Russell Loubser: SAA – only voters can stop the plundering by ANC cronies

Russell Loubser doesn’t know how to sugar coat – and certainly hasn’t deviated from his norm in this hard-hitting interview with’s Alec Hogg. The long-time ex-CEO of the JSE reflects on his decision to step away from South African Airways in September 2012 because he “had lost confidence in the shareholder.” His resignation sparked chairman Cheryl Carolus and half the other directors into following him out the building. In the light of his insights as a director, what has happened since, he reckons, is entirely predictable: in his view the chairman and directors of the airline have long since lost any pretense at running it like a business. Instead, SAA is regarded as a pot of money for the Zuma Administration to dispense largesse and enrich politically connected cronies. The result of this malevolent incompetence will force taxpayers to keep pumping in billions of rand annually – until such time as voters eject the plunderers from office.

In this special podcast, Alec Hogg is with Russell Loubser in studio. Russell, it’s really good to see you again after (for most people) you went out of the limelight/public eye about four years ago, when you resigned from the JSE. Any regrets?

There are always aspects that I miss. I miss the debates, the fights, and the discussions with brokers, listed companies, and other stock exchanges etcetera but I also really like effectively playing the back nine now where I’m on a non-executive basis. I’m very involved with the FirstRand Group so from time to time, I’m very busy. In between, I’m less busy and that to me, is just marvelous.

You went onto the SAA (South African Airways) Board and we’re going to touch on that in a moment. Were there any other boards apart from the FirstRand Group that you served on?

It’s only Strate, which I’ve been on since inception, since we created it back in 1998/1999. It has a lot of good memories for me. It’s an absolutely critical portion of the financial system. Without Strate, you can close the JSE and vice versa. They’re totally reliant on each other. It’s really, only Strate and the FirstRand Group, and the FirstRand Group is big. It has all the divisions and I really like being involved with that group.

Well, you came from there, didn’t you?

Yes. It’s like coming home. It’s management that I can trust, a chairman that I can trust absolutely, and ethics that are outstanding in the group. I enjoy that.

Read also: Russell Loubser: Revisiting Drift, the cancer that’s sliding SA into crisis

You did do a bit of national service when you went into South African Airways. I remember talking to you. We had a lovely interview on the 9th of October. You had resigned a couple of weeks before, off the SAA Board. You’d said you’d lost confidence in the shareholder i.e. in the Government.

That’s correct.

Let’s just retrace your steps a little, about what happened at that time because straight after you resigned, a number of the other board members joined you.

Yes. Okay, maybe we should start from the beginning. The reason for making myself available for SAA in the first place… Then, I was still working full-time for the JSE. I had a chat with my chairman, Humphrey Borkum – a remarkable man – and said, “We as South Africans (all of us) have choices. We can either sit on the sidelines and moan and chirp, or you can try and be part of the solution and not part of the problem.” I said, “I think I can help. Would you mind if I put this word out, that I’m available to help if they think I can help?” We put the word out and I was invited onto the Board, which was a three-year appointment. Of course, my first question was ‘is the chairman still going to be Cheryl Carolus because otherwise, I wouldn’t have joined. It was Cheryl Carolus and I’d like to think I worked very well with Cheryl. As a board, we really tried to do the right thing and I’d like to think that we stopped a lot of nonsense happening in those three years.

In those three years, from the nominal shareholder DPE; you couldn’t get any significant response to any of the major questions. For example, “Why (in South Africa) do we have three wholly-owned airlines?” Not one. Three. SAA owns Mango 100 percent and then separately, DPE also owns SA Express. Why do we have three that are all competing against each other, and cutting each other’s throats? Why isn’t somebody somewhere, like the shareholder that has built those three airlines with taxpayer money, thinking about rationalizing that industry? You couldn’t get an answer. Not in the three years that I was there, could you even get half an intelligent answer out of DPE on that issue.

So the Department of Public Enterprises presumably had a group of people there, working on the aviation section.

They have an aviation section that does nothing. They never came back to us – never even bothered to come back to us. Very early on in my three years there, I said ‘guys, technically this company is insolvent. If it’s not insolvent, it’s way undercapitalised. It’s going to become insolvent. We need to have a chat. DPE (who is the nominal shareholder) needs to have a chat with Treasury (who advances the money) to sort this problem out one way or the other’. You either sell the asset completely, which is not necessary or you capitalise it properly but then you have to manage it properly. Well, we never got an answer on that either.

