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SAA To Receive Another Government Bailout

Author: Jason Snyman
Date: 2019-07-14
State-Owned-Vampires, South African Airlines (SAA), Eskom, Denel and the SABC are set to receive further taxpayer-funded bailouts from the government this year. When will the madness end?

CEO of South African Airways, Vuyani Jarana, resigned last week, citing a lack of government support as one of the main reasons for the decision. Jarana went on to state (in a resignation letter that was leaked to the press over the weekend) that in order for lenders to open up to the idea of dealings with SAA, the government will need to make a clear commitment of support to the company.

Even though SAA has implemented a turnaround strategy (every sinking SOE has enjoyed throwing this term around over the last couple of years – turnaround strategy – but few have been carried out with any semblance of competence, if at all), the strategy, according to Jarana, has been undermined at every turn. 

SAA, according to the now ex-CEO, has not been given adequate funding to pull itself out of this nosedive. Last year’s R5 billion injection from the National Treasury reportedly went directly toward funding creditors, and so the situation becomes far clearer – even to those who haven’t been following it.

SAA, like most SOEs, has been run so far into the ground that saving it will prove to be very, very expensive indeed. 

This lack of financial support from the government, combined with an incredibly sluggish decision-making process, has rendered the execution of any heroics near impossible. 

Chairman JB Magwaza also handed in a letter of resignation on Monday, according to a spokesperson for the Public Enterprises portfolio, but no specific reason was relayed. 

‘Abandon Ship’ seems to be the general consensus. 

Government Confirms That Another Bailout Is On The Way

In last month’s state-of-the-nation address, President Ramaphosa made no mention of SAA, and nor did Finance Minister Tito Mboweni in his February budget speech. This raised some concerns – not least among South African taxpayers – about how SAA and the government will handle the ailing airline’s massive R9.2 billion debt, which is set to mature later this year. 

In the Treasury’s budget address last week, however, Mboweni revealed that SAA is on a list of companies that will be receiving financial support from South Africa’s contingency reserve account. Other companies waiting in line for a hand-out include the South African Broadcasting Corporation (SABC), Eskom, and weapons manufacturer Denel. 

The SABC, as has been well-documented in the press of late, is running at break-neck speed toward Day Zero – a total broadcasting blackout. The company has had to cut costs and dodge municipal bills from the City of Johannesburg in order to keep the circus going. 

Though bailouts have been confirmed, Mboweni was quick to voice his disapproval.

We really and truly cannot go on like this.

Mboweni emphasized that this additional government support cannot be viewed as a blank cheque to these SOEs, and that a broad and strategic framework will soon be published, dealing with the role that government expects from SOEs, among other things. 

The South African economy has underperformed over the last few years, to put it very mildly, and GDP growth has been slower than population growth for five consecutive years. We’re lagging behind other global emerging markets quite considerably, and we can ill afford to keep mismanaged companies afloat forever and ever. Business doesn’t work that way. 

Part of the problem, of course, is the lack of leadership. 

Eskom and Transnet are both being run by interim CEOs, and now Zuks Ramasia, who has previously held the position of GM of operations, has been appointed as the interim CEO of SAA until the company can find a permanent replacement. 

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