resignation of power utility Eskom’s chief executive Phakamani Hadebe last month, who had also been trying to stabilise his highly indebted company.
Asked about the board’s views on equity partnership, Kingston said the board does not have an “ideological” view on whether it should or should not have a partner, be it an equity partner or not, as that is for the government to decide.
The Ministry of Public Enterprises has said before that the airline should prepare for a strategic equity partner.
“We need to understand that there is nobody who is going to invest in any of these assets unless they are perceived to be profitable or capable of being turned to profitability,” Kingston said.
“The current challenges facing the board need to be addressed by the board. They will not be addressed by an incoming shareholder. The view will be, if the board and the current shareholder are not capable of dealing with them, then no incoming equity partner with a minority stake will be able to do so.”