SAA on Human Resource Development, Transformation, Risk Management Plan & long-term procurement plans: briefing

Meeting report

SAA Presentation
Advocate Sandra Coetzee: Acting Chief Executive Officer (CEO), South African Airways (SAA), said that the areas of Human Resource Development, Risk Management and Procurement had been discussed previously between SAA and the Committee and these areas been recognized as needing special attention at the Board and Executive leadership level, as well as at Divisional and Subsidiary (Operational) level.

Risk Management
King III had placed special emphasis on the importance of risk-based audits and on integrated risk-based reporting of companies as best practice. SAA’s ability to be risk alert and the ability to manage its risk profile was a key performance indicator for SAA. The Board Committees responsible for risk oversight were the Financial Risk Management and Investment Committee (FRIC), which focused on financial and general risk methodology, and the Audit Committee, which was responsible for the control aspect of risk - whether SAA methodologies were control attuned and effective.

FRIC served as a gatekeeper to the demand function. Prior to embarking on a significant procurement process, FRIC would access all financial and other risks relating to that transaction and decide whether management should proceed with a transaction. The Audit Committee was the centre for irregularity reporting and identifying any risk in terms of failure of control.

Operational Committees at Executive Committee (Exco) level were established to address specific areas of risk.

The Treasury Working Committee (TWC) was a cross-functional Committee responsible for executing all financial market transactions with reference to foreign currency (hedging) and commodity markets (fuel).

The Financial Risk Sub-Committee (FRSC) was responsible for development of the hedging strategy itself and making recommendations to FRIC via Exco regarding the quarterly review of the hedging strategy.

The Emerging Risks and Crisis Committee (ERCC) was an operational type of Committee which tended to disruptions such as IT, ticketing, and the recent fog problem at Heathrow from Scandinavia.

The Anti-Fraud Committee focused on implementation of fraud prevention, detection and response measures, including investigation of irregular, corrupt and fraudulent activities.

The Compliance Forum was a cross-functional Committee which ensured overall legislative and regulatory compliance with the industry. In particular, a Public Finance Management Act (PFMA) forum had been established and had recently been extremely active. All top management had been taken through a PFMA awareness review and this had filtered down to other levels within the company. The Compliance Forum also drove the Competition Act Compliance Initiative, Aviation Safety Requirements and the new Consumer Protection Act. Management was responsible for designing and implementing appropriate risk and compliance management systems.

An external service provider performed internal audit spot checks on the effectiveness of the risk management framework and compliance risk areas, such as procurement. Significant enterprise risks were determined by using a five-by-five Risk Assessment Matrix, which incorporated financial and non-financial elements. In the past, the matrix had been focused only on financial elements. Risks were categorized from catastrophic to minor depending on the impact, probability and severity of an event occurring. The level of impact of an event was assessed in terms of its financial and business impact, its impact on reputation, legal/regulatory non-compliance, natural environment and safety and health (employees and communities).

Strategic risks were identified, analyzed and evaluated as part of an annual corporate planning process. Progress in mitigating of risks was reported to the Audit Committee, Board and Shareholder as well as National Treasury on a quarterly basis.  By and large, the sources of the strategic risks lent themselves to legacy issues and the regulatory framework within which SAA operated. SAA had made significant progress in dealing with legacy issues in all three areas (risk, human resources (HR) and procurement) but there were still residual legacy issues which permeated the risk profile.

Significant risks at Divisional/Subsidiary/Functional level were treated and managed at Divisional or Subsidiary level and reported to Exco regularly and to the Audit Committee quarterly for guidance on how to deal with that risk. Functional risks mostly related to compliance issues with existing and new legislation such as the Consumer Protection Act (Oct 2010), anti- trust and hedging issues and were a focus of the Compliance Forum.

Project risks such as for the World Cup were identified when major projects were initiated and reported to Exco on a day to day basis.

Some of the top risks currently being monitored by shareholders were: a weak balance sheet, onerous contracts – some of which were entered into over a decade ago; anti-trust litigation in various jurisdictions - difficult to manage as they emanated from transgression activities some years in the past by past managers; and baggage pilferage, particularly in South Africa. SAA wished to shed the baggage of legacy issues as soon as possible and move forward with agility and awareness.

Procurement
Adv Coetzee said that the Committee had had the benefit of being briefed by the SAA Chairperson on aspects of past irregularities that were reported through the KPMG report. The procurement policy, manual and practices were designed with particular attention to compliance to Section 51 (1) (iii) – a systems focus and Section 55 (2) – a control focus of the PFMA.

