The national carrier may be forced to ground to a halt if the latest messages hailing from Treasury are anything to go by. Paulina French looks at the ever-growing flights of fancy at SAA, in search of a redemptive wing of hope but the tale just seems to be bleaker and bleaker.
South Africa’s national carrier, South African Airways, hasn’t made a profit for six years. It is so marred by debt that it cannot focus at all on the growth of its business. At a time when the country should be capitalising on the potential growth in tourism, to get ourselves out of the current recession, we simply continue to plough money into its cavernous debt-depths.
The carrier’s current CEO Vuyani Jarana is well respected but I certainly wouldn’t want to be in his shoes. He has many tough decisions to make. Worse, the airline’s only shareholder, the South African government, is sending mixed messages as to its fate.
On 1 November 2018 in New York, Finance Minister Tito Mboweni suggested to investors that SAA should be shut down. “It’s loss-making. We are unlikely to sort out the situation, so my view would be close it down,”.
Then on 5 November, Public Enterprises Minister Pravin Gordhan stood before SAA staff and told them, “We need some courage from you now — the courage to stand up for the right things otherwise this airline will not be saved.”
Six days after the meeting with New York investors, President Cyril Ramaphosa rejected Mboweni’s suggestion that the government should get rid of SAA. Were SAA to be sold it would completely collapse the South African fiscus because it is so debt-laden said the president. Shutting down the airline would have a ripple effect as its frightful debts become immediately payable. It may still be feasible to consider an equity partner, although I am not sure there are many lining up who want to acquire this debt-mired balance sheet.
I cannot help but cast back to the Medium Term Budget Policy Statement (MTBPS), just a few weeks ago, when the just-appointed Finance Minister Tito Mboweni boldly proclaimed: “We must stop talking in contradictory terms”. He also said that “there should be no holy cows” referring to the need to take “more radical measures” and mentioning SAA specifically. Then again in the very same budget, we were told that SAA would receive a government bailout of R5-billion together with SAA-owned SA Express who were to get R1.2-billion.
It is predicted that SAA will require R22-billion over the next three years to be able to sort out the business. In the 2017/18 Financial Year, it reported a loss of R5.6-billion. Of course it’s taxpayers, you and I, that are funding this at the expense of other projects which would benefit far more people.
A project to build modern flush-system toilets in public schools and reduce the number of pit toilet deaths comes to mind. According to PassMark, a data-driven journalism project investigating issues around education, we are building an average of 462 toilets a year. “At the current rate that means it will take around 19 years to eradicate the pit toilets in the remaining 8,679 schools.”
Despite this, the BBC reported that the Sanitation Appropriate for Education (SAFE) Programme is to be funded in partnership with private groups such as the Nelson Mandela Fund and the UN Children’s Agency (UNICEF). It is alleged that it will cost in the region of R6.8-billion. In the MTBPS, Mboweni told us that there is a projected shortfall in revenue collection by SARS of R27.4-billion for the 2018/19 period. If this is true then it is likely that there will soon be no funds available to keep the national airline in flight. Sadly other State Owned Entities (SOEs) appear to be in much the same predicament.
Hopefully, there are upstanding people reading this who work for these SOEs. Like the whistleblowers and journalists who have exposed the corruption and looting across the national landscape, we commend you.
For your courage to stay on, to help to turn these constantly failing entities around. For doing what you believe to be right. Without you, South Africa would rapidly come to a crash landing. Thank you for sticking it out.