EDINBURGH — South Africans were once proud of South African Airways, with its world class service on routes to major global cities flying the flag of the new democracy. But former president Jacob Zuma’s friends ran the national airline into the ground, pumping up huge debts for taxpayers along the way. New finance minister Tito Mboweni has indicated that he’d like to call time on the state entity that has become a case study in corruption, nepotism and financial mismanagement. But President Cyril Ramaphosa has poured cold water on that idea. His concerns resonate with the London-headquartered Financial Times, which cautions that grounding SAA could be just as expensive to the national fiscus as keeping it in the air. – Jackie Cameron
By Thulasizwe Sithole
Can President Cyril Ramaphosa reform South Africa’s bloated, inefficient, expensive state entities? The way his government works on South African Airways is the test. That’s the message in the Financial Times, which outlines the decline of the national airline. SAA is having to get to grips with its parlous finances, having recorded a R5.7bn loss in its 2017-2018 financial year, says the publication.
South African Airways once flew the flag for a proud young democracy after the country’s emergence from the apartheid era, it notes. “But by 2015 it was heavily indebted and plotting a move that reflected its chronic mismanagement — opening a money-burning route to Khartoum as a favour by then-President Jacob Zuma to his Sudanese counterpart.”
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One civil servant reportedly scribbled across a report to the finance minister: ‘‘I cannot understand why this entity can contemplate another lossmaking route!”
“The plan was ultimately defeated by the Treasury and the note revealed this year by a probe into Zuma-era corruption. Yet many other financially destructive ideas were put into practice. The fate of SAA, which has not turned a profit for six years and required about R30bn ($2bn) of government bailouts over the past half-decade, has become a big test for Mr Zuma’s successor, Cyril Ramaphosa,” continues the FT.
“The former businessman took office with a pledge to rebuild state institutions brought low by graft and misrule and threatening public finances. While other state companies, notably the power utility Eskom, are buckling under larger debts, the battle over SAA’s survival highlights the grim choices facing Mr Ramaphosa.
“Even his own finance minister, Tito Mboweni, has balked at the cost of saving SAA, which is seeking about R16bn from the state in the short term to shore up the airline while it plots a return to profit by 2021, and eventually looks for an outside investor,” says the London-based newspaper.
Pravin Gordhan, a former South African finance minister and now Mr Ramaphosa’s overseer of state companies, is reported as saying to SAA staff: “Will you buy a shirt full of holes even if it is on sale? We need to clear out the dirt for this airline to survive.”
Many, says the FT, blame the company’s woes on years of misrule under Dudu Myeni, executive chair until last year who is accused by opposition parties and civil society group of running the airline as a fiefdom under Mr Zuma’s protection.
“They say Ms Myeni, who is also the head of Mr Zuma’s charitable foundation, dispensed favours through contracts to lease planes and — as in the Khartoum case — the routes they flew. Ms Myeni and Mr Zuma have denied any wrongdoing. SAA has made efforts to improve performance, putting in place a turnround plan under Vuyani Jarana, its new chief executive.”
Major mis-steps in the past include cutting long-haul connections to Cape Town. “Rival European, Gulf and other African state-owned carriers have all profited from expanding routes to the tourist hub instead.”
One executive brought in to oversee the turnaround said: “Everything surprised me when I started. Nothing surprises me any more.”
Doubts about SAA’s viability were exacerbated last month, points out the FT, when finance minister Mr Mboweni suggested that the government may cut its losses and shut down the carrier — comments that unnerved creditors. The attempted turnaround at SAA was “unlikely to sort out the situation, in my view we should close it down”, Mr Mboweni is reported as telling investors in New York.
“The statement earned a rebuke from Mr Ramaphosa, who countered that SAA’s debts would become payable immediately if the state abandoned the airline. This could wreak havoc with public finances if it led lenders to doubt the creditworthiness of other state companies, he told MPs after the finance minister’s remarks,” says the FT.
It reminds its global audience that defaulting on one loan to SAA would trigger repayment clauses in its other sovereign-guaranteed debts, presenting straitened public coffers with an upfront R16bn bill.
