South African Express Airways & Safcol turnaround progress

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Public Enterprises

14 June 2017
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Meeting Summary

SAFCOL and South African Express Airways (SAX) briefed the portfolio Committee on Public Enterprises on their turnaround strategies and the implementation thereof.

Briefing by SAFCOL on progress made in the diversification strategy and turning around the company

According to SAFCOL, the forestry industry has only utilised 1 224 456 ha or 1% of land in South Africa, However, Forestry South Africa represented growers of over 93% of the plantation area in South Africa, 11 corporate companies; about 1 300 timber farmers; and 20 000 small-scale growers. The strategy that the board must apply needed to be significant enough to ensure that SAFCOL tapped into the industry. Timber-frame structures has a lot of potential for growth and government can utilise it to build schools, clinics, timber bridges and even RDP houses.

In terms of the diversification strategy and part of the turn-around strategy, SAFCOL planned to partner with the Department of Agriculture, Forestry and Fisheries (DAFF) to utilise its category B and C plantations in order to expand forestry land. This will assist in expanding the footprint and better position the organisation in the industry and make profits. The organisation was developing Biomass Collection Plan and costing model for feasibility in the Eskom Torrefaction Plant Project. In addition, a feasibility study was conducted for Eco-Tourism and Property Management and soon EXCO will be submitting the recommendations to the board.

The financial results for the 2016/17 financial year are not fully available but the team was delighted to report that even though not yet audited, SAFCOL reported a profit of R127 million. Return on equity has increased by 0.1%, whilst revenue growth increased by 9.7%. The organisation will come back to the Committee once the auditors have completed the audits to present its audited outcomes.

Members asked questions about the shareholder compact for SAFCOL and to what extent SAFCOL was engaging the Departments of Public Works and Basic Education for their buy-in and how are those engagements going. Members also wanted to know what was being done at SAFCOL to address the misappropriation of assets, land claims and whether SAFCOL was able to get the buy-in of the affected communities with regards to the inclusive model.

The Committee asked where the timber-frame structures are located; what the real financial projections are and what outcomes are foreseen out of the summit. Members asked questions on the cost of the re-branding of the organisation and how the delegation team and the board envisioned combining IFLOMA and SAFCOL as one company.

Briefing by the South African Express Airways (SAX) – turn-around update

SAX reported that the Minister announced that there was a need for a change in the organisation due to operational inefficiencies SAX has been experiencing which were very substantive. The former CEO was pushed out of the business because there were substantive differences and after consultation with the shareholders and the board looked at other stakeholders within government and identified someone who will be able to change the culture of the business and who has executive experience – within the portfolio of public enterprises. A number of issues have been identified for him to look into – technical division, costs of charter aircraft (there was a need for mechanisms to be put in place in order to foster the change immediately).

In terms of the challenges facing the organisation particularly regarding the weak balance sheet, the intervention was to recapitalise and acquire more aircrafts in order to improve the asset base and the balance sheet. In terms of legacy debts, repayments will be negotiated with the creditors, and seek for shareholder injection instead of opting for loans as well as getting rid through sale of all the obsolete stock. The low appetite of creditors for SAX will be addressed through strengthening the balance, improving relationships with financiers and stabilising business operations to gain credibility. The challenges around the high cost structure will be addressed through cost cutting and containment and reduce aircraft lease costs. In terms of aircraft maintenance backlogs, SAX will intervene through shareholder cash injections and establishing good relationships with the suppliers and the Original Equipment Manufacturer as well as enhancing supply chain management processes. Lastly, on flight schedule disruptions, SAX will increase aircraft dispatch and return all aircrafts to service and replace the returned aircrafts

Members asked questions on how SAX tied the interventions and the short-term strategies into the financial objectives. They asked questions on compliance and how far ahead SAX was in terms of pre-empting the audits. They wanted information on SAX’s loan repayment plan, on its gong-concern state and what the position of the organisation was on corruption. .

Meeting report

Opening remarks

An apology from the Minister was submitted and the Deputy Minister, Mr Ben Martins departed early to attend to Cabinet.

