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South African Airways (SAA)
SOEs, like SAA, will continue to act as a massive drain on South African resources.

South Africa has had a murky history with regards to state-owned enterprises. For decades many companies have been subject to the control of the remarkably inept South African government, and it is this chokehold of the markets that has landed us in the most dire of circumstances. Entities that are protected by legislation morph into monopolies, resulting in a stifling of competition. Time and time again these legislated monopolies bank on taxpayer rands to bail them out of the repurcussions of what seems to be chronic underperformance. Below is a list of industries that are overshadowed by state-run monopolies that, if deregulated and privatised, will yield far greater returns to the citizens of South Africa.

Aviation

The South African aviation industry has, to a certain extent, been deregulated since 1991. This deregulation resulted in great growth within the industry and consequently higher levels of competition between various airlines. This greater competition was to the benefit of South African consumers as prices were kept in balance through this market competition, despite SAA being continuously bailed out by the South African government.

The Airports Company South Africa has also been partially privatised but the final step still needs to be taken. Unfair competition sanctioned by the South African government is being maintained through keeping SAA as a state-owned company. Notwithstanding the fact that SAA has a horrible profit making history, the airline keeps being bailed out by our government. With each bailout, the airline loses incentive to deliver better quality service.

The South African government should look at the successes of airline privatisation as guidance. British Airways, Iberian Air and Air France have all been privatised which in turn led to huge growth and improvement in services. Rather than following in the footsteps of the eight previous “turnaround” strategies of SAA and wasting R16 billion we should look to the worldwide move towards private and competitive airlines as a model worth following.

If the South African government ever decides to take the wise decision to privatise our national airline we will finally see an airline that is dedicated to its customers and not to the deployed boardmembers that sit at the helm of this sinking ship.

Power production

As certain is the perpetuity of time, so too is the granting of Eskom bailouts. One cannot help but wonder at the persistence with which the government continues to pursue failure.

The problem is not a management or structural issue at Eskom, but instead a structural flaw of our energy market. As with the aviation industry and SAA, Eskom has little incentive to pursue innovation and better service delivery when bailouts are all but guaranteed. This state-owned power producer will continue to fall short of the lowest standards of service and innovation as long as it has the indulgence of a guaranteed income and an insured failure.

Independent power producers (IPP’s) in South Africa are our future. If the South African power production market is decentralised more capital will naturally flow into more efficient energy alternatives. South Africa is well placed to reap the benefits from our vast amounts of sunshine and long coastlines for solar and wind power.IPPs that risk capital to develop technologies to produce power should be the competitors of Eskom and not the suppliers where Eskom fails miserably. By privatising Eskom, the power-hungry and short-sighted politicians are eliminated from the equation, and are instead replaced with enterprising individuals who are better qualified to provide quality services.

Railways

South Africa has the tenth longest rail network in the world. Yet the state-created rail monopoly has only resulted in disinvestment and considerable economic damage.

The clearest and most recent example of the failures of our national transport company is the Transnet Durban-Gauteng fuel pipeline that opened nine years after starting construction. Costs for this project spiralled from R12.7 billion to R30.4 billion. The recent, and very much controversial, Canada-USA fuel pipeline is twice as long, yet it cost 35% of what the Transnet version cost. This is indicative of the ineffectiveness of Transnet.

Our extensive railway network is vastly underutilised and inefficient. Only two Transnet rail lines make a profit. This loss is made despite a huge demand for alternative logistics and transport options. Furthermore, the commuter routes in our cities and between our biggest cities are not utilised. South Africans instead turn to privately owned bus or long distance shuttle services. The appalling management of the South African railway network has very much contributed to the overburdening of  roads, as well as to the great amounts of interprovincial traffic. Prasa posted a loss of R1.2 billion in 2015 in addition to very many other fiascos, such as the wasteful purchasing of the incorrectly sized train-carriages for our railways.

Ending this monopoly and opening the market brings new opportunities not only for South African businesses, but also for the South African people. We need to get South Africans on the move. We need to get goods moved around and to get our people to work. By getting more freight and traffic onto our rails we will reduce damage to our roads and highways.

Conclusion

Imagine South Africa had only a single grocer where all South Africans had to buy groceries. Imagine that this grocer was placed in this position because legislation placed it there and the same legislation prohibited any other grocers. Imagine this legislation was enacted because the government felt that everyone should be able to have access to groceries.

Why would this company want to have better services for its customers when it is the only or by far the largest grocer in the country with no competition? Why would this company want to sell better, fresher and more products if it knew that by the end of the year government will purely make up for any shortfall or loss that it makes?

It seems ridiculous when we imagine only Pick n Pay as our national grocer. The same ludicrousy exists within the state-legislated monopolies of our aviation, power production and railway industries.

  • Gillian Benade

    On point.

  • Harald Sitta

    To the point. By the way, in the state monopoly grocery system no groceries and if in shop, rotten!!

  • Med rapper 12

    But then how would they loot? 🤔

  • ammajs

    Hasn’t worked in the UK. In fact we now have the worse railways in Europe and the energy marked is regarded as “broken” with consumers being ripped off on an annual basis.

    • Paining

      Problem remains the human factor in either system. Inefficiency (public) on the one hand and greed (private) on the other. The inefficiency in itself is supported by self-interest of politicians which is greed, so I guess that greed is the common factor which ever way we decide to go.