7 January 2013

South Africa: SAA in Crisis Yet Again

Photo: Wikipedia
South Africa FlySAA

press release

A report in the Sunday Times of 6 January 2013 confirms that South African Airways (SAA) is once again in a state of severe crisis. Thousands of passengers narrowly missed having their flights grounded this week when government stepped in to provide the national carrier with an emergency short-term loan to cover fuel costs for local and international flights.

Earlier this week, Finance Minister Pravin Gordhan and Public Enterprises Minister Malusi Gigaba signed a guarantee that enabled SAA to secure a R550 million loan.

This latest bail-out follows in the wake of numerous crises that have plagued the national carrier in the past year. On 8 October 2012, the DA released a statement warning Minister Gigaba that, if thoughtful and measured interventions were not applied urgently , SAA could find itself grounded by the end of 2012. I have also requested the Competition Commission to investigate a possible connection between state bailouts and the closure of other domestic airlines in South Africa.

In March 2012, SAA posted losses of R1.25 billion. A rash of resignations by board members occurred during the last quarter of 2012 and the appointment of Dudu Myeni, a close ally of President Zuma, as acting chairperson did little to strengthen the position of the crisis-ridden airline. Myeni's record does not exactly inspire confidence:

Early last year, senior officials in the Department of Water Affairs recommended that she should not be reappointed as chairperson of the Mhlathuze Water Board because "she would bring instability back into the board and was at the centre of the current crisis and disharmony".

A failed probity test revealed a default judgement against her in relation to R416 460 owed to ABSA bank in respect of a R3,7 million Richards Bay property.

Standard Bank received a R1.7 million judgement in its favour in respect of a property she reportedly co-owned.

She was implicated in an investigation by the Special Investigating Unit (SIU) into alleged maladministration, abuse of state resources, unfair dismissal of staff, and noncompliance with procurement and tender processes at Mhlathuze between January 2004 and September 2008. The outcome of the investigation never saw the light of day and an SIU source has claimed that an "outbreak of shredding paper and deleting computer files" stopped the investigation in its tracks.

The endemic dysfunction of SAA has sapped public coffers for far too long. Privatisation of the national carrier is the only recourse, and government can no longer hide behind the excuse of "national pride" whenever privatisation is mentioned. There is no national pride in an airline that survives on repeated Government bailouts; that posts losses of R1.25 billion; and that has still not managed to come up with a viable turnaround strategy.

Government cannot continue to secure emergency funds for SAA indefinitely. Minister Gigaba needs to acknowledge, sooner rather than later, that the costs of running a national carrier far outstrip the benefits. The idea of a state-backed carrier has flown its course.

Natasha Michael, DA Spokesperson on Public Enterprises

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