Lessons from the Past: How Political Interference Destroyed ATC

A Business Discourse on State Enterprise Management- Part One.

A number of recent Government actions and pronouncements indicate ATCL, the new ATC,  might be moving in the same direction as its predecessor; a definite path to failure. Aircraft have been purchased by hard cash–by the Government, the board of directors is over-sized, management is being instructed by the Government on what to do, critical administrative positions are being filled by political appointment. History is repeating itself.

President John Pombe Magufuli Receives recently purchased Bombardier Q400 NextGen aircraft from Canada to revamp the State airline ATCL

President John Pombe Magufuli (in red tie) receives recently purchased Bombardier Q400 NextGen aircraft from Canada to revamp the State owned airline ATCL

 

By Jaston Binala.

 

Tanzanians are currently elated the dead State owned airline, Air Tanzania, is back in the skies,  an act that is literally reminiscent of exhuming  a dead ‘person’ from the grave. What is missing is discussion on how this airline failed in the past—how it was placed into the grave between 1977 and 2015–to be a management lesson for days to come.

Research indicates the state airline formed in March 1977 as Air Tanzania Corporation (ATC) –now renamed Air Tanzania Company Limited (ATCL)–was actually destroyed by Government political interference. Yes, the corporation suffered from management weakness, but the weakness was in fact something of Government design research shows.

Political interference in the management affairs of ‘the first edition’ of ATC denied managers freedom to operate like an independent business. And, unfortunately, the second edition of this airline seems in danger to be moving in the same direction.

To form this airline’s first edition, which,  for purposes of this presentation, will be called ATC (as opposed to the second edition which will  be called ATCL) the Government, under the late Mwalimu Julius Kambarage Nyerere bought all the aircraft with hard cash after doing away with leased aircraft.

ATC was established on 11 March, 1977, to operate local and international routes suspended in the wake of break-up of East African Airways (EAA) which was owned jointly by Tanzania, Kenya and Uganda. ATC initially leased one Douglas DC-9-32 5Y-ALR from Kenya Airways and a Boeing 707-331 YN-BWL from Areo Nica.

The leased aircraft were an insult to President Nyerere. He decided Tanzania should buy its own aircraft with hard cash, and that is what happened, although purchase figures were not readily accessible during research.   ATC acquired two Boeing 737-200s and four Fokkker Friendship F27s and four smaller de Havilland Twin Otters. The purchases were made by State House itself through a State House official named Bokhe Munanka.

All the aircraft were purchased by hard cash.  At the time of conducting this small research project, ATCL, which had taken over all ATC assets and liabilities, had an outstanding debt of Tsh. 133 billion (about USD 60 million) owed to contractors who did NOT have documentary evidence to support their claims;  suggesting that ATC owed people money but they could not prove they received the goods and  services.

An evaluation made by Ernst & Young in 2009 found that the airline’s current net worth (at the time) was  a  negative Tsh. 26 billion. In the year 2015 the airline was still technically insolvent, where technical insolvency refers to a company being bankrupt but owned by a ‘a person’  who pledges to inject money from other sources.

But how did ATC get where it was?  Research  found   four serious management problems  that may have been the reason this government airlines failed  during its ‘first edition.”

Ethiopian Airlines represents the best Airline on the African continent. In fact it competes on the list of the world’s  best airlines.  Ethiopian Airlines is a Government parastatal like ATC, but it operates independently as if it were a privately owned company. It is virtually independent from Government interference. It was reported overseen by  a very small board of directors; at the time of research the board of directors was reported to be about  four board members—both well versed with airline industry issues.

HISTORY REPEATING ITSELF

 

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ATC has always had a huge board of directors. The board of directors has traditionally comprised of about 10 members—all of them political appointment wish zero experience in the airline business.

President John Pombe Magufuli recently picked the Chairman of the  new Board of Directors comprising seven people, and the ATCL Director General. Thes two positions have always been presidential appointments. The Board of Directors will be chaired by Engineer Emmanuel Korosso, appointed by the President on September 15 when he also appointed Engineer Ladislaus Matindi as the new ATCL Director General.

