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Questions over new SAA CEO's employment contract

Aug 28 2017 15:40
Liesl Peyper

Cape Town – There are doubts as to whether newly-appointed South African Airways (SAA) CEO Vuyani Jarana has in fact signed an employment contract with the national carrier.

In a statement issued on Monday Alf Lees, Democratic Alliance spokesperson on SAA, pointed out that SAA board chairperson Dudu Myeni does not seem to have knowledge of any signed contract between the airline and Jarana.

“[This] leads us to believe that Mr Jarana may not have signed the contract yet,” Lees said.

National Treasury referred enquiries about the status of Jarana’s employment contract to SAA.

SAA spokesperson Tlali Tlali told Fin24 that Jarana has received an offer from SAA and that the airline is awaiting his response. He could not say if Jarana has accepted the offer or signed a contract. 

During a parliamentary hearing on August 23, Myeni told members of the standing committee on public accounts (Scopa) that she did not have a starting date for Jarana but that he had accepted the CEO position, and that she hoped he’d start on September 1.

Jarana’s appointment was announced in a statement issued by National Treasury on August 3; he is SAA’s first permanent CEO since November 2015.

Jarana, 46, has been head of Vodacom’s enterprise division since 2012 and was previously chief operating officer at the mobile company.

Although Jarana was alleged to have been earmarked for the position, Myeni reportedly had a different candidate in mind.

The Sunday Times in June reported that Myeni attempted to halt an SAA board meeting aimed at approving Jarana’s nomination, as she doesn’t approve of the candidate.

National Treasury previously said Jarana will commence his duties after his current employer has officially released him.

Lees said Gigaba has assured the country on numerous occasions that Jarana has been appointed as the CEO.

“[But] these assurances seem to have been contradicted by Myeni.”

Risk of loan defaults 

Lees said it is paramount that a permanent CEO is appointed at SAA, as failure to do so could result in a default that would require all of its remaining R14.6bn in bank loans to be repaid immediately.

Fin24 earlier reported that Gigaba intends to table a Special Appropriations Bill proposing a R10bn appropriation to SAA in the 2017/18 financial year. This amount includes the R2.2bn SAA was granted on June 30.

Of the additional R7.793bn SAA will receive, R6.785bn will be used to repay loans maturing on September 30, while the remaining R750m will be used for working capital.

Gigaba said SAA’s lenders initially agreed to extend the repayment of its loans to April 30 and then again to June 30 2017. SAA now has to repay an amount of R6.785bn at the end of September 2017 of which R1.761bn is owed to Citibank, which did not want to extend SAA’s loan facility beyond the end of September.

SAA is not in a financial position to repay Citibank, or any of the loans due on September 30. If SAA fails to honour these debt obligations, an additional R7.8bn in guaranteed debt – due between 2019 and 2022 – will need to be paid immediately due to the so-called cross-default clauses, which means a borrower is automatically in default to all lenders if it defaults on one loan obligation.

The finance minister pointed out that SAA doesn't have enough cash reserves to pay its suppliers, although it managed to defer payments of close to R750m. The airline is however not generating sufficient cash to pay suppliers timeously.

This, coupled with the unwillingness of lenders to extend the loan agreements – even with government guarantees – requires urgent intervention from government.

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