State should dump SAA despite new strategy, analysts say

● South Africa’s cash-strapped state-owned carrier SAA may have kick-started a turnaround strategy that will see the business break even in 2020 but industry pundits still believe the state needs to cut its losses and privatise it.

Speaking at a presentation on Thursday, CEO Vuyani Jarana said SAA was not attractive for any strategic partner at the moment and would need to first transform, which would take about two or three years.

The group reported a 23% drop in its market share and a R5.6-billion loss in its 201718 annual financial results.

The results come against a background of poor management and a lack of accountability for several years during the presidency of Jacob Zuma.

In an attempt to clean up state-owned enterprises, President Cyril Ramaphosa’s government has emphasised that the culture of dependency on Treasury bailouts must end.

Finance Minister Nhlanhla Nene, who attended the results presentation after the business had its first annual general meeting since October 2016, said he was encouraged by the new SAA leadership and was looking forward to the implementation and success of the new strategy.

However, Lumkile Mondi, an economist, said the worst was not over for the airline and that the state needed to make a complete exit.

“The focus should be on areas where the state can make a huge developmental impact. I don’t see why the state continues owning one airline, it just doesn’t make any economic sense.

“Resources are being wasted on stateowned enterprises that are never going to bring back any value to society.

“Leadership needs to stand up and really make those hard choices around those SOEs, including South African Airways,” Mondi said.

“How is that airline going to ever make money? We need new ideas as to how to deal with these SOEs, such as SAA, that were never really making money.”

Jarana said the new strategy would see the business reviewing some of the lossmaking domestic routes and non-core assets to manage costs, while domestically, Mango remains the area of growth for SAA.

He added that the business would cut the second daily flight to Heathrow airport in London from OR Tambo in Johannesburg from April 18 because it was making losses. Jarana said he hoped that the one daily flight would be profitable.