Shooting down all justifications for the folly that is SAA
When Russell Loubser, the former long-time CEO of the Johannesburg Stock Exchange walked away from the board of South African Airways (SAA), you know it had to be bad.
Loubser is up for the toughest of challenges and transformed an incestuous trading den into a world-class stock exchange. But SAA was beyond the pale for him — as it is for most South Africans, who wonder why this postapartheid state-owned dinosaur persists, constantly crawling to its shareholder with begging bowl outstretched.
Free Market Foundation director Leon Louw says SAA is probably the only state-owned enterprise that does absolutely no good for SA. “We could argue Eskom, SABC, Alexkor have some benefit to the people, but SAA offers no advantage whatsoever. It’s the most extreme, obnoxious and obscene example of redistribution of money from the poor to the rich.”
Louw explains that constant SAA bail-outs are not a taxpayer expense, as is often described, but rather a reallocation of money. “We do not go to the taxpayer for additional funds – rather, we take money from an already designated spend in the budget, and usually money that is largely spent on the lower income and poorer segments of South African society.”
The twaddle and clichés for having a national airline frustrate Louw no end. “The national flag-flying justification is nonsensical, and the SAA logo has become a source of national shame rather than pride. The concept of a national stateowned airline is outdated and is now only found in very badly run emerging countries.”
The cry that strategic routes should be serviced by SAA also falls flat for Louw, as you can fly anywhere these days with multiple airlines. and all decent destinations are easily accessible.
The tourism argument is also unconvincing as there are far cheaper and more effective ways of promoting the country as a holiday destination. Persisting with this embarrassment doesn’t do much for local procurement, as it is very much an import business.
Louw showcases the stark numbers. Post the Mandela presidency, under Transnet and then the government, around R46bn has been lost/wasted by SAA. The latest request for a recapitalisation of R10bn is not enough and assuming no further losses we would be R7bn short.
An injection of R17bn would take SAA to a value of zero. That’s a truckload of money — or social houses, schools, degrees, hospitals and grants. Surely the self-indulgence that ensures free flights for life for SAA staff and numerous government officials and politicians, must stop.
Another frequently lobbied criticism is that these all too frequent bail-outs make the airline sector uncompetitive. The playing field is notably unlevel when a subsidised state business competes head on with the private sector, and SAA has the blood of several failed private airlines on its hands.
It also limits other airlines, doing tourism in SA no favours. Its behaviour discriminates and distorts the market and is unfair to the consumer. Our regulators need to rework our competition law and tackle instances when the state competes directly with the private sector.
The current incarnation of the SAA board comes in for a huge drubbing from Louw. He bemoans its lack of proper aviation expertise and concludes that the board is overseeing a reckless business. Company law could potentially saddle board members with huge personal liability for allowing this. But they would undoubtedly rely on the repetitive handout from government whenever required. “It is reprehensible to run a business assuming this will always happen,” says Louw.
SAA could potentially be rescued from its downward spiral by a radical, startling and immediate shakedown. But, echoing most of SA, best that we close it up in the least disruptive and least costly way. “Let’s shut this folly down,” says Louw.