The legacy of PFMA-related non-compliance extended from both the 2006/07 and 2008/09 annual financial statements. These irregularities pointed to failure as far as systems and controls were concerned. A three-year Intervention Action Plan was put in place in 2009 with the objective of re-establishing the procurement function at a level that was statutorily compliant, was in step with best practice and in line with the business requirements of SAA.
A high degree of the budget related to provisioning of services. SAA was a high procurement environment and therefore needed to design a procurement system commensurate with the nature of SAA business. Accordingly, the Action Plan was designed with particular reference to matters of governance, people, methods and practices.

The Procurement and Tender Process Committee (PTPC) was a new Committee to ensure that the necessary gate-keeping and mandate processes were in place and that there were no flaws in the tender process; FRIC was focused on the value proposition and the business case which prompted the procurement process; and the Audit Committee was focused on the control environment.

Comprehensive Vendor Profiling gave a clear picture of the volume, value and vender dependency exposure in the procurement cycle. SAA was redeploying the use of Software Solutions and Applications (SAP) as an electronic gate-keeping mechanism to ensure that requisition did not happen in the absence of a valid contract or purchase order issued with the required mandate.

From a policy to a systems level, SAA was implementing change to ensure that the procurement process was cost effective and efficient, but with the necessary controls. While the short-term focus was to have the policies, systems and practices well-established, the medium to longer-term focus was on the staff skills, efficiency, capabilities and culture through a centre-led procurement organization that re-enforced SAA’s policies and strategies.

The Clean-up Project aimed to enhance catalogue buying and demand and supplier relationship management and through due diligence reduce unnecessary spending. SAA targeted a cost saving of R58 million for the 2010/11 financial year and R73 million of annual benefits from 2011/12 and beyond.

Initiatives deployed included continued review of contracts and all suppliers and at management level included regularization of suppliers through the Bid Adjudicating Committee (BAC). In terms of Delegation of Authority framework, significant material transactions which required regularization went through the Board. There was clear resolve at Board and Management level to achieve 100% compliance and achieve no audit comments or qualifications by the end of the 2010/11 financial year with regard to procurement. This intent was very much dependant on SAA’s ability to resolve legacy issues.

SAA was also working hard with service providers to improve their Broad-Based Black Economic Empowerment (BBBEE) rating from its current level of accreditation by the end of the financial year. BBBEE procurement spend for 2009/10 was 43.23 % and for the first quarter of 2010 (to date) was 42.31%. This figure was not significant in terms of SAA’s ability to improve on the average for the current financial year.

Human Resource Development and Transformation
Human Resource Development and Transformation was enjoying Board attention through the Remuneration and Human Development Committee. In the past, the Committee was called Remco, the Remunerations Committee. With 7 973 employees, the new Board had placed particular emphasis on human development, the focus being to attend to employee value proposition and business case for remuneration and human development processes.

The junior level represented 93% of the workforce with the net effect that SAA was a significantly unionized business. Further analysis of the headcount showed that the majority of the company was represented by ages 26-45 years. Approximately six percent of the workforce was close to retirement age. SAA believed that if it succeeded in its Retention Strategy, it would be successful with Succession Planning as well, where young people could lead the company in future.

Demographically, 34% of the workforce was BEE (Asian, Black and Coloured) Male, 27% was BEE Female, 30% was White Male and 9% was White Female. Currently, the most significant differential between African, Black and White/Foreign, at June 2010 in the five year cycle (currently in year two), was in the top Management level. This was a function of the size of the group. As of July 2010, considering the size of the workforce at middle Management level with reference to the Employment Equity target, that level required attention. At the various levels of Management in relation to Black, Coloured and Asian representation, Black Male candidates represented the highest total percentage at management level. Further breakdown of the statistics in terms of top, senior and middle Management, when comparing Black, Coloured and Asian representation, Black Male representation was highest, followed in declining order by Black Female, Asian Male, Asian Female, Coloured Female and Coloured Male. However, in terms of totals at middle Management, White Male and Female representation was still in the majority.

SAA had developed an Employment Equity Policy, approved by the Board, to improve Employment Equity status and this policy was being revised after further discussions with the Department of Labour. SAA had also finalized a Draft Disability Policy which was under consideration by the Exco.

