Harare- Air Zimbabwe, the struggling national carrier, has appointed Edmund Makona as its new Chief Executive Officer (CEO). With 38 years of industry experience, Makona brings a wealth of expertise to the role. However, the challenges being faced by Air Zimbabwe go beyond mere experience, as corruption, lack of transparency, and nepotism have significantly impacted the company. Rotating CEOs alone will not solve these issues; instead, it is crucial to prioritize transparency, eradicate corruption, and ensure independent decision-making within the organization. The frequent turnover in leadership, exemplified by the short tenure of previous CEO Ripton Muzenda, underscores the difficulties in establishing a stable leadership structure.
The issue of rotating CEOs at Air Zimbabwe is not the root cause of the organization's problems. Rather, it is the pervasive influence exerted by the government, resulting in subjective appointments based on political affiliations and a lack of independent decision-making. This is evident from the significant turnover of top leaders within a decade, with nearly ten individuals assuming the CEO role by 2023. The constant changes in leadership reflect deeper issues of nepotism and a management crisis within the organization. The government's track record of politically motivated appointments has raised concerns about transparency and the focus on fulfilling responsibilities. One such controversial appointment is that of Chipo Mutasa as the chairperson of Air Zimbabwe's board, which took place on February 6, 2023. Mutasa's appointment has faced criticism due to her history of leaving previous roles with substantial debts and financial losses, such as at TelOne and Rainbow Tourism Group (RTG). Despite these concerns, the government appointed her to key positions within Air Zimbabwe, which was already grappling with significant challenges, as well as on Mutapa Fund's board.
These appointments and the perception of politically motivated decisions have raised concerns about the government's approach to managing state entities and selecting individuals for leadership roles. Since the dollarization of the Zimbabwean economy in 2009, like said, the airline has witnessed a high turnover of leadership, with more than 10 changes in the top management positions. This frequent rotation of leaders indicates a lack of stability and continuity in the airline's management structure. The instability and frequent changes in leadership have detrimental effects on an organization's operations and ability to implement effective strategies. It disrupts the continuity of plans, hinder the development of a coherent vision, and create a sense of uncertainty among employees and stakeholders.
Peter Chikumba became CEO in 2010, followed by Inocent Mavhunga in 2011, and Edmund Makone from 2013 to 2016. Despite these changes, the airline struggled to achieve significant improvements. Subsequent acting CEOs, including Ripton Muzenda, Rainer, and Joseph Makonise, faced similar challenges. The frequent shifts in leadership suggest systemic issues within Air Zimbabwe, extending beyond the CEOs and highlighting the need for effective management and structural reforms. Tafazwa Zaza assumed the CEO position in November 2021, marking yet another change in leadership within the company.
Currently, Air Zimbabwe operates flights to six destinations, including Dar es Salaam, Victoria Falls, Johannesburg, Bulawayo, and Harare. However, the airline's limited route network highlights the need for expansion rather than solely focusing on bringing in new leaders. The challenges faced by Air Zimbabwe in generating significant profitability on these routes can be attributed to underlying internal issues stemming from the major shareholder. In comparison to more efficiently managed competitors like Fastjet, Air Zimbabwe has struggled to achieve profitability, particularly on domestic routes. Therefore, addressing these internal problems and enhancing operational efficiency is crucial to improving the airline's financial performance and expanding its footprint.
The newly appointed CEO inherits this challenging period characterized by significant debts that have resulted in the suspension of international routes. The biggest obstacle confronting the organization is corruption and a lack of transparency. These compounded challenges have contributed to the short tenures of previous CEOs, as they face resistance when attempting to address underlying issues. The acting auditor general's report for the full year 2022 (corresponding to Air Zimbabwe's 2019 fiscal year) highlights several alarming findings. Firstly, aircraft amounting to US$430.9 million were recognized in Air Zimbabwe's financial statements, yet no impairment testing was conducted on these assets, despite indications of impairment. Additionally, a discrepancy of US$92.4 million between the 2019 and 2018 balance sheets could not be accounted for by the management. The report also reveals that Air Zimbabwe failed to perform tax calculations for both income tax and deferred tax in 2019, and quarterly income tax returns were not filed. Consequently, it is unclear whether there was a tax liability or tax losses that should have been recognized. Furthermore, expenses totaling USD 1.8 million in the cost of sales were included without supporting documents, further raising concerns about the accuracy and reliability of reported expenses. These findings strongly suggest the presence of widespread corruption within the organization.
