Forget China: Ethiopia Is The Business Model South Africa Needs To Follow

Forget China: Ethiopia Is The Business Model South Africa Needs To Follow
Jacob Zuma seen here with Dudu Myeni

AFRICANGLOBE – Why is Ethiopian Airlines, headquartered in poor Addis Ababa, more successful than SAA, which is based in Africa’s richest region of Gauteng?

Next time President Jacob Zuma sends a government delegation outside the country to learn how other governments run state companies he must consider an unlikely tutor, Ethiopia.

Poor as it is compared to South Africa, Ethiopia can teach our government officials a thing or two on how to run state companies profitably without bleeding state coffers.

Ethiopian Airlines has reported a record-high net profit of R2.2-billion for the financial year ending June, up from last year’s R1.98-billion.

While Ethiopian Airlines makes billions and expands into new markets, our national carrier, South African Airways (SAA), is bleeding money and retreating.

SAA is bankrupt and survives on loans guaranteed by the government.

Its managers have failed to produce sound financial reports. It was recently placed under the political curatorship of the national Treasury.

This after Dudu Myeni, SAA’s chairwoman who has been learning on the job but shows no signs of improvement, clashed with the Department of Public Enterprises and senior executives over the airline’s direction.

And there have been reports, so far not denied, that Myeni takes instructions from Zuma, who is clueless about airlines.

For many years our airline has been subjected to a string of scandals, political interference and incompetent appointments.

What was supposed to be the nation’s pride has been turned into a shabby company which burns taxpayers’ money like its fleet does fuel.

It must be hurting to the most dedicated professional employees who want SAA to succeed but watch helplessly as ignorant appointees drag it to its knees.

In 2014, while the fractious SAA board intensified its typical fight with the latest chief executive officer to be forced out, Ethiopian Airlines was declared as the largest airline in Africa in terms of revenue and profit.

Why is Ethiopian Airlines, headquartered in poor Addis Ababa, more successful than SAA, which is based in Africa’s richest region of Gauteng, closest to the most developed city of Johannesburg?

The most obvious answer is that unlike South Africa, the Ethiopian government has appointed a competent chief executive officer.

His knowledge of the aviation industry does not start and end as a passenger.

Tewolde GebreMariam, who was appointed chief executive in 2011, has been with Ethiopian Airlines for 30 years, starting in 1985 as transportation agent in Addis Ababa.

He worked through the ranks and got postings as area manager in Saudi Arabia and the United States. In 2006 he was appointed chief operating officer.

SAA has no history of appointing chief executives with comparable pedigree, who combine relevant experience with solid business qualifications.

GebreMariam has qualifications in economics and business administration.

Unlike SAA, Ethiopian Airlines does not have a chairman who is learning on the job — and failing at it.

Ethiopian Airlines has a long-term plan: Vision 2025. SAA, with its high turnover of executives, cannot set a long-term vision. Its short-term turnaround strategies never get implemented in full.

Whoever is in charge, usually not always the best available, invariably encounters political thunderstorms, forcing them to make a U-turn.

But there could be another compelling reason for SAA’s failure: politicians believe running down the airline has no adverse consequences.

Our politicians are readily prepared to sign endless guarantees for SAA to plunge into debt markets.

Ethiopian Airlines, on the other hand, has no option of failure, as its government cannot afford big loan guarantees.

Its failure would mean the failure of the country itself. Ethiopia depends on the airline to propel its growing economy.

In-transit accommodation is growing fast around Addis Ababa Airport. With it tourism, construction and job creation. A number of Addis Ababa’s hotels are getting a facelift, thanks to the success of the airline.

Ethiopian Airlines is an African success story that holds lessons for our government leaders — only if they have the capacity to appreciate this.

So, next time our government officials visit China to lick the shoes of Chinese leaders while claiming to study business models, they should go via Addis Ababa and take some notes.

 

By: Mpumelelo Mkhabela