SAA had also developed a plan to empower all stakeholders in terms of their roles to ensure successful implementation of the BBEEE Plan. A number of initiatives had been lodged: A Talent Management Project in collaboration with Tertiary Education Institutions; and a Cadet Pilot Programme, particularly through SAA Technical which was accredited locally and internationally, were ongoing and in line with the demographics of South Africa. Over a four year training cycle, the number of apprentices decreased as they moved to fix term employment with SAA.

In summary, SAA had made significant progress in relation to HR development although challenges did persist. In relation to procurement and risk, there had been progress but legacy issues, particularly on the procurement side, required resolution. The necessary policies and manuals were in place to be compliant in this regard. The present key focus was to ensure that supporting systems and human capability, in terms of applying the necessary control and accountability, would follow suit to ensure compliance, that SAA was risk aware, agile, cost effective and efficient.

Discussion
Dr G Koornhof (ANC) asked for detail on the composition of the Financial Risk Management Committee, on the frequency of their meetings and if Members of that Committee were independent.

Ms F Hajaig (ANC) asked what the composition of the Audit Committee was, how independent the Members were and how often they reported to the Board.

Adv Coetzee replied that the Audit Committee comprised independent, non-executive Members who reported to the Board on a quarterly basis. It was fully aligned with the new Companies Act, as well as with King III. The Chair of the Audit Committee was very familiar with the auditing profession and the King III code.

Adv Coetzee said that the FRIC met with the same regularities as the Audit Committee and the CEO and the CFO were in attendance at the meetings but were not Members and of the Committee and non participatory in the meetings. The majority composition was non-executive Members. To avoid the silo effect, the Board had decided that Chairpersons of the different Sub-Committees of the Board would also ex-officio sit on Committees. Thus, tender discussed at FRIC had the benefit of checks and balances between the Committees. The new Board had launched a number of initiatives to catch up on legacy issues and to move to compliance as quickly as possible. The Committee met on a minimum of a quarterly basis.

Adv Coetzee said that if a CEO or CFO was the subject of discussion, the Audit Committee and FRIC had the right to excuse them from their Committee meetings and this practice also related to the Remuneration and HR Committees.

Adv Coetzee said that in relation to reportable irregularities, SAA took comfort in the fact that their internal audit function had been outsourced to one of the top auditing firms which randomly spot-checked the procurement registers of tenders and which reported directly to the Audit Committee. Minor irregularities and improvements were engaged with the Exco but investigations were totally independent of the Exco.

Dr Koornhof commented that after engaging with both SAA and the Airports Company of South Africa (ACSA) at previous meetings, it was evident that solutions to the top four risks were a huge challenge. He asked that should SAA not have time during the meeting, it could engage with the Committee on solutions to these risks at a future meeting.

Adv Coetzee said that the intention of the presentation that day was to give a snapshot of the top four risks.

Mr Joseph Makoro: Chief Risk Officer, SAA explained the risk of baggage pilferage. Baggage went through various stages before being loaded onto the plane and investigation had shown that pilferage could occur at any stage. Therefore, separate service providers had been assigned internationally, regionally and domestically to monitor those sectors and for SAA to compare service providers in terms of performance and cost. The additional benefit was that SAA could cost benchmark and could be presented with competitive costs and enhanced performance from service providers. SAA now focused on enforcing penalties when service provider contracts were breached and had increased airside operations to include monitoring of the supplier. In the past few months, SAA had deployed surveillance cameras in aircraft halls to combat pick-pocketing and bag pilferage, as well as vehicle-driven surveillance cameras with a zoom which could monitor aircraft operations more extensively. Crime intelligence, ACSA and SAA were currently engaging in co-operation practice.

The Chairperson asked if SAA perceived information and document management as an important risk and what SAA was doing about information security.

Adv Coetzee said that information technology (IT) support and documentation security was identified as a risk on the total risk profile from a business continuity point of view but was not identified as one to the top four risks. SAA would like the opportunity to brief the Committee on the top four risks and the Risk Mitigation Plan.

Dr Koornhof asked what the link was between the Risk Management Committee, Procurement Committee legacy issues and the KPMG report and what pro-active steps were taken by the Board Committee, specifically with regard to the finding against the former CEO.

Adv Coetzee said that some of the Committees were in existence at the time and prior to the KPMG investigation. The current Board had undertaken to assess the effectiveness of some of those Committees to avert risks exposed through the KPMG report either through consolidation and alignment of functions or by reviewing the policies and procedures or by enhancing systems and enforcing accountability to avert repetition. The KPMG investigation was conducted independently of the Committees and as a consequence of the investigation, a number of initiatives directed at corrective action had been undertaken to improve the control environment.