Briefing by SAFCOL on progress made in the diversification strategy and turning around the company

Mr Rudolph Mabece, Chairman of the Board, SAFCOL, took the Members through the presentation. He noted that in terms of the strategic significance, the forestry industry has only utilised 1 224 456 ha or 1% of land in South Africa, However, Forestry South Africa represented growers over 93% of plantation area in SA – 11 corporate companies; about 1 300 timber farmers; and 20 000 small-scale growers. The strategy that the board must apply needed to be significant enough to ensure that SAFCOL tapped into the industry. Timber-frame structures has a lot of potential for growth and government can utilise it to build schools, clinics, timber bridges and even RDP houses. This was a market that was not fully utilised by government, so the strategy needed to ensure that the organisation fully turned itself around to start reaping the benefits of the industry. The benefits of the timber-frame structures included short periods of construction and energy efficiency (thermal productivity). Timber-frame structures are also easily extended and cost effective.

Progress report on diversification strategy and turn-around strategy

Mr Mabece stated that with regards to IFLOMA, the board resolved end of “care and maintenance”, and developed an operationalisation plan in order to explore partnership opportunities. The organisational structure was approved in February 2017 and the structure was aligned to the strategy which was currently being implemented. The board took it upon itself to channel some funding towards re-branding SAFCOL because it felt that it was necessary to help extend its footprint and raise awareness in the industry. Re-branding the organisation will also assist in exploring export markets.

In terms of the diversification strategy and part of the turn-around strategy, SAFCOL planned to partner with the Department of Agriculture, Forestry and Fisheries (DAFF) to utilise its category B and C plantations in order to expand forestry land. This will assist in expanding the footprint and better position the organisation in the industry and make profits. The organisation was developing Biomass Collection Plan and costing model for feasibility in the Eskom Torrefaction Plant Project. In addition, a feasibility study was conducted for Eco-Tourism and Property Management and soon EXCO will be submitting the recommendations to the board.

The financial results for the 2016/17 financial year are not fully available but the team was delighted to report that even though not yet audited, SAFCOL reported a profit of R127 million. Return on equity has increased by 0.1%, whilst revenue growth increased by 9.7%. The organisation will come back to the Committee once the auditors have completed the audits to present its audited outcomes.

He noted that going forward as part of the turn-around strategy, for forestry industrialisation there was a planned round-table discussion on 20 June to engage with the other stakeholders in the industry which will be followed by a summit later in the year – the summit will include a variety of stakeholders around the country and abroad to assist in expanding the footprint and the acquisition of more information about the forestry industry and how South Africa can branch into other markets. This initiative was inspired by the fact that South Africa was far behind in the forestry industry - about 40 years behind, so the board was looking to engage stakeholders from other countries on how SAFCOL can fast-track its operations and partner with countries that have the skills and have utilised the industry in their countries.

Discussion

Mr R Tsedi (ANC) said the shareholder compact as it related to SAFCOL was an issue that came out very sharply as the budget report was being finalised and it should be made available to the Committee. The promotion of the culture of wood was a very good concept and he asked to what extent SAFCOL was engaging the Departments of Public Works and Basic Education for their buy-in and how those engagements are going, if it was indeed happening.

The misappropriation of assets was another issue that was identified before and he wanted SAFCOL to shed some light on this and what was being done to address the issue. On the new model of the land claims that was mentioned, he wanted to know if there was buy-in by the affected communities. It was not enough to talk about the concept whilst not seeking buy-in from the affected communities. Where was the timber-frame structures located? The only thing that was mentioned about this was the schools in KwaZulu-Natal but where were the rest of the structures that SAFCOL managed to construct?

Mr C Hunsinger (DA), said he was excited to see the turn-around strategy happening and also see the financial returns. However, he asked about the real financial projections in terms of revenue because that would be the priority (and the revenue benefits of these concepts, economic growth of the involved communities and job creation). He also wanted to know at what stage was SAFCOL at in terms of the bullet points outlined on page 36 and what was the intended process on each of those and if there was a time schedule that would feed in a form of revenue going up. He asked why SAFCOL believed that the summit was necessary and what was the foreseen outcome of the summit.

Mr M Gungubele (ANC) expressed his appreciation for the presentation, especially the positive narrative on the improvement of the revenue of the state, poverty reduction and economic growth as well as sustainable development. There was a lot of potential in the forestry industry but the goal was to move away from the potential to actual plans of how this can be implemented in the country and what it can do in terms of the National Development Plan (NDP) goals so that funding can be allocated accordingly/appropriately. SAFCOL made a strong point about market diversification and product diversification, so he proposed for a move towards the next step: the implementation phase.

The Chairperson said it was clear that Members needed to see the implementation of the strategies and certainty on whether the strategies are working or not. She asked how much it cost SAFCOL to re-brand, whether it was really necessary to re-brand, and why did SAFCOL feel that it needed to re-brand. On the turn-around strategies, she asked if the team can explain how they envisaged combining IFLOMA and SAFCOL as one company as this was not very clear on the presentation.