Read also: Hawks probe SAA: Corruption, irregular route closures on charge sheet

So you knew what the solutions were, but you couldn’t action them because your shareholder was not prepared to even talk about it.


Wow. Why? Incompetence or…?

Well, it’s arrogance. It’s incompetence. It’s lack of business sense. If you took any businessperson who has achieved something (black or white) in South Africa and put them in there, that would be one of the first things they’d address and they would be able to run SAA profitably. An airline business is difficult. The margins are slim but they can definitely be run profitably. All you have to do is look at Eric Venter at Comair who has done it year after year, after year despite the competition (or maybe because of the competition). Can you run SAA, SA Express, and Mango profitably? No question. However, not with the current mindset of the nominal shareholder (and we can maybe come to that), and definitely not at the present moment with the current board or chairman with that mindset of ‘this is a State-owned enterprise’.

According to them, State-owned enterprises will be used for State objectives and we know what that means.

What does it mean?

Well, that definitely means dishing out largesse and let’s not beat about the bush on that one. It’s not going to be a question of you buying at the finest price, the best product from the company able to deliver. That doesn’t even feature in the thinking. It’s more about which companies are politically connected or that have politically connected people that we can support. That’s the State objective. That’s impossible in that situation, in that very competitive environment, to run something profitably. In fact, it’s just going to go one way and that is downhill.

It seems to have since you left in 2012. Did you anticipate it?

Obviously. There is no other way with the current mindset and the current board. There is no other way that it will turn out.

Just explain. When you were there, Cheryl Carolus was there. There was a pretty strong board. You were stopping a lot of nonsense, as you said before. When you walked out of the building, who did you leave behind? Who replaced you?

Well, when I said I’m not prepared to operate under those conditions anymore because it’s tantamount to reckless trading and we couldn’t get an answer of any sort from the nominal shareholder and said I’m walking out’, then 5/6/7 directors left with me. Instantaneously. That was a smart move on our part because we had to. There was no choice.

If you carried on while the airline was trading recklessly then presumably, you would have been under some kind of potential sanction by the law.

Well, that’s possible.

Is it part of the Companies Act – SAA?


So a normal company director trading like that can go to jail, in fact.

Yes, of course. The question now is, “Who’s going to sue you?” The shareholder? Okay, there are outside shareholders but then you also have creditors and I just wasn’t prepared to work under those conditions anymore.

When you left…

When we left, they replaced us with other directors. There were a number of CEO’s. The chairperson changed to what I think now is the current chairperson.

Does she have business acumen?

Well, if she has, it’s well-hidden because I served on the board with her for three years.

What are her qualifications?

I’ve no idea but it’s definitely not airline-related and that’s clear in the results you’re seeing and the appointments that are made where the head of HR is made the acting CEO for a period of time – that’s just fairyland stuff –, where the CEO’s are replaced, and the latest thing where a company is trying to be interposed between the supply of the aircraft and SAA.

What went on there? It’s a bit confusing for people outside of it to see. We know there’s a little company that is somehow getting involved (or going to be put in between) with SAA and Airbus. Why and what’s happening?

Well, it’s obvious what’s happening there. All that needs to be done Alec, is that you just have to shine the sunlight onto that company and then you’ll see the largesse that is being dished out. This is the State objective. The stupid reasons or excuses that are advanced as to why this company must be interposed… For example, SAA doesn’t have foreign currency risk. Somebody’s got to have foreign currency risk, whether it’s SAA or the company in between and that’s big foreign currency risk. That is correct. If it’s a small company, then it can’t assume the big foreign currency risk. It’s going to have to go and hedge itself by an institution like a bank that is big enough to absorb that risk. It is merely a layer that has been added in and merely an extra layer of costs. These extra costs are there as part of the State objective…this is part of the largesse that is being dished out.

So, taking taxpayer money and finding ways to give to people who are politically connected.

That is correct. There’s no other way of describing it.

Read also: SAA gags press. Ministry – Airbus swap deal, media coverage premature.

This deal with Airbus – the original deal that SAA is going to buy some aeroplanes from Airbus: was that in your time that it was done?

We were talking about that (and that deal had most probably changed a number of times since I resigned from the board), that SAA needs newer and more modern aeroplanes that are more fuel-efficient. That’s quite correct.

