14 July 2003

South Africa: State Plans to Give SAA Wings Out of Transnet

Johannesburg — NATIONAL airline SA Airways (SAA) is to be stripped out of the Transnet stable and set up as a stand-alone company, as part of a complete overhaul of its parent company.

This would make SAA the second major division of Transnet to be turned into a stand-alone company, with plans already well advanced for the National Ports Authority to follow this route, raising questions about the effect on Transnet's cash flow and revenue.

In an interview, public enterprises director-general Eugene Mokeyane confirmed government's plan to take SAA out of Transnet, saying a discussion document on the plan would be finalised by the end of the year.

The most likely option is to turn SAA into a national carrier, which would be wholly owned by government. This option is understood to be favoured by key government officials. Selling all or part of SAA is not considered an option at present.

A decision to turn SAA into a national carrier would be intended to promote tourism and promoting SAA's drive into Africa.

Removing SAA from the Transnet fold would also be a key part of the state-owned transport utility's long-delayed overhaul, leaving it as a streamlined holding company with minority investments in its key businesses.

Although no timeframe has yet been set for the SAA move, government's policy document for implementing Transnet's reshape has 2007 as the deadline.

Mokeyane said SAA's improved performance for the year to March was an indication that the airline was capable of standing on its own.

"SAA is a good asset with very solid underlying assets and businesses. The core business of SAA has returned to sustained profitability and this confirms the airline's competitiveness and reputation for excellence, despite operating in a highly competitive global arena," he said.

He was confident that the restructuring of Transnet would be done in such way that its profitability and credit ratings were not compromised.

"The thrust of the restructuring of Transnet is guided by the principles of maintaining Transnet's commercial sustainability, the competitiveness of its business strategy and its good credit ratings," Mokeyane said.

Transnet spokesman Tami Didiza said the transport conglomerate was part of the discussions about end-state model, and that whatever decision taken would be for the benefit of the company and government as the sole stakeholder.

Randall Howard, general secretary of the SA Transport and Allied Workers' Union, said SAA was an important national asset and government should consult all stakeholders to make sure common ground was reached .

In terms of the National Ports Bill, the National Ports Authority will become a state-owned corporate entity, with its role confined to the day-to-day management and control of ports.

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