New headwinds for SAA as finance head's suspension rattles lenders
Yet another crisis could be brewing at cash-strapped South African Airways (SAA), whose lenders are jittery after the airline’s chief financial officer, Phumeza Nhantsi, was suspended a week ago.
Local creditors met the company’s leaders last week and expressed concern about the move on Nhantsi, who was suspended with SAA Technical CEO Musa Zwane.
Nhantsi has been an integral part of the airline’s turnaround strategy, having been the lenders’ go-to person in terms of SAA’s financial arrangements.
Business Day understands that the local lenders had grown accustomed to Nhantsi, building a relationship of trust with her. Some insiders have told Business Day that her suspension had come at an awkward and crucial time for SAA.
The airline can ill-afford a situation similar to what happened in 2017, when two of its major lenders, Standard Chartered and Citibank, recalled loans because of governance concerns.
The Treasury was forced to step in and bail out SAA.
The local lenders had been working closely with Nhantsi.
The Treasury was unavailable for comment.
SAA spokesman Tlali Tlali confirmed on Sunday that a meeting had been held with lenders on Thursday.
"The purpose of the meeting was on liquidity management business, taking place on an ongoing basis," he said.
Another meeting had been held on Friday, this time with the government, the shareholder.
Tlali said this was to prepare for a session with Parliament’s standing committee on finance, scheduled for this week.
Tlali said SAA’s loans with lenders remained secure.
"The issue of recall of the loans did not arise.
"We have been granted loan extensions by the lenders until March 2019," the spokesman said.
Nhantsi and Zwane face disciplinary hearings over allegations made against them following forensic investigations at the national carrier.
Auditor-general Kimi Makwetu gave the airline a qualified audit report after it recorded a net loss of R5.6bn.
The auditor-general’s office also indicated that certain inventory at SAA Technical, which provides aircraft maintenance, repair and overhaul services, could not be verified.
The financial statements also did not record accounting irregularities on maintenance costs and inconsistencies with group assets. Makwetu has also raised concern about the airline’s going-concern status.
SAA is yet to finalise its 2016-17 financial statements, and as a result has missed the deadline to table them in Parliament.
Nona Sonjani has been appointed acting chief financial officer and Wellington Nyuswa is keeping fort at SAA Technical.
SAA executives are due to appear before the standing committee on finance on March 27 to brief Parliament about the airline’s quarterly performance.
The airline continues to court controversy even after a change of leadership and a new board, CEO and other senior officials.
SAA had allegedly hired bodyguards for five top staff before the national carrier was set to wield the axe and institute tough cuts, Business Day’s sister publication, the Sunday Times, reported on Sunday.
The bodyguards would come at a hefty R10,500 a day in a two-year, R35m deal. The deal was allegedly negotiated outside of procurement processes by CEO Vuyani Jarana.
Jarana, a former Vodacom executive, was appointed in 2017 and previously indi-cated he was keen to review and cut unprofitable routes while also selling aircraft.
A merger of SAA, South African Express and Mango was also being investigated.
In November, Malusi Gigaba, finance minister at the time, said SAA could explore the sale of part of the business.
On the procurement of security services, Tlali said SAA disputed the allegation its CEO had procured bodyguards in violation of procurement processes.
"The [supply chain management] policy makes provision for that," he insisted.
The security contract was with Control Risks, a KwaZulu-Natal group that offers, among other things, VIP protection and security of power stations.
SAA employed 10,706 staff in the 2015-16 financial year, according to its 2016 report, the latest available.