Seven years ago, former JSE president Russell Loubser quit his national service as a director of South African Airways, leading half the board in a very public walkout. He cited the incompetence of a Public Enterprises department then run by since disgraced Zuptoid Malusi Gigaba. On Rational Radio, Loubser resisted the “I told you so temptation” after the continuing chaos was marked by yet another CEO’s resignation. He re-iterated what needs to be done to fix the national airline, and when pushed, said if these pre-requisites were imposed, would agree to a third stint of national service. – Alec Hogg
I led that walk-out in 2012.
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2012? Russell, just go back a little bit. With Malusi Gigaba there, I remember talking to you at the time. You did go public and you did say to people that there was a problem going on at South African Airways. Yet, not a lot was done publicly, anyway. Did you get any support from behind the scenes?
Well, I had a very good chairperson in Cheryl Carolus and certainly some of the board members (and only some) were also excellent. Anything substantial: if you wanted a response or an answer out of the Aviation Department, which is within DBE, it was just hopeless. Management couldn’t get it. The board couldn’t get it and after all, what is their function if it’s not to look after… If they have the Aviation Department within DBE. It was just hopeless. Under Gigaba, there was just no concept of what was necessary, what was urgent, and what was not urgent so it just became hopeless and dangerous in fact because already, the signs were there that SAA was running into financial trouble. Anybody with half a brain as a shareholder, would have done something about it immediately but that was not forthcoming at all from DBE and that’s why I had to leave.
Is it rescuable now?
To answer that question, you’ve first got to go back and say, “Okay, do we actually need an SAA?” and the brutal answer is, “No. We don’t” because there are other service providers in South Africa but Alec, where you stand on an issue normally depends on where you sit and we’ve got SAA. In fact, we’ve got three wholly owned, state-owned airlines. We’ve got SAA, which owns Mango 100% and then separately, we’ve got SA Express. We’ve got them and now the question is, “What do we do with them?” Can we fix them? Yes, of course you can fix them. There’s Comair that’s been…I don’t think Comair’s ever made a loss and if all airlines all over the world made losses, then we wouldn’t have airlines.
So, it is possible to fix it but then the correct steps have to be taken and they are not that difficult either, it’s just got to, you have to have somebody who has the understanding and then you’ve got to take brave steps because it doesn’t involve just money. Properly capitalising the airline is obviously critical to start off with, because you can’t be fighting liquidity and solvency issues all the time, I mean that’s impossible, but once you’ve capitalised it, properly, then you’ve still got to do the right things there, otherwise you just slip back into this position that you are in now.
So, if Pravin Gordhan picked up the phone to you and said: “Russell, you were the president of the stock exchange. You have a fine record in banking. You’re on the board of South African Airways. What is your recommendation to us now?”, how would you respond?
Well first of all, we don’t need CEs for each airline which, at that stage, were all working against each other, competing against each other, getting into trouble with the competition commission as a result, and not working as a unit. The first thing we should do is decide whether we need 3 and you’ll most probably come to the conclusion that we don’t need 3, so that means you’d most probably have to close down 1 or 2. Then, to agree completely that the unions will be taken care off because the unions normally present a problem whenever it comes to right sizing anything. It’ll be a problem at Eskom, it’ll be a problem at Transnet, it’ll be a problem at the new SAA as such. So, you have to get an agreement that somebody will take care of the unions because you can’t have a CEO fighting that all the time. Then, you have to get complete agreement that you will have a proper board and an honest board. You’ll have a CEO that actually understands the airline industry and that is honest, and just stopping this stealing already is a huge step in the right direction. Then, an undertaking that once you’ve put in the new management plus the new board that you will have no shareholder interference whatsoever which you continually had those days and still most probably do have, no shareholder interference, that the shareholder agrees they’ve put the management in place and give the management a chance to fix it and if they don’t like, and if the management is not capable then replace the management but you don’t interfere, you don’t do things that your normal shareholding does not allow you to do.
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It sounds a lot like what the pilots of South African Airlines are talking about not that they were against Vuyani Jarana but they certainly are saying, “Please give us a replacement of someone from the airline industry.” Do those human beings exist within South Africa or might they have to go offshore?
There’s no harm in getting somebody from offshore. In fact, there’s most probably a lot of sense in doing that. How you persuade somebody who, if that person is enlightened to the way we’ve been doing things up until now in South Africa, well then you’ll never get anybody who’s got the competency to do it, to join. So, you’ll have to get an agreement on those things first and of course knowledge of the airline industry is important, it’s got to be there somewhere, whether it’s in the CEO or the chief operating officer, or both, or the chief restructuring officer, whatever but it’s got to be there somewhere. This thing that you can just put anybody in place like we seem to believe we can do and we continue using this ridiculous cadet terminology and you can just put any cadet in there and things will come right. If it was that easy then we should actually patent that and we should export that to the entire world, because unfortunately the real world doesn’t work that way.
Dudu Myeni: you predicted/forecast it. I remember when we did talk about this, you said she was the – I can’t remember your exact words, Russell – but it was something like underwhelming or not the strongest director you’d ever worked with, so I guess when she became chairman that wasn’t a surprise to you that things fell apart.
No, not at all. Remember, we all sort of for a little while live under the misconception that people have been put in place to run things in an efficient way and then we all are rudely disappointed when we find that those people had no intention from the start of running it properly. They had every intention of doing what Gigaba said – state-owned enterprises will be used for state purposes. Now, that is just the euphemism for stealing. So, it was obvious the way things would go once Myeni was put in place.
Now that (as you say) there is a reputable or an honest head of the Department of Public Enterprises in Pravin Gordhan, if he asked you to return to the board, would you?
Not unless those preconditions that I’ve just gone through are all agreed to that they will be put in place, otherwise it’s hopeless. It’ll just be a repeat process all over again.
But, if they were to do that (because surely, we’re now looking for solutions here and we know that Cyril Ramaphosa in particular has got lots of international contacts), he might be able to find the right chief executive if there’s the political world to bring someone really good in – not a Coleman Andrews, no doubt. Would you go back under those circumstances?
Yes, well you know, Alec…
National service, Russell. National service.
Yes, okay. Well, then that will be my third term of national service, yes.
Russell, lovely talking with you. Thanks for, as always, being frank, honest, open, and for giving us your views on exactly what’s going on around here. Russell Loubser the former director of South African Airways.
