Business

SAA plunged into crisis as another board member resigns

2016-08-24 15:47

The chair of South African Airways’ audit and risk committee, and one of only three remaining non-executive directors, has resigned because the airline seems destined for liquidation.

Yakhe Kwinana – a member of the SAA board since 2009 – simultaneously sent a letter on Monday announcing her departure to Finance Minister Pravin Gordhan and SAA chair Dudu Myeni.

In it, she said that “it has come to a stage where I had to weigh the risks of staying”.

If SAA was liquidated with her as a director it could disqualify her from the boards of her own companies, she told City Press by phone.

“The bottom line is that my reputation is at stake. My professional certification is at stake.”

Kwinana is a chartered accountant.

Her resignation could also help resolve the impasse that seemed set to drive the national carrier into the ground.

According to Kwinana, her resignation would leave the board dysfunctional.

The SAA memorandum of incorporation called for there to be five board members of which the majority needed to be non-executives. After Kwinana’s resignation, there were only four board members left, of which only two were non-executive, she said.

Kwinana admitted that the Companies Act could technically override this problem with its more minimal requirement of three board members, but that breaking SAA’s own rules of incorporation would force Gordhan to appoint new blood.

“It is his prerogative to appoint a new board. The minister has not done what is expected, maybe other forces are hindering him,” said Kwinana.

“We assume he has the power to replace us, but he has not. So I say ‘let me resign’.”

Another consequence of her resignation was that the SAA board has no one that can take over as chair of audit and risk, said Kwinana.

“It has to be a non-executive director with a finance background and it cannot be the chair [Myeni].”

The troubled state-owned airline faces the threat of having its planes grounded by local and foreign aviation authorities because it has not produced financial statements since 2014. It cannot do so until it receives a new guarantee from the national treasury, but the treasury has refused to grant the guarantee until the SAA board is replaced.

“I choose to resign rather than see SAA folding under my watch, 9 000 jobs being lost, because of my holding on to the position as a board member,” Kwinana said in her resignation letter.

“Non-issuance of the guarantee results in non-issuance of the audited financial statements, which are required by many parties that SAA is doing business with,” Kwinana said in her letter.

“This also leads to financial distress which, in terms of the Companies Act, requires the company to file for business rescue.”

According to her, the most pressing concern was the threat by Hong Kong’s tax authorities to ground SAA planes unless the airline provided financial statements by September 6. Practically, this meant by August 31 because the auditors would still need to look at them, she said.

“If we are grounded in Hong Kong, others will follow.”

South Africa’s own Air Services Licensing Council might be forced to ground SAA locally due to the treasury’s unwillingness to provide financial assurances – separate from the guarantees.

Kwinana said that other domestic airlines could reasonably be expected to start thinking of going to court if SAA was not grounded, given that the same rules have previously led to smaller private carriers getting censured.

“If we do not get a guarantee, we are going to be liquidated,” said Kwinana.

SAA spokesperson Tlali Tlali responded to an emailed question, saying that “protocol dictates that board members who are appointed by the shareholder, in the event they decide to terminate their services, would notify the shareholder as they were appointed by the shareholder and not the company they may have served”.

“Accordingly, we strongly recommend that you refer your enquiry to national treasury for comment.”

National treasury had not responded to queries at the time of publishing.

Next on City Press

December 9 2018