So, there’s nothing wrong with the concept.

There’s nothing wrong with the concept. SAA’s actually a very good company because you’ve still got very good pilots. As long as the pilots with the Evergreen Contract remain the quality that they are at the moment, SAA has a chance. Even that is being attempted to be tampered with, which is the stupidest thing that you could possibly think of.


Well, you just need one accident – just one accident. You don’t need more – and then the confidence will disappear. Fortunately, SAA has a fantastic safety record because it has great pilots and it has good service mechanisms. Take either of those two away and you have nothing left. If you take the confidence away…well, then you have nothing.

Now the pilots are fighting with the chairman – the same person you dealt with…

Well, I think it’s the chairman fighting with the pilots.

What’s going on there?

Who knows?

She says it’s something to do with transformation. The pilots say they’ve got no confidence in her and that she’s running it badly.

Well, the pilots are correct. It’s impossible to have confidence in a chairperson of that caliber.

Did you anticipate that any of this stuff would happen, Russell?


And that’s why you resigned.

That’s why I resigned. You could see it. When I say we managed to stop some stupid things happening in those three years, that’s what I mean but then you see it building up and the questions that should just be attempted to be answered are never tackled. For example, why do we have three airlines that are all cutting each other’s throats, which are being dragged before the Competition Commission from time to time? That is cretinism. Nobody even bothers attempting to answer that question and that can easily be sorted out. Somebody with half a business brain could turn our three airlines into a profitable organisation. Not massively profitable, but definitely not the way it is at the moment where it needs a massive capital injection. It’s going to need a massive capital injection every year because there is no business sense in running the organisation.

How do you interpret the move though, from Department of Public Enterprises to Treasury? Is that not a step in the right direction – that at least, Treasury is now responsible for SAA?

Well, it can’t be worse than previously, let’s put it that way. We now have to see whether that political will to do the right thing is present, even in Treasury. Treasury is definitely better than DPE. There’s no question about that.

I’d like to talk more generally about a discussion we had a while ago about drift. I’m finding that when you look at Brazil at the moment, it’s very interesting. I don’t know if you’ve been following the Brazilian story but Estevez, a billionaire banker has been in jail now for the last two weeks and is unlikely to get out of jail, given that he accepted such largesse as we are seeing happening in South Africa quite openly in many areas. Surely, we have a legal system that at some point in time will turn around and address these issues.

Well, one would hope so Alec, and at the moment we still have a fairly independent judiciary, which seems to work. In my mind, there’s no doubt that we have a governing party that has lost its way. I liken it to the taxi industry. In the taxi industry in Johannesburg, you must expect anything from a taxi. If it’s a main taxi route, if you think you can automatically cross that route through a green traffic light then you are taking a chance, because you can expect anything (and I mean anything stupid). Every single traffic violation that you can think of, I see on a daily basis from the traffic industry.

Why don’t the cops stop them? I also see this. A red light is a suggestion. In most cases, it’s certainly not even a suggestion and yet you get your Metro police pulling other people over for taillights or whatever it might be.

Yes. Can that be a problem? The nice thing is that we don’t have a single problem in South Africa that can’t be sorted out – not a single problem.

But you say the governing party is a bit like the taxi industry.


In what way?

Well, you can expect just about anything from the ANC nowadays. This is not Madiba’s ANC. You can expect just about anything that’s dumb or stupid to come out of the ANC.

And the SAA example is a reflection.

Well, how much time do we have? There’s the Post Office. There’s the SABC. There’s just about every municipality. PRASA is just another one as well as that petroleum company that we have. Here, we’re talking about billions (not hundreds of millions). We’re talking about billions (those numbers that our President can’t read out) and there’s a disregard for the law. It’s almost identical to the taxi industry where you can expect just about anything that’s nonsensical, to come out of the leadership and there’s often a blatant disregard for the law.

So, the drift that we discussed three years ago, has just gathered momentum and is still happening.


Again, just revisit that. What is drift?

It’s a great term because before Alan Pullinger educated me with the term ‘drift’, I used to talk about a lowering of standards. Drift is better because a lowering of standards, which was seen constantly in South Africa and mediocrity, which we are unfortunately starting to accept… Lowering of standards could be interpreted as a once-off, whereas drift implies a constant and a continuous lowering of standards. That’s what we are seeing in so many instances in South Africa and the danger is that we get used to it and we think ‘well, that’s the new norm’, that the new norm is a lowering of standards and that we get used to this mediocrity.

