SAA’S MODEL SPELLS BLEAK FUTURE FOR SOES
IT HAS degenerated into an ugly war of semantics. No sooner had Minister of Public Enterprises Pravin Gordhan announced the new public-private partnership (PPP) for SA Airways with a “black-owned” strategic equity partner (SEP), Takatso, tongues were wagging: “Is this privatisation or not?”
To Gordhan it is an “entirely home-grown solution” between the government and the private sector to relaunch SAA as a “sustainable, competitive and transformed airline".
Ideologues such as the ANC’s coalition partner, SACP claim victory over Gordhan in its role in averting the airline’s “liquidation” and “wholesale privatisation”.
He needs to come clean to what extent the SACP claims are true and how beholden the PPP will be to its neo-socialist agenda for national assets, which scoffs at the very thought of being a burden to the Treasury through constant recapitalisation and “the conservative notion of fiscal consolidation involving budget cuts”.
Maybe the SACP has to exaggerate its importance to believe in its own relevance. In contrast, its ideological rival, the EFF have condemned “the privatisation of SAA”, warning it is a precursor to fast-track the sell-off of other SOEs.
If this is the public-private model President Ramaphosa is championing then the future for SOEs is bleak. SOEs are the bane of Finance Minister Tito Mboweni’s plans to stabilise the country’s growing debt – 80.3% of GDP for 2020/21 and projected to rise to 88.9% in 2025/26, according to Fitch. Gross loan debt is projected to increase from R3.95 trillion this year to R5.2 trillion in 2023/24.
Last year, he reluctantly forked out R10.5 billion to keep SAA afloat, grounded and under “business rescue protection” as it was, which saw 80% of staff laid off and at a cost of R7.8bn to the taxpayer.
The plan is to relaunch domestic and regional services by September and international services thereafter. Gordhan is committed to underwriting SAA’s historical debt of R14bn. A perfect storm from a rush to Africanise SOEs at any cost under the government’s Black Economic Empowerment (BEE) strategy, gross mismanagement and over-employment and wanton state capture during the Zuma era transformed functioning parastatals into their current sorry state.
It is astonishing that due diligence on almost every facet of SAA’s operations and structures, and crucially the future of its subsidiaries, has yet to be carried out.
The ailing subsidiaries – Mango Airlines, SAA Technical and Air Chefs– before the Zuma kleptocracy, were once the pride of the group, profitable and well respected within the industry.
Takatso will own 51% while the state 49% complete with a “golden share"of 33% of the voting rights. The emphasis on the “black-owned” consortium, comprising Harith Global Partners and Global Aviation (GA), is revealing. But there is a stench of conflict-of-interest, cronyism and back-door ANC involvement.
The state-owned Public Investment Corporation (PIC), castigated by the Mapti Commission in 2020, has a 30% stake in Harith, according Swiss aviation intelligence network, ch-aviation. Consortium chair and Harith co-founder Tshepo Mahloele is the former corporate finance head of PIC. The two are financially intertwined in several ways. So is GA, the patsy in this “deal of the century".
Talk of a public offering down the line to allow ordinary South Africans to have a stake in listed national assets is far too premature because it would only be possible if the relaunched SAA is profitable.
There is scant information about the shareholders and financial strength of Harith and GA. How their promised R3.5bn injection of funds will relaunch domestic and regional services is a mystery. GA is an aircraft leasing company. The consortium’s strengths are in running local budget airlines, leasing and charters, not a major airline with a “world-class” global presence.
Why Gordhan did not explore a pan-African solution is a mystery..