Gordhan passes the test on SAA

The deadline was crucial because it was seen as the motive behind President Jacob Zuma's shock firing of former finance minister Nhlanhla Nene on December 9. A week before his axing, Nene instructed the SAA board not to revise the deal and to continue with an agreement he had signed off in July.

But SAA chairwoman Dudu Myeni had a different idea and legend is that this prompted Nene's removal from office. And so when Pravin Gordhan was reappointed finance minister, it was natural that his handling of the SAA/Airbus deal would receive close scrutiny. The fact that he reiterated Nene's terms to the SAA board was a huge relief.

A crucial first step

But the Treasury's media release went out only at around 10pm, indicating that Gordhan did not impose his will on SAA's board that easily. In the end he did, forcing the airline to go ahead with the approved deal under which cash-strapped SAA swapped purchases of Airbus aircraft for leased ones, saving about R1.6bn and taking significant pressure off its ailing balance sheet.

Gordhan's success with the Airbus swap deal was a crucial first step in establishing his authority - had he failed, investors might have hit SA even harder than they already had after Nene's firing.

Resolving this soap opera is just a baby step. Gordhan and his colleagues have not yet started on the road towards reestablishing the government's policy credibility or to sorting out the financial and governance mess, not only at SAA but also at other key public entities.

Dark skies for SAA

The airline is certainly an extreme example of the malaise besetting public enterprises, and its heavily subsidised, stateowned status is arguably one of the hardest to defend as it operates in a competitive market and offers no compelling advantages for SA. It has been kept afloat with R14bn of government guarantees even though it is technically insolvent and probably needs up to R5bn more in guarantees to remain a "going concern". Where that money will come from, given fiscus constraints is unclear.

The financial mess is simply a reflection of a much bigger governance disaster at the airline, whose chairwoman appears to be pursuing her own interests rather than SAA's and has driven out a series of executives and directors. With just three members, the board is not even quorate, nor does the airline have a permanent chief financial officer or CEO.

In its role as custodian of the Public Finance Management Act, the Treasury has managed to rein in the board on the Airbus deal. As shareholder, it must now fix the airline's governance and put measures in place to sort out its finances and operations. That means getting rid of Myeni and her pals, a tough task given their proximity to the president. But if Gordhan and his colleagues are to restore the government's credibility, they will have to be resolute. They will have to tackle the cronyism at other ailing public entities and show they have the stomach for the battles this might entail.

Gordhan's handling of the Airbus deal has been an important victory for accountability. Myeni failed to get away with her machinations because the media, the public and the markets protested loudly when Nene was shafted by Zuma. We need to stay sharp and protest just as stridently at other breaches of governance and ethics in the public sector. That will strengthen the hands of the good guys and encourage them to do what is right even in the face of political interference.

Source: Business Day