SAX bailout scandal; SA pvt sector shrinks; trade war rattles financial markets; JSE gold stocks glisten

By Jackie Cameron

  • Another government entity is at the centre of a money scandal – this time SA Express (SAX), which has sucked up more than R1.5bn in taxpayers’ funds to cover losses. The Free Market Foundation (FMF) crunched numbers that will make your eyes water. It says that between August 2018 and July 2019, SAX received at least R1.54bn in bailouts: R1.24bn from government in November 2018 and, more recently, government guaranteed funding of about R300m. During the period, SAX carried fewer than 400,000 passengers. This amounts to R3,850 per passenger one-way and R7,700 return. Every passenger on every flight is obscenely subsidised with money diverted from poverty relief and taxpayers. The Free Market Foundation says that, assuming 50 passengers per flight on average, this is the equivalent to two RDP houses for every one-way SAX flight and four houses for a return flight. “The state-owned airline has been generating losses funded by the poor since 2011 and, in contravention of the Public Finance Management Act (PFMA), has failed to produce Audited Financial Statements (AFS) since 2016.” Unsurprisingly, there seems to have been self-enrichment involved, by a pay-out of about R11.5m in executive bonuses. FMF Executive director Leon Louw said, “Every person who flies SAX must look down as they fly over conspicuously poor settlements and reconcile their conscience with the implications of their ticket. Every time you are at an airport and see a SAX plane take off, think about the subsidy that you are paying to enable rich people to fly while tax-payers are fleeced and the poor are denied services, housing and welfare. It is immoral and obnoxious.” You can find out more about that, on
  • President Cyril Ramaphosa and his team have more work cut out for them to fix the broken economy, with the latest purchasing managers index confirming that the private sector is taking more strain. Reuters reports that South African private sector activity contracted in July for a third consecutive month as demand and factory output fell, a survey showed on Monday. IHS Markit’s Purchasing Managers’ Index (PMI) fell to 48.4 in July from 49.7 in June, further below the 50 point mark that separates expansion from growth. The dire unemployment figures followed a shock contraction in growth in the first quarter, piling pressure on President Cyril Ramaphosa’s pledge to deliver a turnaround, says Reuters.
  • The China-US trade war has cast a dark cloud over global financial markets, with South Africa’s rand slipping against the dollar in early trade on Monday as prospects of a sharp escalation in the US-China trade war turned investors risk-averse. Bianca Botes, a treasury partner at Peregrine Treasury Solutions, is reported as saying in a note of the general climate on global markets: “The trade war remains the focus point for the time being.” Beijing said on Friday it would retaliate against US President Donald Trump’s decision to slap 10% tariffs on the remaining $300bn of Chinese imports, a move that ended a month-long trade truce, says Reuters. Bloomberg says the recent escalation in the trade war could cost the already fragile world economy dearly. Modelling by Bloomberg Economics shows that global GDP would be 0.6% lower in 2021 if the market slumps during an all-out trade war, compared to a no trade war scenario. That, it says, is the equivalent of a $1.2trn hit to the global economy.
  • JSE-listed gold mining companies have benefited from volatility on global financial markets, and, with gold surging to a six-year high, were the big movers at the beginning of the week.
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