The government has recently moved to give up its majority stake in South African Airways (SAA). A move that must come as a great surprise for all people cognisant of our ruling party’s ideology and modus operandi. For a government obsessed with control and having access to state-owned enterprises to pillage, giving up 51% of a vanity project they have bailed-out for more than R60 billion doesn’t seem in-character.
SAA has been a black hole for the fiscus for ages, with the government only recently committing to no more bailouts despite a lack of profitability. This commitment to no more bailouts precipitated a recent borderline privatisation, where 51% of SAA has been acquired by a private consortium called Takatso, containing Global Aviation and Harith.
The agreement is a strategic partnership between government and a private partner, hopefully leading to profitability and better competitiveness by the state airline.
But does it go far enough?
Granting a private partner 51% of the enterprise implies an acknowledgement that it was government involvement causing the rot. And this is true. State-owned enterprises are inherently flawed, lacking the incentives to succeed, and merely acting as tools for the state to increase their petty control over the economy. But if the government wants to save SAA by bringing in the private sector, why not sell it off completely? Why retain 49%? Vanity? That isn’t a good enough reason.
If the government actually cared about saving SAA, they would fully privatise it.
As the deal stands right now, SAA will apparently no longer incur public debt. That is good, but also raises the question of why the state still holds 49%. What’s their role? Where’s their liability? So many unanswered questions.
The only conceivable reasons to retain the state involvement is so they can retain petty control over an airline that should long be dead (and that even unions oppose), while not losing face by giving up a vanity project they’ve sunk so much public money into. Oh, and they don’t want to lose a potential cash-cow.
Things become clearer, however, when it is revealed that Harith’s, one of the two companies involved with SAA’s new owner, chairman is Phillip Jubulani Moleketi, ex-Deputy Minister of Finance under Thabo Mbeki. A member of the ANC. Moleketi and the majority of other board members have ties to government institutions like the Public Investment Corporation. This is not to say they still do government’s bidding, but it is certainly a concerning coincidence that the investor government chose to do business with happens to have some many former (and current) officials and deployees on its board.
The ideal privatisation is transparent, non-political, and based on a combination of consultation with present stakeholders (productive stakeholders!) and an open auction system whereby any investor can take part.
This is not that. Like many cases of pseudo-privatisation around the world, this doesn’t allow for the virtues of privatisation. Privatisation is the democratisation of state entities. It gives an opportunity for inefficient and controlling state enterprises to now be owned by citizens, while following economic laws and being held accountable through the market.
Like with the Power Ships, government officials seem to have gone behind the back of the people to pick private players that they wanted. Even seemingly transparent tender systems are prone to corruption, as it all comes down to the arbitrary whims of a politician.
True privatisation needs to be non-political. This SAA privatisation stinks of politics.
I am not optimistic about SAA, even under its new dispensation. I suspect that its new structure might be used to shuffle around loot and hide corruption, using the guise of the private sector to hide the public sector corruption.
The 49% will inevitably be sending money to fund the 51%, which contains potential cronies and allies of the ruling party. And when it all fails, the private sector will be blamed, dashing the hopes of the true privatisation we need and being used as justification for increased nationalisation. The government knows that many South Africans have very selective and short memories. They will blame privatisation for the failure, ignoring the even worse failures under complete nationalisation.
This SAA privatisation is anything but. It appears to be a ruse to restructure SAA so they don’t have to liquidate, while still allowing them control over their vanity project, and access to its coffers.
Frankly, why does SAA even exist? National carriers are white elephants. They serve no practical purpose. The Air Force exists for strategic aviation, not SAA. I am not even pro-privatising it. Its assets should be divided and sold. And the company should be no more. But the government would be too ashamed to do that, as they care more about their own petty wealth and reputation. Simply, they don’t want to lose face.
We need full privatisation, utilising a transparent system that ignores BEE, racialised politics, and disallows governments officials and politicians from being involved. Failing that, liquidate the company. Rather that, than keep it as a tool for corruption and a scapegoat for the apparent failures of their fake privatisation.
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Russell
Interesting to note:- Checking airline prices from Jhb – Cape Town, SAA do not even have a price. Best Price is SAFAIR.
But here is the point I want to make:- In any business venture, profitt is always the bottom line. Without this, there is NO reason to even enter into a venture. To be competitive, SAA need to look at the entire costing structure and completely revamp their pricing. Several years ago (2018) the cost of an airline ticket to Doha was less than half the SAA price flying on Qatar. Everything is wrong with SAA. And no sane business venture would touch it with a bargepole.