Mr Mabece responded and said that SAFCOL has not directly engaged the Department of Basic Education, but has with engaged the Independent Development Trust (IDT). SAFCOL was not happy with that interaction because it reflected the same challenge of bad attitude that has been persisting regarding wood in many other government stakeholders. SASSA has showed an interest in timber wood structures, but when the people who were going to assist and materialise this interest left SASSA, the whole thing fell apart. This was the challenge and the main reason that SAFCOL thought it was important to have the summit because it will bring together all the relevant parties. In addition, this will clarify why the country was so behind in terms of utilisation of wood. On the timber-frame structures, he suggested that perhaps it would be best to invite the Committee to where these structures are located. The team will put together a document that will address the issues around finance and investments.

On re-branding, he said that when the current board was appointed in August 2015, at the time there was a world forestry conference that took place in South Africa for the first time. At that conference all the spokespersons that spoke from South Africa, including Ministers and government representatives did not mention SAFCOL or referred to it – they only mentioned SAPPI and Mondi. After the conference SAFCOL went on the ground to ascertain whether people were aware of it or not and then discovered that even people on the ground know of Komati Land Forest, but not SAFCOL. It was about that time the board came to the realisation that the company has been operating in silos. IFLOMA was part of the turnaround strategy of SAFCOL. There was promising business in Mozambique to even get some land for forestry and expand the operations of SAFCOL. IFLOMA was also getting its special attention as well and this will include looking at partners that will bring in value to the organisation.

Mr Gabriel Theron, Acting Chief Executive Officer, SAFCOL, asked for more details on the question regarding the misappropriation of assets.

Mr Tseli clarified and said that it was on the misappropriation of assets in the organisation which came out of the analysis of the performance of the entity. If there was no information at the moment, it can always be shared with the Committee at a later stage.

Mr Mabece stated that this may related to the investigations that have already been reported on, SAFCOL was experiencing delays on the part of the Hawks and the National Prosecuting Authority (NPA) regarding the cases that were lodged and these are external factors that are outside the control of the entity. Everything within the control of SAFCOL has been dealt with decisively.

Mr P Gordhan (ANC) asked about the charges, and how many people it affected within the organisation as well as the nature of these charges.

The Chairperson asked how far the investigation was and the returns that SAFCOL will recoup from the investigation.

Mr Mabece replied that SAFCOL did not have control in terms of what both the Hawks and NPA were undertaking regarding the investigations. All internal processes have been fully applied and action has been taken against employees implicated on the charges.

The Chairperson said SAFCOL dismissed its CEO, CFO and COO of which are senior positions in the organisation and were charged, so the Committee needed the details and what charges were laid against the above mentioned people and why they were dismissed.

Mr Mabece responded to say that the former CEO and CFO resigned during the process of the investigation, in December 2015.

Mr Godhan asked what SAFCOL was investigating.

Mr Mabece replied that when the new board started at SAFCOL, the previous board had already dealt with a number of issues. The new board consolidated the work that was previously done with its own undertakings and as a result new charges were brought forward due to new information that came from the new board’s investigation. The investigation was covering compliance with Public Finance Management Act (PFMA) infringements, procurement issues, theft and performing audits to ascertain whether the assets were in actual existence. There was also collusion with customers of SAFCOL and general theft that was taking place and about 40% of the trucks that were moving around the forest had false registration plates. These are some of the things that came up in the report.

Mr Theron added to say that the organisation did share in the previous Committee all the information with regards to the investigation, and it did a specific presentation of all the charges and the process as it unfolded. The presentation will be updated in terms of where the investigation was now, and what has happened since then forwarded to the Committee.

Mr Tsedi said that the Deputy Minister stated specifically that the delegation must update the Committee on the issues that were raised in the past. The Committee had hoped to get a progress report today on all the issues that were raised previously by the Committee and what has been achieved or has not been achieved thus far.

Mr Theron responded that it was a matter of oversight that the information was not included but going forward it will be noted. On SAFCOL’s re-branding, he said he was not aware of SAFCOL prior to his appointment as a board member. The reality was that SAFCOL was not well known within government spheres. The forestry industry has so much potential to elevate the company to Eskom’s level. Hence, the board needed to re-brand the company to ensure that it became well known within the relevant spheres of government and in other regions and countries. SAFCOL was actually the third largest forestry company in Africa. SAFCOL was far behind in comparison to the rest of the countries in the world and again this was where the re-branding and the summit come in to bridge that gap. This will bring together all the architects and engineers to change the mindset of the people and the attitude they have towards wood, but most importantly changing the demand side of wood and build more and more infrastructure such as schools and clinics to help facilitate the demand side. South Africa was 40 years behind on this industry and the plantation was also very small. Wood has a 25 year rotation cycle and there was a need to start now to get all the relevant stakeholders involved through the summit.