Comments on Russell Loubser
Some of the comments under the link to this story on Alec Hogg’s Facebook page.

At some point in time, you run out of money though. Take the SAA example. It’s an obvious one. One day, the Government won’t have any money to bail it out.

That’s right. If you’re a company and that’s the way it should be, then you run out of money and you go under whether you’re a private company or a public company, or even if you’re an individual. You are sequestrated. However, when you’re a State-owned enterprise, you just keep getting bailed out and it needn’t be like that at all because SAA plus Mango plus SA Express (with proper management) could easily be run profitably. Not massively profitably, but it could be run profitably and not be a drag on the fiscus.

It’s almost like we saw last week… Wolf Meyer, who’s a long-serving financial director of SAA: he had a fight with the chairman a couple of weeks ago and he’s now departed as well. You wonder whether this is just a continuation, that it’s now accepted that the drift is so deeply entrenched there that in fact, anything goes.

That’s right and the so-called leadership that we have – and we do have leadership in South Africa. It just happens to be bad leadership… Hitler was a leader but he was a bad leader. Putin is a leader – no question about it – but he’s a bad leader. That’s what we have in South Africa as well. We’ve got leaders, but they are bad leaders and these bad leaders are not changing the situations that can, so easily, be rectified. They are just allowed to continue. It’s almost as if they don’t see it. It’s incomprehensible.

But there has to be a change, surely.

Well, yes.

When does that come?

That comes when finally, the voter decides enough is enough and votes incompetence out of power. Of course, then it’s a question of whether that is acceptable to the ruling party because we have a President at the moment who says, ‘ANC comes before the country” and we have a ruling party who doesn’t even contemplate the possibility (in a democracy, by the way) of losing power to another party and then trying to fight your way back as it happens in most democracies. Our ruling party doesn’t even seem to contemplate that possibility.

I guess there’s always upside. If you see what’s happened in Venezuela yesterday with the opposition coming in to power there… Who would have thought Chavez’s party could ever lose? Fifty-nine percent is what the opposition won there so they had to accept the vote. Similarly, in Argentina. You see the big backlash in France over the weekend as well where the socialist – this kind of dispensing of largesse – is now being swept away. Could it not happen in this country?

It could definitely happen. Of course it could happen and it should happen.

Are you remaining optimistic? Obviously, you’re South African. This is your place. This is where you were born. This is where you grew up. Is there reason…can you find little specks of optimism?

Absolutely. I’m totally optimistic. I’m just very, very annoyed because we are operating way below our potential. This is a source of irritation, Alec. If I weren’t optimistic, I wouldn’t be here. I am optimistic, but I’m extremely annoyed and this is what’s necessary – for the voting public to become annoyed and to vote accordingly.

Read also: How the world sees us: Tim Knight – SA’s slide from Madiba to Zuma. Oh Boy.

Are you finding that others in the business community feel like you do?

Absolutely. Black and White. More and more. We can see it in the municipal elections. We can see it happening. It’s just happening too slowly. We’ve had 20 years of this incompetence. It’s enough now. It’s not as if it’s all South Africa’s fault. The world is having a pretty tough time at the moment. You have extra complicating factors such as the current drought, the slump in the commodity cycle, and it carries on. Then it makes whatever we want to try and do, even more difficult. It’s not as if it’s all our own fault but a lot of it is our own fault, where we just cannot seem to recognise ‘what is the right thing to do’.

The right moral compass. We’ve been hearing that we’ve lost the moral compass and leadership of this country a long time ago.

We have lost it. That’s not even a debate. We’ve lost it.

So, what does one do about SAA – boycott the airline?

No. While you have good pilots, (which they’ve got), you’ve got good staff, and on many layers of management you have good management, you’ve got very good people there. To my mind, there’s no question about that if you’ve got a good maintenance section, planes are being maintained, and they’re being flown very well. You’ve just got this idiotic leadership at the top and there’s no proper sense coming from the nominal shareholder either at the moment.

So, at some point in time, all of this drift has to hit rock-bottom somewhere. How far are we from it?

