State ‘within its rights’ to support SAA

Independent Newspapers

Public Enterprises Minister Malusi Gigaba. Picture: Sarah Makoe.

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The government has a big role to play in the economy and it is within its right to support and own strategic businesses like SAA and other parastatals, according to Public Enterprises Minister Malusi Gigaba.

Speaking in Midrand on Friday, Gigaba said the debate to privatise these businesses was ended in South Africa decades ago and he did not agree that the government’s role had to end any time soon.

“If you look at the levels of inequality in the country, if you look at the levels of poverty, you still need a government that is active enough in the economy to address the needs of the people,” Gigaba said during The New Age business breakfast.

Azar Jammine, the chief economist at Econometrix, said the general consensus was that SAA needed to be totally privatised. But the problem was that, if put in the hands of the private sector, the operators of the airline might not be interested in flying to regions where there was not enough traffic, while at the moment SAA was fulfilling the role of being a strategic national resource by linking small towns and regions that might not be viable from an economic point of view.

“As government you can justify it even if you run that airline at a loss because you are linking different sectors of the economy,” he said.

Jammine said the government might also want control over SAA for diplomatic links in the African continent as intra-African trade was limited by the lack of air traffic routes.

He said the Department of Public Enterprises and the government had to decide what was more important: SAA’s sustainability or for it to become a strategic national resource that would require its support.

Gigaba said the government as a shareholder would pull out all the stops to correct market failures that disadvantaged SAA. The failures related to the difficult operating environment that saw SAA sink further into financial trouble.

The government agreed last year to give the airline a R5 billion guarantee, which Comair, the only remaining rival airline, has challenged in court.

Gigaba said that, given the pending court challenge, he wanted to state that SAA was a government company and the government had a right to participate in the economy.

“Much has been said about the extent of support that SAA has enjoyed from the fiscus over the past 10 years. However, the key question that still requires assessment is whether SAA has been properly capitalised in the first instance,” Gigaba said.

Last month SAA chief financial officer Wolf Meyer told Parliament that the airline’s audit committee was concerned that SAA was undercapitalised.

Gigaba said that although SAA had incurred losses, those resulted from historical problems which the new long-term strategy, due to be finalised at the end of this month, should address.

Gigaba said governance challenges at SAA were under control despite the airline having changed chief executives four times since 2009. He said the appointment of a new chief executive at the end of the month should put an end to the governance challenges.

The minister admitted there were particular instances where it was discovered after the appointment of a person that it was a mistake; but he did not believe Vuyisile Kona’s appointment was a mistake.

His sentiment comes less than a month after the portfolio committee on public enterprises said during its interaction with SAA that it was shocked to learn of Kona’s appointment in the first place.

Kona had worked at SAA before and when he left in 2006 he sued SAA for R3.3 million after the carrier failed to pay R4.7m it promised to as part of his exit package.

But Gigaba said the government as a shareholder and SAA had looked at that issue before Kona was appointed as acting chief executive and satisfied themselves that this would not have a bearing on his new job.

Gigaba said that in his decision to axe Kona he acted on the high level of public interest and complaints about SAA.