Importation of furniture from China was overtaking the local producers and manufacturers, because the country cannot compete. South Africa had the product and the skills available and yet local furniture shops are closing down because it was cheaper to bring the products from overseas. This was something that needed to be addressed and consequently changed. There are also other challenges locally pertaining particularly to procurement. There was a struggle to procure amongst SOEs, as well as focusing on how communities get involved in the building process and not allow outsiders to come into the industry to do jobs that should be done by communities. There can be huge costs savings if the challenge in procurement amongst SOEs could be dealt with.

The details of the projects can be shared with the Committee at a later stage. The company’s balance sheet was very good because the company has a low debt and a bigger asset base, but cash revenues are low and down. In order to get the projects going, partnerships must be formulated and funding must be raised to up-scale projects, but without appropriate cash base this cannot be achieved.

Total budget for re-branding was R8 million, but the re-branding was going to be done in phases and there was a company assisting with that. Thus far, it has cost SAFCOL R3 million over three years, but this did not include the re-branding of all the offices.

The Deputy Director-General (DDG), DPE, noted that when the current board came in, it had stacks and stacks of forensic reports that were waiting for them and they need to be applauded for the work done up to this point, notwithstanding the fact that the executive team was not helpful. The new board has delivered on the new strategy and as they are learning and discovering new information the strategy needs to be revised accordingly. With regards to the shareholder compact, this issue has been raised before and it should be raised again with the Minister because it was outside the control of SAFCOL. On land claims, he said the Department has engaged with the Department of Rural Development and Land Reform (DRDLR) and there was an agreement to expedite the claims on the forestry side and an agreement that the land lease model was an appropriate model and the values extracted are not significant enough for communities and may lead to problems in the future.

Mr Gordhan asked what went wrong with the supervision of the Department in SAFCOL that gave rise to the pile of forensic reports and what was working and what was not working. What is the gap between what is being collected and what could be collected in terms of revenue?

The DDG responded to say for a business that was 20% integrated, the revenues that SAFCOL was realising now are the maximum revenues that it can achieve at the moment. When the organisation gets the vertical integration to somewhere around 60%, it needs to leave some space for SMMEs. The organisation hoped that the category B and C forests of the Department of Forestry which are sitting at 30% unplanted can come into the SAFCOL fold so that more revenues can be realised. At the moment the Department was comfortable that the maximum revenue ceiling was reached given the current circumstances.

On what went wrong in the oversight, he said the Department got to know about the forensic reports that were not being attended to and so the Minister was alerted. The structures that were applied surely yielded some results, but if you have people in the organisation that are dedicated to misappropriating assets and funds, then the problems will continue.

The Chairperson announced that the Committee will soon do an oversight on the Sabie plantation and perhaps after that oversight visit the Committee and SAFCOL will engage more.

Briefing by the South African Express Airways (SAX) – turn-around update

Mr George Mutema, Chairman of the Board, (SAX) Directors noted that the Minister announced that there was a need for a change in the organisation due to operational inefficiencies SAX has been experiencing which were very substantive. The former CEO was pushed out of the business because there were substantive differences and after consultation with the shareholders and the board looked at other stakeholders within government and identified someone who will be able to change the culture of the business and who has executive experience – within the portfolio of public enterprises. A number of issues have been identified for him to look into – technical division, costs of charter aircraft (there was a need for mechanisms to be put in place in order to foster the change immediately.

Mr Victor Xaba, Acting Chief Executive Officer, SAX, gave an overview of the key development that he has undertaken for the past 66 days, some of those developments included the following:

-Workshop with EXCO and with senior management to develop a 101 day recovery plans;

-2017/18 Corporate Plan Review - this involved dismantling the 21 aircraft operational schedule because it was unrealistic and came up with a plan that will be able to cover the operational and fixed costs until the organisation has recovered;

-Road shows undertaken with employees and roll out of short to medium strategic plan in Johannesburg, Cape Town, Eastern Cape; and

-Key stakeholders were also engaged, such as the Auditor-General; lenders (2 of the 4 banks); Civil Aviation Authority; Airline Association of Southern Africa; South African Airways (SAA); and strategic media and industry public relations events.

