Time for government to throw in towel on SAA

AFTER decades of mismanagement and waste, SA’s comical airline, South African Airways (SAA), will be liquidated and its remnants sold to the highest bidder, according to our wise new Finance Minister Nhlanhla Nene.

That might be what he had in mind when he said in his medium-term budget speech that there are "areas where government is not supposed to be" and "those assets should be disposed of".

This column’s report on his speech said there were three means of "disposal": sale, deregulation and outsourcing. It was wrong. There is a more appropriate fourth method that exists to deal with government liabilities, such as SAA, as opposed to assets.

The latest episode in the SAA soap opera is, well, do we need to be told, an umpteenth rerun of earlier corruption allegations, vacuous promises, waste, bail-outs, subsidies, guarantees, mismanagement, incompetence, resignations, dismissals, investigations, reports, patronage and rescue plans.

Every one of these issues may not be present in every repetition, but you are on safe ground if you prattle as many as come to mind when SAA crops up in conversation. There has been such a surfeit of failed turnaround strategies that SAA’s board, management and staff are too dizzy from being turned around to actually turn it around. On the bright side, it spares journalists the tedium of writing news updates; with a few tweaks, such as a billion or so added to reported losses, they recycle what they have written ad nauseam.

Ten airlines seduced into the industry by the government’s fraudulent "open skies" policy have been driven into insolvency. More than R25bn has been diverted to the rich who fly and the super-rich management from the poor who are deprived of services, infrastructure, housing, healthcare, education and welfare. That SAA’s low-cost carrier, Mango, continues its crazed assault on private carriers is as criminal as the diversion of wealth from the poor.

Whoever the SAA CEO might be — they rotate too fast to keep track — is reported as saying that "a further substantial cash injection by the poor (he might have said ‘the state’) would be crucial to the airline’s perpetuation of waste (he might have said ‘return to profitability’)."

The government’s last de facto bail-out, a R5bn guarantee, expired in September. Despite being extended "quietly" and "indefinitely", according to an Independent Voice media release, it falls far short of SAA’s infinite capacity to waste other people’s wealth and drag SA further down international ratings.

Why the government sacrifices politically popular causes to enrich a few elites is the notion that SAA is a "strategic national resource linking small towns and regions on routes that might not be viable from an economic point of view". If the notion had validity, SAA would serve or outsource such routes at nominal cost. But it is too giddy. Instead it wastes billions on routes that are maximally viable for private airlines and maximally wasteful for itself. Before deregulation, secondary routes were left to, and perfectly served by, profitable "commuter" airlines.

As we have new ministers of finance and public enterprises, and people with predictably short shelf lives running SAA, this is the moment for the government to seize the opportunity to rid itself of an area where it "is not supposed to be". And the most profitable way to do that is to terminate all support; allow SAA’s liquidators to maximise asset value by negotiating a compromise with creditors and selling assets to highest bidders. Creditors, being the world’s most self-interested entrepreneurs, will maximise value by ensuring that no viable flights are cancelled and that all resources, especially planes, are used immediately and optimally.

• Louw is executive director of the Free Market Foundation.

This article was first published in Business Day on 19 November 2014

Help FMF promote the rule of law, personal liberty, and economic freedom become an individual member / donor HERE ... become a corporate member / donor HERE