IS ANYONE surprised by South African Airways’ (SAA’s) admission that it has been subsidising its low-cost carrier, Mango, since its inception in 2006?
For more than a decade, Mango and its perennial loss-making parent company have been flying in the face of the poor, costing taxpayers billions of rand. The cost of these flights of fancy for the rich is simply staggering — an estimated R30bn over the course of the past decade, money that could have been used to build housing for the indigent, improve SA’s dismal education outcomes or fund basic services for the poor.
The problem with all state-owned enterprises is that they lack any economic incentive to be profitable. No private sector operation could ever survive losses such as SAA’s and its rotten child over such a sustained period. Yet private airlines, which have long suspected Mango has been receiving subsidies from SAA, are expected to continue to operate in an environment that is clearly neither fair nor appropriate.
The government’s flawed ideological thinking of supporting a "national carrier" at all costs has crowded out nine private airlines — the much-needed competition that would have harnessed prices — even after the Competition Commission has repeatedly found SAA guilty of cheating, and, in a sad, twisted way, forced taxpayers to foot the bill.
There is absolutely no rational reason for the government to be involved in a business that caters almost exclusively for rich individuals. Rather than spending billions of rand on rich people, the government should be focused on creating an enabling environment in which real businesses can function profitably and competitively, and citizens can depend on getting reliable and functional basic services.
The government needs to stop using taxpayers’s money to pay for its own mistakes.
The only way to rectify this situation is to unbundle SAA and auction it off to stop the rot.
This article was first published in Business Day on 15 June 2016