With regards to key business imperatives, he noted that the state of SAX business is underpinned by five major business imperatives included the following key areas:

-The commercial viability of SAX was linked to diminished competitive edge (SAX was competing with private established brands) and the reliance on SAA for commercial enabling systems;

-Operational efficiencies driven by aircraft availability, optimum fleet strategy, cost efficiency, and the transfer of the Aircraft Maintenance Organisation to Denel;

-Human Capital value, related to management and employee morale/culture, accountability, performance, appointments in line with competencies and critical skills retention; and

 -Long term financial sustainability, with the requisite capital injection lieu of recapitalisation requirements and the pending consolidation of State Owned airlines.

Across all imperatives, SAX was left wanting and without leverage. The financial/operational sustainability of SAX was negatively impacted by the state of affairs across these imperatives. There was a combination of contributing factors (largely) inherent and external. A realignment and focussed effort need to be taken jointly in addressing the factors:

-Management to remove inherent factors and drive repositioning in regulatory and finance stakeholder environment;

Shareholders to drive policy aspects that are eroding the competitive edge of the airline,

In terms of the challenges facing the organisation particularly regarding the weak balance sheet, the intervention was to recapitalise and acquire more aircrafts in order to improve the asset base and the balance sheet. In terms of legacy debts, repayments will be negotiated with the creditors, and seek for shareholder injection instead of opting for loans as well as getting rid through sale of all the obsolete stock. The low appetite of creditors for SAX will be addressed through strengthening the balance, improving relationships with financiers and stabilising business operations to gain credibility. The challenges around the high cost structure will be addressed through cost cutting and containment and reduce aircraft lease costs. In terms of aircraft maintenance backlogs, SAX will intervene through shareholder cash injections and establishing good relationships with the suppliers and the Original Equipment Manufacturer as well as enhancing supply chain management processes. Lastly, on flight schedule disruptions, SAX will increase aircraft dispatch and return all aircrafts to service and replace the returned aircrafts.

Discussion

The Chairperson said SAX has not yet gone to its AGM and after they have gone to the AGM the organisation will then be invited to come present its Annual Report.

Mr Gungubele said regular engagements with the entity are needed in order to identify the progress that has been made. The new CEO has underlined the intentions very well in terms of the strategies that will be undertaken to deal with the legacy issues pre-existing before his appointment. However, the Committee needs to know what changes will actually be happening in the organisation going forward.

Mr Hunsinger said there are a couple of things that need to be repaired such as reputation, credibility and financial damage. On page 12, there was an expression of where SAX comes from, and if these objectives are projected carefully and implemented, he asked how the CEO would tie that into the financial objectives. In addition, how long can that be carried and blended with expenses to get into the positive. He asked what was in place to address the reoccurring problems, because SAX was still sitting with the same aeroplanes. In terms of compliance, he wanted to know how far ahead was SAX in terms of pre-empting the audits so that when it was at fault there was a contingency plan already set up.

Mr Tseli said he was impressed by the presentation, but next time the Committee will appreciate being taken through the progress that has been made since today’s meeting as a form of an update. He wanted to know where the organisation was on the Nedbank and RMB loans in terms of payment. The last delegation indicated that the organisation was paying off the loan in instalments.

Mr Gordhan said he was not excited as much as his colleagues about the presentation and he asked how long the board has been in place.

Mr Mutema replied that the board was in its second year of the first term. 

Mr Gordhan wanted to know what key concerns the board had with the previous CEO and management team. Did the board not think that it was slightly reckless by allowing SAX to slide in those two years and is the organisation still teetering on the margins? Corruption played a significant role in the fall-out of SAX and he wanted to know where the organisation stood on corruption. He asked what customers are going to experience differently going forward and how will the organisation go about increasing the market share, because without the market share there will not be any revenue generated. Talking to the banks was not an indication of a good reputation. In fact the banks have lost confidence in both SAA and SAX. What is going to be different this time? What are some of the structural things that are going to be different? It was all about getting the basics right. Some of the basic things included looking into the number of planes available versus the number of planes flown, the gap between seats availability and seats occupied – these are the ratios that will need to be looked into.