The two  presidential appointments will oversee ATCL,  the new ATC edition revived by two Bombardier Q400 NextGen  aircraft from Canada, bought with hard cash at a cost of 46.6 million US dollars (over 90bn/-).  The President has also affirmed the government has allocated money to buy another two aircraft, a 160-seater aircraft and another plane with capacity to carry over 240 passengers. All to be bought with hard cash.

“If we purchase the aircraft that carries 240 passengers, customers will be assured of direct flights from Dar es Salaam to China or US and our tourists from China, US, Russia, Germany and other countries will comfortably arrive in our country,” the President recently said.

But, like its predecessor, ATCL is 100% Government property. It will be managed by political directives. Immediately after the two Bombardiers arrived and started operataions, the Minister for Works, Transport and Communications, Professor Makame Mbarawa, appointed five  new ATCL board members to assist the two presidential appointments, bulging the size of the board to seven people.

The Minister named the new board members as Dr Neema Munisi, a lecturer at the University of Dar es Salaam (UDSM) and an expert in international management and good governance in financial institutions; and Mr Ibrahim Mussa, who is the Director of Marketing and Tourism at the Tanzania National Parks Authority (TANAPA). He named others to be Dr Omary Mbura, also a lecturer at UDSM and an expert in business and marketing, Dr Mussa Mgwatu, who is the Director General of Tanzania Electrical, Mechanical and Electronics Services Agency (TEMESA) and Engineer Leonard Chimagu, who is a manager at the Tanzania National Roads Agency (TANROADS).

It was not immediately clear how many of these board members have suffient understanding of the airline industry. Then the Minister issued a directive instructing this board to start firing people who had held the state airline together while on its death bed. Media reports said immediately after unveiling the new board of directors, Prof. Mbarawa expressed dismay over the existing top ATCL management, directing its overhaul.

“If you think you should scrap the entire leadership, it is within your discretion to do so because we now want efficiency so that we can excel in the airline business, which is very competitive,” the Minister was quoted as directing the board. History seems to be repeating itself.

Research determined effective, efficient and productive airline boards of directors are lean, containing anywhere between two and four board members. This is an important requirement because the airline industry requires speedy decision maning, according to  Rogatian Mfinanga, Shaaban Mtambalike and Jones Msokwa. the three former ATC members of staff who were part of the people who spoke to me during the small research. The former ATC employees held senior management positions before retirement.

An airline works better with a small board of directors because it is faster and easy to convene a small board of directors during an immergency than it is convening a big board. Some serious decisions in the airline industry require speedy board decisions. It is difficult to convene a large board of directors because  the airline might be wanting a quick decision at the time when the many board members are scartered  across the country doing personal errands at a time  the company needs a decision in 24 hours.

An example of speedy decisions that often come up in the airline industry include purchases. There maybe an aircraft for sale at good price, or even spare parts. If you wait for too long to make a purchase decision somebody else makes the purchase and the opportunity is lost. Research respondents said Mozambique Airline (LAM) is among the best managed airlines in Africa. The board of directors comprises about four people.

INDISCIPLINE

office-blockResearch also determined the Government placed incompetent people in critical decision-making positions, and that when competent management was placed in authority, political interference disturbed the correct functioning of the company.  The over-riding research conclusion became that political interference was the main reason ATC collapsed. ATC lacked operational independence since inception in 1977–which consequently worked against entrepreneurship and therefore failure.

Staff indiscipline was identified among many problems in the airline—particularly in the finance department– but indiscipline in a business or any organization for that matter, suggests serious management weakness–which leads to the next question: How and why is management weak in an organization?

Management is weak when you have incompetent people in decision making positions, and this was observed to have been the case at ATC, especially after the 1985 general election when incompetent people were placed in important decision-making positons for political reasons.