Dr Koornhof asked what actions were taken by the current Board in retrospect with regard to the findings against the former CEO.

The Chairperson asked SAA to answer the question elaborately and extensively in the near future as it was not the first time the question had been asked.

Adv Coetzee said that KPMG would be asked to express an answer to the question as they had conducted the investigation independently. SAA Management could not take a view on the matter but would report back to the Committee with KPMG’s answer.

The Chairperson objected that since the SAA Board had used the report to create a platform to assess what worked for SAA and what went wrong in as far as the former CEO was concerned, the Committee expected the SAA Board to respond to the question so that Members could learn what the lessons were in terms of failure on the part of the Board during that period.  

Adv Coetzee said that the question had been taken and that the Board would rely on the assessment by KPMG. The new Board was very conscious of the lessons learned from the past and as a result a number of reviews and corrective action initiatives were underway. Statistically, the frequency of Sub-Board Committee meetings had almost doubled since the previous financial year to address legacy issues.

Mr C Gololo (ANC) asked which Risk Committee was responsible for currency fluctuation and hedging.

Adv Coetzee said that essentially the Financial Risk Committee developed and recommended to the Board a generic hedging strategy which applied to currency, fuel, or commodities which were price volatile. The TWC was responsible for the day-to-day Risk Mitigation Strategy in terms of the currency transactions themselves.

 Mr A Mokoena (ANC) asked if servicing of aircraft was outsourced or if it was performed internally. He also asked for the frequency of commerce with the Civil Aviation Authority (CAA) and the relationship with the CAA in terms of compliance.

Adv Coetzee said that SAA Aviation Safety and Risk Mitigation was very much regulation and licensing based. Not only did SAA have a very good engagement record with the CAA and underwent annual licensing with the CAA and the Federal Civil Aviation (FCA) in the United States (US), which provided accreditation to SAA Technical, SAA’s service provider and subsidiary, for maintaining aircraft. Thus SAA relied on both CAA and FCA for operations, aircrafts and maintenance thereof. Over the past licensing cycle, reportable variances had been reduced to an absolute minimum and those incidences were minor documentation errors.

Mr Mokoena asked if SAA was proactive with CAA in terms of external Risk Mitigation or if it engaged only at licensing and default instances, such as what happened at George Airport.

The Chairperson added that external risks under the control of ACSA affected SAA. She asked if SAA was proactive in engagement with ACSA and at what stage SAA escalated a risk from ACSA to the CAA.

Adv Coetzee clarified that SAA annually renewed its Air Services Licence by satisfying an air-worthiness test. SAA engaged with the CAA on a proactive basis and participated in the CAA Working Committees in addressing codes of conduct, new regulations and problems. Spot checks were also conducted by the CAA. On the Operational Risks side, however, such as with baggage pilferage, the maturity level in terms of risk mitigation had some room for improvement. In the Risk Matrix and Treatment Plan, risks within versus beyond SAA control were distinguished to predict the probability of the risk from occurring.

Mr Mokoena asked what the numerical strength (how many new aircraft) and age profile (life span before replacement) of SAA’s fleet was.

Adv Coetzee said that SAA was in the process of a fleet renewing initiative due to safety, flexibility and cost efficiency of fleet utilization and SAA was continuing with the purchase of 20 Airbus craft over seven years. In the interim, short term leases accommodated for the current demand during the time that the outgoing aircraft were being renewed. SAA’s drive was to replace for sustainability purposes rather expansion of the fleet. Some of the questions were beyond the scope of risk methodology and operations but a presentation on aspects on fleet plan could be addressed in a follow-up meeting.

The Chairperson asked for more detail on fleet ownership, planning and leasing agreements as these affected procurement plans. She agreed that a follow-up meeting was required.

Adv Coetzee said that most of the aircraft were on operating or financial lease but that the detailed breakdown would be made available to the Committee at the next stage. SAA was currently at 54 aircraft and was currently in the process of adding two wide-bodied aircraft to the fleet. By the end of the three year corporate framework, there would be a total of 58 aircraft.

Mr Gololo asked for clarity around the previous CEO’s announcement in the past about grounding of all 747s as two weeks previously he had witnessed a 747 in flight.