Latest report shows that Air Zimbabwe's fiscal year 2019 was marked by severe corruption and mismanagement, leading to a state of technical insolvency. The losses incurred during this period amounted to a staggering US$407.8 million, with total liabilities surpassing assets by US$380.2 million. The airline experienced losses of US$15.3 million, following previous losses of US$84.8 million in 2018. To achieve a turnaround, Makona must prioritize addressing these discrepancies and holding accountable those responsible for the corruption and mismanagement. However, given the history of short-lived CEOs, it is uncertain whether such actions will be taken. Without addressing these issues, securing rescue packages from internal or external investors will be challenging. Additionally, resolving the substantial debt owed to various partners is crucial, as by 2020, Air Zimbabwe had accumulated a debt of US$341 million, with the majority owed locally (92%) and the remaining 8% owed to foreign creditors. As a result of these challenges, the airline was placed under receivership in 2018 and has struggled to find a strategic partner.
Back in 2011, it encountered significant financial challenges, which led to the impoundment of its Boeing 737-500 in South Africa and its Boeing 767-200 in London. The impoundment of the aircraft in South Africa was a result of the airline's failure to settle a debt of US$500,000 owed to Bid Air Services for ground handling services. Similarly, the Boeing 767-200 was seized in London by American General Supplies due to a debt of US$1.2 million.
The airline has plans to resume intercontinental flights to London Gatwick once it has cleared its payment arrears with IATA. The goal is to operate four flights per week on the Harare-London route using B767-300 aircraft, starting in January 2024. To effectively address these challenges, it is crucial for Air Zimbabwe to have independent management that is not influenced by political interference.
Currently, Air Zimbabwe is confronted with a contingent liability of US$39 million due to an ongoing legal dispute regarding the ownership of an A320-200 aircraft. The claim for this amount has been made by SouthJet One, a special purpose vehicle (SPV) based in the Isle of Man. The dispute revolves around the ownership of the aircraft with registration Z-WPN (msn 1973), which is currently stored at Johannesburg O.R. Tambo, as reported by ch-aviation fleets advanced data. Additionally, another aircraft with registration Z-WPM (msn 630), owned by China Sonangol International through SPV SouthJet Two Ltd, has been stranded in Johannesburg since January 2014. These legal disputes further complicate the financial situation and operational capabilities of Air Zimbabwe.
These two aircraft were originally part of a lease agreement between the former Mugabe regime and China Sonangol International in 2012, facilitated through the two SPVs. However, the Zimbabwean government later claimed that the two A320s were donated to them in 2013, a claim that is disputed by SouthJet. This ownership disagreement has contributed to the legal and financial complexities faced by Air Zimbabwe.
Air Zimbabwe is currently facing bans on profitable destinations, which, if not lifted, could jeopardize its survival. In April 2022, the airline encountered another ban in European airspace, as a result of persistent safety concerns. In 2019, the airline was suspended by the Airports Company South Africa (ACSA) due to unpaid airport charges, indicating financial difficulties and operational challenges. In 2017, the European Commission issued a circular that banned Air Zimbabwe, under the leadership of Simba Chikore as Chief Operating Officer (COO), due to safety concerns. This ban resulted in the discontinuation of direct flights to London, which were previously popular routes for the airline. In April of the same year, all six Air Zimbabwe flights were grounded due to safety concerns, as well as the airline's failure to pay its employees and outstanding debts. Prior to the 2017 ban, flights to London had already been halted in 2012 when one of Air Zimbabwe's Boeing aircraft was seized at Gatwick Airport due to an unpaid debt. The British government also imposed a ban on its nationals from using Air Zimbabwe services as a result of these issues.
Due to that, Air Zimbabwe has experienced a decline in passenger numbers. The annual passenger count dropped to around 230,000, a significant decrease from its peak of approximately one million passengers in 1996. Travelers have sought alternative airlines for their domestic travel needs, resulting in reduced demand for Air Zimbabwe's services across all domestic destinations.
Considering the unaddressed underlying structural issues, it is improbable that any substantial developments will occur. The article suggests that although the ten CEOs possess talent, they have been unsuccessful in reversing the company's fortunes. This indicates two potential scenarios: either the CEOs were restricted in their ability to chart a strategic course due to politically motivated instructions, making it challenging for them to directly confront the primary challenges in their careers; or the government's appointments are driven by political considerations rather than merit, as demonstrated by the repeated assignment of leadership roles to individuals like Mutasa, despite a track record of failures. To effectively tackle the debt crisis, enhance profitability, and promote growth, the government must adopt a realistic approach. This necessitates prioritizing transparency and accountability, addressing issues such as aircraft maintenance, and expanding routes to boost revenue. Overall, the incoming CEO needs to play a pivotal role in driving these necessary changes.
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