Cabinet apologises to SAA

The South African executive yesterday ate humble pie when it effectively apologised to the board of state airline SAA for condemning a settlement with controversial former CEO Khaya Ngqula.
Government spokesman Themba Maseko last week told journalists attending a briefing after Cabinet`s regular fortnightly meeting that the assembled ministers- and President Kgalema Motlanthe – had taken exception to the reported financial settlement reached between the SAA board and Ngqula.
“The reported settlement was reached at a time when serious allegations of misconduct were being investigated by the board,” he said. Cabinet would have preferred Ngqula remaining on “leave” while the allegations were being investigated.
“Cabinet, as shareholder, has asked the Minister of Public Enterprises to seek an urgent audience with the board to establish the reasons for and the details of the settlement. Government [is] not prepared to accept impunity with regard to any instances of misconduct in the state-owned enterprises,” Maseko continued.

He further stated that government would take steps to ensure that state enterprises, “especially those that were under-performing and continued to receive cash injections from the state, did not use those resources to pay large bonuses to non-performing managers.”

The state would also seek legal advice on the processes that were followed by the board in reaching the settlement with the CEO without the express approval of the state as shareholder.

But on Tuesday SAA chairman Professor Jakes Gerwel told the National Assembly’s Public Enterprises portfolio committee that the shareholder – in the person of Public Enterprises minister Bridgette Mabandla – had in fact been consulted and approved the move. “That we acted unilaterally is not factually correct. In fact, on the contrary,” Gerwel said.
He was referring to a Cabinet statement last week which said, among other things, “the state would also seek legal advice on the processes that were followed by the board in reaching the settlement with the CEO without the express approval of the state as shareholder”.
“The documents in your possession,” he told committee chairwoman Fatima Chohan-Khota, “will show, though, that the board decision was after the express indication of the wishes of the shareholder as conveyed in an extra-ordinary general meeting called by the shareholder, and at every step with the formal consent of the shareholder.
“The Cabinet statement, and then with its corollaries about ‘issues of governance, management and reasons for the reported under-performance of the airline’ came as something of a surprise to us and the board,” Gerwel continued.

Yesterday Maseko conceded Cabinet – and he – had spoken without the benefit of all the facts. “Cabinet acknowledges and concedes that its approach on the matter could have been different if all the information that was provided today, was been made available at its last meeting,” he said after a meeting of Cabinet`s economic committee.

“Cabinet also acknowledges and accepts that the board did exercise maximum caution and due consideration of the best interest of the airline, indeed consult with the shareholder department.
“Cabinet also fully accepts the SAA board`s bona fides and agreed this morning that there will be a communiqué in this regard to the SAA board to confirm that in fact their bona fides are not in question,” Maseko said.

He added that the committee had received a “full report” on the settlement as well as a legal opinion on the competence of the board to reach such a settlement. “And the legal opinion does confirm that the SAA board was legally entitled to enter such a settlement and that in doing so there was consultation with the shareholder department and the minister”.

During a questions-and-answers session Maseko confirmed that Mabandla had been in last week`s Cabinet meeting but could not say why she had not told her colleagues and Motlanthe that she had approved the settlement on behalf of the state – and taxpayer.  
“Yes, you are correct, the Minister was present at the meeting and she had articulated a level of consultation with the board but at the time she did not have all the information with her at the time so she was not able to demonstrate to Cabinet the exact details of the settlement that was reached,” Maseko said.
“But you are correct. I mean there was indeed consultation with the Minister, so as I`m saying if all the information was made available to Cabinet it would not have taken the decision that it did at its last meeting.”
Asked whether this was “seriously sloppy work” from a minister “who has greatly embarrassed Cabinet”, Maseko said “that in future the role of the minister as a shareholder and the role of Cabinet … are going to have to be clarified in much greater detail.”
Maseko added that Mabanda yesterday “regretted the fact that there seems to have been a misunderstanding.”
The Pretoria News this morning adds reports have indicated that Ngqula would get anything between R8-million and R33-million as part of his exit from the troubled national carrier.
The Independent newspapers last month reported the airline had suffered a loss of about R1-billion for the 2007/8 financial year after losing more than R800-million in the previous financial year. SAA had asked government for a R5.6-billion rescue package but was allocated only R1.6 billion by Finance Minister Trevor Manuel in his 2009/10 budget.
The Sunday Independent adds that Ngqula has to date received more than R33-million in salary, bonuses and severance pay from the troubled national carrier.

According to SAA’s annual reports, Ngqula earned R2 295 000 in the 2004/05 financial year, R6 850 000 in 2005/06 – including a R1 850 000 bonus payment and R5-million in the 2006/07 financial year. In the 2007/08 period when SAA posted a massive R1 billion loss, he earned R5 880 000, including a R688 000 retention bonus. He would this year have earned around R6.3-million, including a retention bonus and the 7 percent salary increase to which managers at SAA are entitled.

The payments exclude the cost of several helicopter trips to meetings in Gauteng during his four-and-a-half year tenure and the cost of a chartered flight from London to Paris where he apparently has a home.

Ngqula’s departure from SAA earlier this month came less than four weeks after he was suspended pending the outcome of a probe by KPMG’s forensic auditors, who were appointed by the company’s board of directors to investigate numerous irregularities.

These, the Sunday Independent said included: the payment of R60-million in retention premiums to 127 senior airline officials; procurement irregularities related to SAA’s restructuring drive; the payment of more than R100-million to Seabury consultants, which had recommended that 2 000 jobs be cut; and allegations of a conflict of interest after it came to light that Mbali Gasa, Ngqula’s wife, was a director of the empowerment company awarded the airline’s lucrative in-flight catering contract.