Adv Coetzee said that the 747s had been grounded and that the plan had not changed. Two 747s had been deployed for special projects only.

Mr Mokoena suggested that a workshop together with SAA and ACSA would be beneficial in addressing the same issues in one workshop.

The Chairperson said that an in-flight article had highlighted a customer’s dissatisfaction with the aircraft on the South Africa (SA) to Nigeria route. She asked if ageing SAA aircraft had been located to parts of Africa.

Adv Coetzee said that the product in terms of the fleet for the Lagos route was in the process of being changed.

Mr K Dikobo (AZAPO) asked if there was a Worker Representative Committee.

Adv Coetzee said that there was no formalized Worker Representation on the Board or Exco. The current CEO was very focused on the reality that people who served in the business or as a consequence thereof were of great significance in terms of taking the business to a sustainable path. She had met regularly with Labour to ensure that there was sharing of information from an Executive leadership side as well as Labour side and that key issues were addressed.

The Chairperson asked if the Committee which investigated Labour representation investigated everyone in the company, including the Board Members, CEO and senior level management; if it was independent; and the extent of empowerment given to that Committee.

Mr Fanie Zulu: Head of Corporate Affairs, SAA said that dealing with Labour issues was at the top of the agenda for Management and that the comprehensive approach by the CEO to strengthen relations with Labour included clearing of legacy issues at all levels of Management and Labour. The KPMG investigations had originated with issues raised by Labour and they were now satisfied that action had been taken and that the case was closed. Quarterly meetings enabled representatives of Labour to participate in the future of the company. Finally, on an Operational level, various structures dealt with terms and agreements of employment and project matters, so a comprehensive approach to encompass and enhance all aspects of the relationship with Labour was in place.

The Chairperson asked if the relationship with Labour was regulated in policy. It was of concern that if a new CEO was appointed for some reason, the Labour initiatives would fall flat.

Mr Zulu answered that the initiative was not regulated but was instilled after realization by the new CEO of the importance of Labour relations. Some actions taken, such as the quarterly strategic meetings with Labour, would become embedded in the structure of the organization to ensure continuity of that type of intervention.

Mr P van Dalen (DA) asked what the onerous contracts were, as in order for the Committee to assist with a solution, it would need to know the nature and extent of them. He questioned whether there was a secrecy clause attached to them.

The Chairperson asked if the Committee could be provided with a list of the risk policies and also for an inventory on all the legacy issues, the effect that they had on a day-to-day basis, the date they originated, plans for addressing them and the cut-off date for turnaround.

Adv Coetzee said that the legacy contracts and profiling would be provided to the Committee once the audits had been completed and any assistance which the Portfolio Committee could render would be helpful.

Ms Hajaig asked if all the Risk Committees talked to each other and how often they did so.

Adv Coetzee said that the CEO, with support of the direction of the Board, was undertaking a review to ensure that there was alignment and consolidation of these Committees and to optimize time and effort. In most of the Committees, there was cross-functional representation.

Mr Van Dalen asked for clarity on interpretation of the Risk Matrix, where a minor injury interrupted business for one day or less did not warrant immediate attention, as he believed that one day interruption of business was significant.

The Chairperson commented that according to the Risk Matrix, hospitalization should not be the only criteria by which SAA gauged level of seriousness, as long- term medical attention without hospitalization, for which SAA may be liable, could be just as costly as hospitalization.

Adv Coetzee said that the five-by-five Risk Matrix reflected risks which were inherent but at different levels within the business which caused interpretation of the probability and impact in relation to operational, strategic and business unit risks to be different. A more detailed exposition of the various risks and Risk Treatment Plan would explain the nature of the risk content at the different levels.

The Chairperson asked if the matrix for risk management and probability was international law, whether it had been benchmarked internationally and how it compared to best performing international airlines.

Adv Coetzee said that SAA was embarking on a process of benchmarking their generic model with other airlines from a best practice point of view, particularly as an initiative to improve on the maturity of the operational-type risks. The results of this experience would be shared with the Committee.

Adv Coetzee further noted that SAA would report back to the Committee at an appropriate time on the fleet plan and profile, broad-spectrum risks, including Aviation Safety and the Legacy Contract.

Mr Van Dalen asked if Onerous Contracts and Legacy Contracts were two distinctly different contracts.

Adv Coetzee noted that some of the questions on contracts had been referred to generically and detail thereof would be provided.

