We pay, so we deserve to be told
SO SA Express, the stateowned airline, says it made a net profit over financial 2013. At an annual general meeting (AGM) held on Wednesday, its CEO, Inati Ntshanga, unveiled a profit of R650,000 compared with a restated loss of R366m in financial 2012. That’s a R365.3m turnaround in a year. Can these numbers be believed? Ntshanga says disclaimed audit opinions from previous years have been cleared, and adds that “the company is working hard to improve the audit report”.
All that does is underline the unacceptability of holding an AGM without the annual report and the annual financial statements. Perhaps the board has seen these, perhaps even the sole shareholder, the Department of Public Enterprises, has seen them — but the public hasn’t. And, as the tame mules who supply the money, we taxpayers, are indeed entitled to see them, as laid down in the Public Finance Management Act.
So just when are the audited annual financial statements for 2012 and 2013 going to be published?
This leads to another matter. The brief statement claiming SA Express has returned to profitability (was it really ever profitable?), says the airline expects “to update its fleet in the second half of 2014 with next-generation aircraft that will offer a comprehensive route network and improve on operational costs”.
On what basis does an insolvent company go out to buy new aircraft? Where will the cash come from? Will this new fleet be financed through state guarantees or a recapitalisation? Either way, taxpayers stand at the end of the line, the supine suppliers of ever more money to be frittered away by a government that pays little attention to the geese that lay these diminishing golden eggs.
While I’m on this subject, what has happened to the recommendation by the auditors that directors of SA Express who contravened the Companies Act should be criminally charged? I suppose everyone concerned hopes that if they do nothing, this unpleasant possibility will simply fade away.
In a broader context the fact is the private sector can do exactly what SA Express does, only much better. Instead, the government continues to crowd out the private sector. It’s not only in air space that it does this. Someone actually thinks the government can mine our natural resources better than private companies.
It is a concern and it has its roots in this developmental state philosophy which the South African Communist Party and its flag bearers have foisted upon the ruling party.
Another aspect is the remarkable financial result for financial 2013 achieved by Comair — but there’s a dark lining to this silver cloud. The company delivered a 29% increase in revenue (up at R5.4bn from R4.2bn) and improvement in profit after tax of R220m. Its headline earnings per share rocketed from 3.8c to 47.9c.
The dark lining is competition. It always was inevitable that Comair’s long and impeccable record, coupled with its extraordinary success in the past year, would stimulate competition. The executives running Safair Operations, owner of FlySafair, which has apparently secured a licence to operate commercial passenger flights between Johannesburg and Cape Town from the end of this month, are a savvy bunch. Their timing is on the button in the sense that they intend to pick up a share in the domestic travel market as the holiday season approaches.
Comair’s response has been to apply to the high court to ensure the legal requirements are upheld, in particular the matter of local ownership. As the law stands, the requirement is that for an airline to operate domestic scheduled flights it must be 75% South African owned. The law may sometimes be an ass but it’s still the law, so Safair, which has responded claiming adequate local ownership, is going to have to demonstrate this in court.
But it’s worth contemplating what the situation would be without this ownership requirement. An Emirates or Etihad would have popped up in a flash, and that would have spelt the end, before you could blink, for both South African Airways and Comair, which, given the current legal hostilities between the two, is a tad ironic.
E-mail: david@gleason.co.za Twitter: @TheTorqueColumn