Well, from what I see at the moment, we’re just going to bumble along now for a while. We’re going to bumble along from disaster to disaster until such time as the ruling party gets a real wakeup call from the voting public. I can’t see what else is going to get the sense in there because every day, you just see another blunder. They’re making such obvious mistakes but they just can’t seem to see it or care for that matter.

What about the appointment of Mark Barnes at the Post Office?

Look, a guy like Mark… First of all, I admire him for attempting it. I wish him the best of luck. Can he fix it? Has he got the sense and the business sense to fix it? There’s no question about it because it doesn’t take a genius to fix it, but Mark is smart. Now come the real issues. Is the shareholder going to interfere there? What are the unions going to allow him to do, and not to do? Either one of those two can derail the best of plans. I don’t know what Mark’s deal is but if he can get assurance on those two issues (that he’s not going to be hamstrung by the unions and that there’s not going to be this cretin-like interference by the shareholder), then I think he has a very good chance of fixing it. I criticise because criticism is due but whoever has the courage to make the appointment (of a white male); I take my hat off to that person/s.

Now they must go ahead and let him do what needs to be done because that’s another disaster.

The hoopla last week about China…the $6.5bn loan. Remember, people seem to think that it’s investment by China. It’s not investment. It’s a loan that’s being offered to South Africa as a starting point. Is that perhaps where the ANC is seeing its salvation?

Well, on the one hand you try and see the positives there, Alec. What is worrying me is this swing away from the West. It’s almost giving the finger to the West and buddying up to those paragons of human rights like Putin and China in the past. You are right. China does what’s good for China at the end of day and Russia does what’s good for Russia at the end of the day. Now, we seem to be making a definite swing away from the West, to the East. In general terms, I have no problems dealing with everybody but it’s so easy to see what could be happening there, and it’s just more of the same.

Do you mean reinforcing the drift in this country?

Yes, it is reinforcing the drift.

Russell, just a few quickies. Your favourite car?

I’m a bit of a petrol-head so I like cars. Are you talking about a make of car?

Favourite car…favourite vehicle. DB7 James Bond, Aston Martin, or whatever catches your fancy.

Probably a Porsche.

Your favourite rugby player.

That’s going to have to be Fourie Du Preez.

Your favourite executive, outside of the JSE and the FirstRand Group, given your close connections there.

I have a few guys there whom I really rate. If I can name just a few, top of the list would be guys that are outstanding, guys who can sort out any and all of these problems that we talked about if they just used normal business principles. Guys like Laurie Dippenaar, Stephen Koseff, and Brian Joffe etcetera. They can sort out all those problems. Sizwe, whom I was fortunate to work with for three years at FirstRand and whom I’m sure is now going to do great work in the education space. They’re all giants in their own right.

Your favourite share that you’ve invested in.

This is quite an emotive one because in the 15 years that I was at the JSE, I didn’t sell a single RMB share, so RMH.

Your favourite holiday destination.

Plettenberg Bay. Easy.

Soccer player.

Messi – the best, ever.


I’ve been reading so many great books.

What are you reading at the moment?

At the moment, I’m reading a lot on the link between religion and terrorism. I’ve read so many books recently on this aspect, on Islam, and on Russia. If you want to read a book, try Red Notice. I saw Bill Browder a number of times at Davos Hermitage capital and I can clearly remember the nervous look that he had. I couldn’t explain it then. Years later, I read a book that he wrote on Russia (on Putin) and then it explains everything. I don’t read fiction. I’m reading a lot of history and I’m reading a lot about religion, terrorism, and that type of thing at the moment.

Red Notice by Bill Browder is one that you would suggest we all get into.


Role model. Who’s your role model? A combination of people?

Yes, a combination of people and not really a role model but rather people that I have a healthy respect for over a long period of time. A number of them come out of the FirstRand Group but I suppose it’s obvious that I would say something like that.

Your favourite historical figure. If you could take the opportunity to have dinner with somebody (living or dead), who would it be?

It would most probably be a guy like Churchill for various reasons. A very average person growing up, and then a giant of a man when you needed somebody to stand up to Nazi Germany. That unbelievable sense of humour, the great orator that he was and yet, such an ordinary guy, which we all are at the end of the day. We’re all ordinary people so it would most probably be somebody like Churchill.

Russell Loubser, it’s been a privilege, as always.

Thank you, Alec.

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