Dr Koornhof asked again for detail on an action plan to address the four top risks as well as the role and responsibilities of the Board Committee with regard to the former CEO.

Mr Van Dalen asked what policy was in place to ensure that SAA was proudly South African and was not forced into contracts which involved procurement from overseas.

Adv Coetzee said that SAA was in a very competitive procurement environment and with the issue of competitive space and the primary focus being on service rather than infrastructure, SAA operated quite differently from other state-owned enterprise (SOE) industries. Buying ‘South African’ was very much a priority of SAA. However when purchasing aircraft, while competing for purchase parts with Kulula and Comair which had the link with the British Airways franchise, SAA was forced to buy from an international tender. In South Africa this could only be achieved through leasing of aircraft. Short-term operating leases were quite often undertaken locally. SAA suppliers had been compliant with the National Industrial Programme (NIP) but that the off-set requirements of NIP did impose restriction on SAA’s supplier base.  Additionally, the cost of compliance with NIP was factored into the price and as a consequence SAA was rumoured to pay 3-5% more for an aircraft than its competitors. SAA’s Procurement Policy was directed at buying SA and other than the big fleet, all other suppliers were South African. When sharing the audit on the spend, exact detail thereof could be shared with the Committee.

The Chairperson asked if localization, especially with regard to the Industrial Policy Action Plan (IPAP 2) within the regulatory environment of the PFMA had restrained procurement with regard to growing SAA’s business and its meaningful role in the economy.

Adv Coetzee said that she had answered to some questions on the NIP and that complying with the PFMA was not constraining. As part of the procurement processes review, SAA was looking at improving their interpretation of the PFMA to still allow the agility to procure effectively.

The Chairperson asked if SAA procured tenders from other SOEs and if not, what the reasons were. The poor relationship between Transnet and Passenger Rail Agency of South Africa (PRASA) had affected the economy.

Adv Coetzee said that SAA would be interested in awarding tenders to other SOEs should they satisfy requirements according to the Constitution and in terms of SAA’s fair and equitable competition for tenders.

Mr Mokoena asked if the Procurement Strategy was sustainable in terms of retaining procurement beneficiaries for an extended period and if SAA had a track record of producing independent people who could exit the system as job creators.

Mr Van Dalen asked what policy was in place to remove service providers which failed to meet SAA standards.

Adv Coetzee said that a number of service providers were small and medium enterprises (SMMEs) and SAA encouraged a continued environment so that they could grow their businesses. SAA had recently launched a key initiative to improve on the due diligence of suppliers in an effort to ensure that the suppliers would in fact deliver. Thus SAA had embarked on both financial and capability due diligence initiatives.

Ms Alison Crooks: Head of Procurement, SAA, added that in addition to assessing due diligence of a potential supplier, SAA was proactive by outlining the key performance indicators at the beginning of the contract. This measure ensured that the supplier could perform the job as well as identified gaps for improvement. As an added benefit of the initiative, at the end of the contract the supplier would have a demonstrable track record with SAA which could only bode well in the future.

Mr Dikobo asked for clarity on whether all foreign employees were classified as White.

Mr Mbongeni Manqele: Acting General Manager; HR, SAA said that the slant of the slide in the presentation was based on the Black Economic Empowerment (BEE) Act. The 865 White/Foreign professionally qualified employees were not all White but was the contingent of all people working outside of South Africa at stations in Africa and in Europe.

Mr Van Dalen said that from the explanation on the White/Foreign contingent, he understood that White/Foreign could be represented by Black people and that this would skew the BEE target. He asked for provision of actual figures.

Adv Coetzee said an improvement to the presentation of the slide would be made available to the Committee. It was prepared more on an exclusionary basis as it had been prepared for providing detail in relation to requirements for BEE in the different categories, and figures outside that had been grouped together.

Mr M Sonto (ANC) asked for clarity on why so many casuals were employed.

Mr Dikobo asked why 500 fixed term and 1181 temporary employees were excluded from the headcount of 7 973 employees. He asked if the exclusion of employees had anything to do with the level of benefit for the employees.

Adv Coetzee said that for the purposes of the report, the headcount included all permanent employees. Fixed term employment was for an average of five years and the benefits were not materially different except that there was a fixed term to the employment relationship. SAA was phasing out the temporary labour force and giving those people fixed or permanent employment. The future plan was to buy in temporary labour during peak seasonal demand across business in different subsidiaries (services, cargo, technical, operations) and for special projects such as the World Cup.