The Chairperson said it seemed that there are strategies put in place to address low morale, but she was worried about the existing management that was actually working with the former CEO. There was an uncoordinated schedule that was raised before between the three airlines, Mango, SAA and SAX. Is that now fixed in a manner that will help SAX to grow? Is there now a coordinated schedule existing? There were also problems of labour costs and skills, particularly regarding the pilots and technicians and she asked if that was still the case. In terms of routes that SAX did not utilise, she asked if the organisation was now considering re-opening those routes. SAX has been experiencing a lot of hiccups, but if there are clear strategies in place to deal with those challenges, she asked that the delegation share those strategies with the Committee – particularly around the issue of delays. Can the strategies be divided according to their time lines and turn-around times so that when the Committee is conducting its oversight and monitor it is aware of what it needs to focus on at that point in time, and be able to advise appropriately?

Mr N Singh (IFP) said he was not as impressed because previously the presentation was also very good but there was no implementation and no progress on what was presented to the Committee.

Mr Mutema replied to say that in terms of corruption, there was a whistle-blower matter that was presented to the board relating to corruption and upon scrutinising the matter the board agreed that it must be referred to an independent body because it required a further investigation. The board appointed a forensic auditor to look at the matter, and then it was referred to the Hawks and the CEO was still engaging with the Hawks on the matter.

Mr Gordhan asked what the nature of the complaint was.  

Mr Mutema responded that the allegations related to a particular supplier within the North West operations where a new route between Johannesburg and Mafikeng was being established by SAX. There was a service provider that was proving the service of ground-handling, it was alleged that the subsidised amount which came from the North West operations was flowing between certain individuals within SAX and the supplier that was appointed was appointed through a flouted process. Hence, the matter was referred to an external body due to the fact that the board felt there may be individuals within the organisation that may be conflicted or may have an interest in the matter. There were other whistle-blower matters which relate to issues of spares, management of stock and maintenance that are being dealt with internally by the board.

With regards to the concerns that the board had with the former CEO and whether or not the board was reckless, the 2015/16 Annual Report will reflect that the current board since its operation moved the organisation from a negative revenue point to a positive one  (operating profit of R190 million). The concerns about the former CEO were mainly around issues of operating licence that was suspended at the time, and this was a serious issue. Some other issues were on internal controls and the board thought that the CEO just could not continue with the business.

Mr Mark Shelly, CFO, SAX, said in the 2015/16 financial year the organisation recorded an operating profit of R197 million which was up significantly up from the prior year and a net profit of R17 million. The organisation concluded with the Auditor-General around the 2015/16 going-concern assessment and it has signed it off. SAX has successfully negotiated re-structure loans with Nedbank, and with RMB. On the Nedbank loan, a quarterly loan repayment has been proposed, because Nedbank felt that it did not have insight on the banking facilities of the organisation and this will help the organisation to reserve the cash for those loans. The restructure has extended the tenure of the loans, because SAX was tied to what was a five year loan which then ended up being a three year loan due to the issues of the guarantee tenure. In terms of the going-concern, SAX remained highly geared with debt/equity levels of about 600% so it was a very tight balance sheet and it has been for a number of years. SAX was servicing high levels of debt which affected the cash flow and impacted on the profitability. Suppliers look at the risk tolerance and suppliers from overseas are expecting cash up front. Sales and bookings are reported daily; this was being tracked and it was a lot more focused now. In terms of revenue growth opportunity, there was limited space and SAX cannot take pellet load cargos. There was an opportunity to change the agreement with SAA and that agreement has been signed it was now on the implementation stages.

Mr Xaba said on linking the profitability to increasing morale in the organisation, it is not just about morale but the culture of the organisation – it lacked the a commercialised culture. SAX had planned to fly 21 aircrafts, but there was not enough aircrafts at the time to service the 21 aircraft schedule and so this was leading to failure. He then suggested a different approach of decreasing the number from 21 to 14 aircraft although this would reflect and directly impact on revenue, but the focus should be on the bottom line. He requested the management to present him with the number of aircraft schedule that can be maintained with the current number of aircrafts and be able to cover the fixed costs. In addition to his request, he asked for a profit that will cover the going-concern and keep operational costs low, and identify the hidden costs, and negotiate supply discounts. Vacancies at SAX amounted to about R45 million, but the organisation had only R9 million. The focus was on the critical vacancies and the rest remained frozen until such time that the organisation can afford more vacancies.

Ms N Mazzone (DA) said it was a sad situation that customer complaints go unattended at SAX, and that she wrote to the Chairman several times but to no avail. The situation was absolutely appalling and it has now gotten to a stage where people are very terrified using SAX because they do not know whether they will be bumped out of a flight and make their connecting flights.

The Chairperson thanked everyone and the meeting was adjourned. 

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