SAA will not pursue ex-directors: Carolus

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South African Airways reportedly has no plans to extend an investigation into malfeasance at the state owned enterprise beyond various allegations already made, primarily against former chief executive Khaya Ngqula. That’s the word from airline chairwoman Cheryl Carolus.

Carolus yesterday presented the findings of the report by auditing firm KPMG to the National Assembly’s Portfolio Committee on Public Enterprises. Business Report newspaper says opposition members of the committee, who generally welcomed the report, said that a failure to extend the parameters of the investigation to include the board of directors would give the impression that the government was merely targeting one individual who was known not to be a supporter of the current administration.

Congress of the People MP Mlindi Nhanha said that when Transnet attempted to take similar action against Siyabonga Gama, it was unable to because the government backed Gama “because he’s a known supporter of this administration” [that of President Jacob Zuma as opposed to former President Thabo Mbeki, his defeated rival within the governing African National Congress]. Nhanha also questioned why no action would be taken against previous chief executive Andre Viljoen, who had incurred considerable costs for SAA as a result of an order for 41 Airbus aircraft.

He urged a broader investigation, pointing out that Jakes Gerwel had been chairman during the period of Ngqula’s alleged irregular activities. “The previous board has to take the flak for this; it (the new board) must strike a balance in pursuing this matter and the government must be seen to be consistent.” Carolus said the current SAA board, which with the exception of Margie Whitehouse comprised entirely new members, had not written the mandate for the KPMG investigation but had inherited it. She added that if something flowed from any action taken by the commercial crimes unit of the SA Police Service, there would be further investigations, Business Report continued.

But Carolus noted: “We have no appetite to start investigating the history of SAA; we believe the previous board deserves credit for initiating this investigation.” However, committee members noted that the board might not have initiated the investigation without the pressure from SAA’s unions. Carolus said that the new board, which was working hard to address all of the issues, was in the process of enhancing SAA’s risk management procedures, which were a source of worry for the directors. She stressed the board members were very proud to serve SAA. “We don’t want the public to think that all SAA employees are thieves and skelms.”

As a result of the the KPMG findings, SAA has said it would begin a process to recover about R30.8 million, which includes R27m paid for retention bonuses by Ngqula, more than he was authorised to pay.

In a separate analysis, Business Report writer Ann Crotty said MPs were “absolutely right” to ask that KPMG’s mandate be extended to cover the board. “The previous board may deserve some praise for initiating the KPMG investigation but the reality is that it appears to have been done reluctantly and late. And only after determined input from the labour unions, which seem to have grown sick of the unrelenting and costly antics of the top executives,” she says.

Crotty further noted that Ngqula’s “flagrant abuse of corporate governance was really nothing out of the ordinary” for the troubled national airline. “The fact that Ngqula’s rap sheet only amounted to about R31 million worth of alleged offences suggests he may have been one of the less expensive chief executives to misrule the company over the past 15 or so years.”

She recalls former American CE Coleman Andrews was much more ruinous. Hired in 1998 to turn the company around, Andrews relied heavily on expensive consultants and employed several managers from the US to assume key positions in the company. After two and a half years he left, “having extracted R232 million from taxpayers”, including a R74 million termination payment.
“Remarkably nobody on the SAA or Transnet remuneration committees had seen Andrews’ contract until a few months before his departure,” Crotty said.
“Andrews left behind accusations of fraud and corporate governance violations as well as a legacy of anti-competitive practices that cost SAA tens of millions of rands in penalties.”



Andre Viljoen, who had been head of finance, took over from Andrews in 2000. “His four-year tenure was marked by the multibillion-rand purchase of 41 Airbus planes and the R6 billion futures contract that required a bailout from Transnet.”
“But where does this leave the SAA board? In terms of the law and corporate governance guidelines, Andrews and Ngqula’s decisions to ignore the board members does not leave those directors free to walk away from the fiduciary responsibility they owe SAA. However, for the past 15 years or so, that is precisely what they have been allowed to do. In that period the list of directors has included many high profile luminaries – Roy Anderson, Peter Joubert, Valli Moosa, Jurgen Schrempp, Maria Ramos and Louisa Mojela.”