At formative stage during the first phase Government under Mwalimu Nyerere, it was determined important to have disciplined pilots flying ATC aircraft; and  it was for this reason that ATC  hired 10 Air Force pilots and 20 aircraft engineers from the Tanzania Air Force. Civilian pilots replaced airforce pilots at a later stage, after which civilians became pompous, self seeking, caring more about what they could get from the airline, and less on what they could give to the airline.

A docket was sent from Dubai at one time, reporting that the aircraft had all its seats filled with passengers travelling back to Dar es Salaam. But when the aircraft landed at the Dar es Salaam International Airport as it was called at the time, empty seats had been stuffed with boxes of imports and no passerngers were there. An observer walking through corridors at the airline’s head office in Dar es Salaam in 1992 found document files stacked or thrown on the walkways without any order whatsoever. The staff did not care one way or the other.

A management expert called Henry Fayol observes that “discipline is what the leaders make it….  Many times indiscipline is due to managerial faults, lapses.” But like all other state owned enterprises, ATC was managed by the Government through an executive management structure reporting to the Board of Directors.

Members of the Board of Directors were Government appointments, picked from various sectors of the economy, with the intention to bring into the Board diversified experience. Experience in the airline industry was not important.  The parent ministry was the Ministry of Transport.  Board members did not need to have any knowledge of the airline industry, raising a critical business question: How do you manage something you don’t understand?

ATC was formed at the peak of Mwalimu Julius Kambarage Nyerere administration in 1977. Then Tanzania got a new President in 1985 after the general elections. The new President, Mr. Ali Hassan Mwinyi changed leadership at ATC’s parent ministry to suit his political taste.

Mr. Steven Kibona became Minister of Communications and Works, replacing John Samuel Malecela who had held that ministerial position since 1984. Malecela had replaced Guntram Itatiro. Then the new President appointed a radio presenter-turned-politician, Mustafa Nyang’anyi, to become head of the ATC Board of Directors.  It was a Presidential decision, a Government decision; a radio presenter was now incharge of an airline—a specialized line of business known to need specialized management skills.

In 1981, President Julius Kambarage Nyerere had appointed Harith Bakari Mwapachu to lead the airline. Mwapachu was brought into the airline to replace a manager named Lawrence Adabu Mmasi who held this position for some time as Mwapachu attended management training.

History indicates the airline started operations politically, hastily, after the collapse of the East African Community in 1977, using Tanzanians who had been working for the East African Airwys (EAA). Political interest—not business interst seems to have always been at the centre of the airline’s operations.

In 1978 Lawrence Adabu Mmasi was picked by the Government to head ATC.  Mmasi was trained in Finance Management and was being moved to the new airline from his position as National Bank of Commerce (NBC) General Manager.

During those years, as seems to be the case now, senior parastatal positions were Presidential appointments. A person held such a post after being vetted to avoid national security risks. Although Mmasi was a qualified finance management professional, ATC workers who had been in the defunct EAA considered him a bit of an alien in the industry because he was not an aviation industry person.   He had NOT come from among them, but rather “from without.”  Yet, the appointments during these formative years seem to have been reasonable.

In 1981, President Julius Kambarage Nyerere appointed Harith Bakari Mwapachu to replace Mmasi.  Harith Bakari Mwapachu was a seasoned management professional. He came into ATC leadership with a long stretch of management record behind. Mwapachu  had worked as CEO at the parastatals National Development Corporation (NDC),  the State Trading Corporation (STC), the Board of Internal Trade (BIT) and as Principal Secretary at the Ministry of Water.

Mwapachu received his management training first from the University of East Africa at Makerere in Uganda, and later at the specialized management training institution–the  Arthur D Little (ADL) School of Management at Cambridge Massachusetts in the USA.

Many of the professors who taught at ADL were full-time professors at the Harvard Business School and were also global consultants attached to one of ADL’s Global Management practice areas: Technology, Strategy & Organization, Corporate Finance, Operations, and Risk Management. Mwapachu later took short courses on aviation while working as ATC’s Chief Executive Officer.

