Mike Cohen
PRIVATISATION is back on the government’s agenda for the first time in more than a decade as it runs out of options to bail out cash-strapped state companies.
A stake in SAA, the loss-making national carrier, may be one of the first on the block, with Etihad Airways given the option of buying a minority interest. Finance Minister Nhlanhla Nene announced plans in October to raise at least R20 billion by selling “non-strategic” assets to help power utility Eskom plug a R225bn cash-flow gap.
As recently as 2009, the ANC was discussing the option of nationalising mines. Strikes and power shortages, that have curbed growth and tax revenue and left the nation’s credit rating on the brink of junk status, have spurred a change in thinking.
“The policy shift is significant,” Azar Jammine, the chief economist of advisory service Econometrix, said yesterday. “It illustrates the tremendous dilemma the government is facing in terms of where to get the money to run the state companies, which are in such disarray.”
Cosatu opposition
South Africa’s last major asset sale was in March 2003, when it sold 25 percent of Telkom for R3.9bn. The government disposed of 20 percent of SAA to Swissair in 1999 and bought it back in 2002 when the European carrier went bankrupt.
The sale of a minority stake in SAA to Abu Dhabi-based Etihad would not constitute a big policy shift by the ANC, according to party spokesman Zizi Kodwa.
“When you implement policies, you can’t be dogmatic,” he said. “They must be informed by the conditions that exist at a particular time. There is nothing wrong if you take partners from outside to come and build capacity.”
Asset sales could help Nene meet his target of lowering the budget deficit to 2.5 percent of gross domestic product over the next three years, from 4.1 percent this fiscal year, as it would take the burden off the government to support struggling state companies.
Debt-service costs are the government’s fastest-rising expenditure item, consuming a projected 10 percent of the national budget this fiscal year.
Trade union federation Cosatu says the government is moving in the wrong direction.
“We haven’t discussed the SAA issue specifically, but we will oppose any privatisation moves,” Cosatu spokesman Patrick Craven said.
“It certainly needs to be more efficiently run, but we reject the argument that that can only happen if there is privatisation.”
SAA had presented a 90-day rescue strategy to the government that included R1.3bn in annual savings and a review of some long-haul routes, acting chief Nico Bezuidenhout said yesterday. – Bloomberg