Factories lift the economy
GROWTH in the economy was stronger than expected in the first quarter, with a robust rise in factory output countering a steep drop in mining output.
Growth in gross domestic product moderated to 2,7% from 3,2% in the previous quarter, well above consensus forecasts of a 2,3% rise, writes Mariam Isa.
The increase was driven by factory output, which rose 7,7% compared to the final quarter of last year, up from 4,2% in the previous quarter, Stats SA said.
The unprotected strike in January accounted for more than half of that loss, with 120 000oz lost due directly to the stoppage and a further 21 000oz as Implats mines in the Rustenburg area struggled to return to full production. The financial loss to the company from the strike was well above R2bn.
Statistics SA reported yesterday that mining production contracted by 16,8% in the first quarter, mainly due to the strike.
CAPE TOWN — National carrier South African Airways (SAA) did not raise the sensitive question of a recapitalisation by the state yesterday during a briefing to Parliament, but repeatedly highlighted the fact that its balance sheet “does not look good at all” particularly in view of the fleet-acquisition strategy it wishes to pursue in future.
Public Enterprises Minister Malusi Gigaba and the Treasury are discussing the merits and size of a recapitalisation, but Mr Gigaba insisted at a media briefing recently that only he would be commenting on the matter in future. This was after SAA CEO Siza Mzimela hinted that SAA would be seeking R6bn from the state to fund its growth strategy, strengthen its balance sheet and fleet renewal.
This would be in addition to the R1,3bn subordinated loan SAA already had from the government, and the R1,6bn “going-concern” guarantee it had obtained to underpin its cash requirements.
Mr Gigaba emphasised the strategic importance to SA of having a national carrier and Ms Mzimela was at pains to point out the significant contribution the airline made to the economy, both in terms of jobs and as an input into gross domestic product, in her briefing to the public enterprises committee.
The head of SAA’s audit committee, Zakhele Sithole, said SAA was in the process of restructuring its balance sheet and was hoping that its shareholder would support this initiative. Its highly geared balance sheet was not in good shape.
Ms Mzimela told the committee that the airline industry internationally was facing extremely tough times, especially due to the “dramatically” higher fuel bill which had cost SAA an extra R1,3bn net in the period to March after taking into account the recovery of the fuel levy. On the plus side, however, passenger revenue had risen by 20% in the last quarter of 2011-12.
The future outlook was not any brighter, with airline profits globally set to decline even further in 2012-13. Nevertheless SAA was planning to extend its network of destinations, with two new ones in Africa to be added this year.
SAA was engaged in an aggressive programme to reduce its nonfuel costs, Ms Mzimela said, with the aim being to achieve cost reductions and “cost compressions” of more than R1bn in 2012-13.
This was critical to the sustainability of the airline. A significant investment in new fuel-efficient aircraft was also needed.
She said SAA expected to finalise a major aircraft order by year-end to replace the current nonefficient long-haul aircraft. Over the next five years it would also take delivery of 20 new fuel-efficient Airbus 320s to replace the existing short-haul fleet.
Ms Mzimela reported an 87% achievement for on-time performance of SAA flights — the best performance in 12 years — and utilisation of the fleet had also improved significantly. Mishandled baggage had declined 8%.
In a separate briefing to the committee, the Department of Public Enterprises’ acting deputy directorgeneral, Weekend Bangane, allayed concerns of MPs over the risk posed to Denel Aerostructures of having only one major client, Airbus, for which it is producing components for its A400M programme.
He said this year’s R700m state grant had enhanced the sustainability of the company in the eyes of other customers as was the commitment of Airbus to the company. Mr Bangane conceded, however, there were risks to the Airbus contract as Denel had to ensure it retained its highly skilled staff.
Denel Aerostructures has forecast reporting a loss of about R200m in 2012-13 and to break even in about 2016-17.