During the Mwapachu’s tenure as ATC Chief Executive Officer between 1981 – 1986, three people worked in the accounts and finance section.  One Mr. Mushi, holder of the accounting certification of ACCA obtained in the UK worked as Director of Finance.  Mushi, one of the workers inherited from the defunct East African Airways, had worked in the finance section of the defunct airline and was therefore both qualified and experienced. He was assisted by the CPA holder Charles Wagofya hired after ATC was formed.  The two professional accountants were assisted by a former EAA accounts section employee, Burhan Mohamed,  a worker who held no professional certificates but highly experienced.

At a later date ATC developed two sub-sections handling human resources management.  In the beginning, there was one section led by the Director of Personnel, a position held by a former East African Airways worker who had no training in human resources management, Alfred Carere (pronounced as Karere). He was originally a Dar es Salaam-based air ticketing officer.   But this was transitional.

The human resources section was modified during the Mwapachu era to create two sections: The Manpower Development section was created to train aviation industry workers.  This section was managed by a person with training in human resources management, Obed K. Muhembero. The second section was called Personnel Administration, the section which fell under the jurisdiction of the Personnel and Administrative Manager, Jones Moses Musokwa.  Musokwa  had graduated  with  Bachelor of Arts in Economics from the University of Dar es Salaam and a Master of Arts in Public Administration from Carleton University in Ottawa, Canada.

After the 1985 general elections, President Ali Hassan Mwinyi appointed the radio presenter Mustafa Nyang’anyi to the position of ATC Board Chairman and the Nyerere set-up starts to crumble. Nyang’anyi once held the political position of Deputy Minister in the parent Ministry; he had held the  position of Deputy Minster in the parent ministry in 1974–some three years before ATC was formed.  But the new Chairman of the ATC Board of Directors lacked training in management.

In 1986, President Mwinyi appointed Silvanus Rwebangira to replace Harith Bakari Mwapachu. Rwebangira had graduated from Makerere University with a degree in Marketing. The new ATC CEO attended Makerere University at the same time as former President Benjamin William Mkapa. Rwebangira had joined Makerere University after his advanced level education at Pugu High school in Dar es Salaam. But he had some experience in the industry.  Rwebangira was the first Commercial Director of ATC in 1977 and had been short-listed as potential CEO of the airline at the time.

In 1989, President Mwinyi appointed Emmanuel ole Kambainei to the position of ATC Managing Director to replace Rwebangira.   Ole Kambainei was a trained aeronautical engineer, but he had never had management training. A aeronautical engineer was now incharge of airline management, under supervision of a radio presenter.

Kambainei re-organized the Manpower department to make it operate under the Corporation Secretary. As result Makwaia, the head of manpower became answerable to Apolo Maruma,  the corporation secretary,  an equal in rank before the re-organization. This created problems in the manpower department. The corporation lost direction when Rwebangira was removed, according to research findings.

The corporation nose-dived under Ole Kambainei, proving a person’s academic qualifications could be one thing, while the person’s capacity to lead others is something else”

In 1992 President Mwinyi made another change at the ATC.  Ole Kambainei was replaced with Melkizedeck E. Sanare who is said to  have graduated from the University of Nairobi with a Bachelor of Commerce (B Com) degree.  Among steps Sanare took at the airline during that year was to firing many people through what was called a redundancy clean-up.  He demoted all directors to start with a new team.  But ATC was a dead horse now.

Management experts say indiscipline in a work place can result from improper co-ordination, improper delegation of authority and improper fixing of responsibility.

A number of recent Government actions and pronouncements indicate ATCL, the new ATC,  might be moving in the same direction as its predecessor; a definite path to failure. Aircraft have been purchased by hard cash–by the Government, the board of directors is over-sized, management is being instructed by the Government on what to do, critical administrative positions are being filled by political appointment. History is repeating itself.