File Image: IOL
JOHANNESBURG - In so many ways, the continued failure of our national carrier can be likened to the routing of the British Expeditionary Force (BEF) together with the French army during the Battle of France in May and June 1940, where poor training, weak man management and especially incompetent leadership sealed the fate of the Allies in spite of materiel superiority over the Germans.

Notwithstanding the warnings from Air Chief Marshal Hugh Dowding that every available fighter aircraft would be required for the coming Battle of Britain, perpetual political meddling demanded that critical fighter aircraft resources be allocated to the Battle for France, resulting in the loss of 195 fighter aircraft out of a total 261 sent to the continent - aircraft which would have been vital in the Battle of Britain had the fortunes swayed ever so slightly in favour of Adolf Hitler.

As the BEF began its long retreat to Dunkirk, the interference by politicians for additional aircraft continued and the fact that the vast majority of the BEF was rescued to fight another day owes nothing to the politicians, but everything to decisive leaders and the owners and crew of the little boats.

While the chaotic events of the Battle of France culminated in the miracle of Dunkirk - a snatching of victory of sorts from the jaws of defeat - one must ask whether the shambles that represent SAA are not analogous to the BEF’s disastrous continental campaign, and if a few inspired leaders with the support of “boat owners” will be able to replicate a Dunkirk moment which will save SAA not only from itself, but also prevent a domino effect which will further damage our economy and defer the dream of a better life for all.

The French generals, with few exceptions, were a disgrace in terms of leadership, which quickly translated into poor fighting morale and although the BEF was staffed with some highly capable officers and men, the facts confirm that quality was interspersed with sub-par units which were ill-equipped and poorly trained and when added to the mix of bad communication and the lack of trust between the leaders of the Allied forces, there was the inevitability of a doomed campaign.

So what of SAA?

If British and French structures were ill-prepared for the Battle of France, then nothing within our political or SAA leadership inspires any confidence, given that over the past 15 years we have been subjected to continual infighting and all too frequent turnaround strategies which are either still-born or characterised by complete failure.

The change of season inevitably heralds a raft of new non-executive director appointees and the fact that they accept their appointments and are prepared to sit on the board throughout the financial year creates the impression that there are significant gaps in their understanding of their collective responsibilities with respect to the Public Finance Management Act (PFMA), the Companies Act, other applicable legislation as well as their specific responsibilities with respect to the signing off of annual financial statements (AFS).

These require that they ensure that the statutory disclosures are correct and that the figures fairly reflect the financial position of the SAA group.

If the non-executive board members are the colourful annuals, then the evergreen perennial takes the form of the chairperson who waxes lyrical about corrupt management, but seems unable or unwilling to excise this particular form of aggressive cancer present within SAA.

And, if the paucity of prerequisite skills at board level over the years of a business as complex as the SAA group isn’t grounds for concern, then at executive level, the frequent appointments of acting chief executives with bogus qualifications or those that have been promoted from divisions within the SAA group where question marks exist over irregular procurement running into billions of rand should be enough to give any shareholder or creditor white knuckles.

And, while much of the rest of the SAA body is diseased, sight must not be lost of key service providers who have also been absent in action - an observation best illustrated by a recent investigation by the Independent Regulatory Board for Auditors into the performance of the external auditors of the SAA group.

The PFMA places the responsibility on the board of directors to ensure that the company’s assets are responsibly managed and protected and the most effective way of achieving this is to have internal control systems designed and closely monitored by the chief audit executive and his or her internal audit department.

It follows that if an internal audit department is dysfunctional, then internal control will collapse, which will lead to an entity’s assets, including cash reserves, being looted in the high risk area of procurement - and this is best illustrated by the widely publicised malfeasance at Eskom.

Now, imagine if the chief audit executive of SAA was to admit that his directors believed that he lacked accountability and if he was to confirm that independent quality assurance reviews of SAA's internal Audit had revealed significant weaknesses within SAA internal audit’s workflows?

And what if it was admitted that SAA internal audit working papers were inadequate for 2012, 2013, 2014 and possibly 2015?

Crisis point

And if imagination and “what ifs” became the reality, then would 2016 and 2017 be any different from previous years and would SAA not have jetted well past the crisis point with respect to internal control?

The external auditors don’t seem to think so, as they remain unflinching and resolute in their audit opinions contained in successive years, which confirm that “we have considered internal control relevant to the audit and have not identified any deficiencies in internal control which are considered sufficiently significant for inclusion in the report of the auditors” - certainly a view which beggars belief, even for those with only the most rudimentary understanding of audit procedures.

And it is the same external auditors who have blithely accepted the SAA board’s disclosed irregular, fruitless and wasteful expenditure of a miniscule R12million (a tiny fraction of 1percent of total procurement spend of R22bn) in the 2016 AFS.

Given the admissions by the SAA chairperson of rampant corruption, this figure is an insult to users of the SAA financial statements and one must ask whether the figure is downright disingenuous.

If the external auditors have been missing a good game, then consider that successive SAA boards have raised no concerns with respect to internal control and internal audit - perhaps these boards have not understood their responsibilities with respect to correct disclosure or perhaps they are not blessed with the necessary core competencies?

If one is to be brutally honest, the situation at SAA is far worse than that of the BEF in France in May and June 1940, and if we are to have a Dunkirk miracle then certain steps need to be taken to rescue SAA not only from itself, but to prevent a full-blown economic contagion.

The practical steps

* Non-executive directors must take a stand (like Dowding did in 1940) and refuse to bow to political pressure and decline to approve the 2017 AFS, which in all likelihood will have failures in statutory disclosure and misstatements similar to those of previous years and which will justify a “non-approval”. Should the political pressure be too great, then resign en masse.

* The external auditors have to interrogate all aspects of internal control and procurement. In the event that the board is coerced into signing off the 2017 AFS then it would seem that the pervasiveness and the materiality of admitted irregular and wasteful expenditure, together with the apparent internal control failure will justify the most damaging audit opinion possible being an “adverse audit opinion”.

* Refusal to sign off the AFS by the directors and/or an adverse audit opinion will render it impossible for any credit provider, in terms of its own governance requirements, to provide commercial funding to SAA and make it impossible to trade in what can only be described as a reckless fashion given the losses that are being incurred on a daily basis.

The only option remaining would be for the finance minister to sell off assets like Telkom and raid the government pension funds, which will result in the little boats of millions of state employees setting sail in revolt.

Simon Mantell runs the biscuit factory Mantelli’s that is based in Cape Town.

-BUSINESS REPORT