The Chairperson asked what SAA was doing to improve its Recruitment Strategy, as personnel aged 50 years and older amounted to more than 30% of personnel while young people aged 18-25 years were not being actively recruited.

The Chairperson said that 865 Foreign/White employees constituted 10% of the total professional qualified employees. She asked what SAA was doing to improve recruitment and training to correct this figure.

Ms Hajaig asked if there were any foreign Black employees in the company.

Mr Gololo asked if the Apprenticeship Programme included training of Black foreign employees to accommodate the regional airlines in Africa.

Mr Manqele said that foreign technicians were indeed trained in the Apprenticeship Programme because each time SAA flew into or took off from countries in Africa, a Line Maintenance Technician was required to work on the aircraft. A limitation was that technicians were licensed to work on a specific aircraft which meant that not every technician could work on any aircraft. SAA training capability was limited to the aircraft which SAA flew and aircraft owned by other companies could be maintained by technicians on a third party basis.

Ms Hajaig asked if SAA personnel in Africa were trained in South Africa.

Mr Manqele said that the legal requirement for training of staff, especially the cabin crew, was that after a certain amount of flight hours, they would return for training.

Mr Mokoena asked if servicing of aircraft was performed in-house or outsourced.

Adv Coetzee said that servicing of aircraft was performed primarily by SAA Technical, which was a subsidiary of the SAA group.

Ms Hajaig asked if SAA Technical extended skills training to SAA personnel in the Southern African Development Community (SADC) regions and if SAA had a plan to accommodate and enlarge its training capability in terms of South Africa’s new NIP as SAA could provide skills training that encompassed not only civil aviation but other sectors to the economy as well and as a developmental state, every resource needed to be utilized and one of the shortages in our country was lack of skills.

Adv Coetzee said that SAA was investigating the possibility of establishing the SAA Technical Training School as a Maintenance and Rehabilitation (MAR) hub for the SADC region. Skills training in support of those regions and in line with the NIP formed part of that strategy.

Mr Van Dalen asked if he was correct in saying that since SAA was thinking about establishing a MAR, that SAA Technical was no longer for sale.

The Chairperson said that she had failed to inform the Committee that SAA Technical was not being sold.

Mr Van Dalen said that he had seen an advertisement for the sale of SAA Technical.
The Chairperson added that failure to withdraw the advertisement was a legal risk for SAA.

Mr Gololo asked why BBBEE procurement spend had decreased from 43% in 2009 to 42% in 2010.

Adv Coetzee said that 42% was the year-to-date performance only. She added that SAA had a BBBEE initiative to improve on the rating.

Ms Crooks said that two factors could drive the decrease in BBBEE procurement spend: the mix in spend by the supplier or the absolute rating and the accreditation associated with that particular spend. A key initiative for SAA was to improve on the subsystem/database to track those factors in a more proactive manner in order to improve on the spend.

Mr Gololo asked why it had taken over 18 years to introduce the Draft Disability Policy.
Adv Coetzee said that she could not answer for what happened in the past but since the current CEO and Board were focused on people, people with disabilities were being given priority.

Mr Sonto asked how long the Clean-up Project had been in existence, what the progress was to date, and the prevalence of invalid contracts and debt irregularities were within SAA.

Adv Coetzee said that the project had been initiated late the previous year. The aim was to complete the clean-up before the end of the current financial year in March 2011. An extensive audit had been undertaken to establish what remained to be done in terms of cleaning up the irregularities.

Mr Gigolo asked if safety announcements could include other languages and if people with hearing disability were assisted either with sign language or other.

Adv Coetzee noted the question and said that crew would assist passengers in this regard and were required to speak in more than one language.

The Chairperson said that a check-list would be mailed to the Executive Office to plot plausible dates so that SAA could report back to the Committee. The Chairperson excused herself.

Ms Hajaig, who was asked to be Acting Chairperson, said that due to time constraints, questions would be compiled and mailed to SAA for answers.

Adv Coetzee asked the Committee to bear in mind that a number of the initiatives covered in the presentation were currently being worked on and SAA would like the privilege of signalling to the Committee when a comprehensive presentation on those could be made, rather than making presentations in pieces.

The Acting Chairperson thanked SAA.

Consideration and Adoption of Third-Term Committee Programme and Adoption of Committee Report on Oversight Visit to Alexkor were postponed due to lack of a Committee quorum.

The meeting was adjourned.