SAA must be world-class

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Airline

Minister of Tourism Marthinus van Schalkwyk acknowledges there is a lot of debate around whether a country should have a national carrier like SAA, but he believes that as South Africa is a long-haul destination, it makes sense that we do have one.

Speaking at the Cape Town Press Club yesterday, the minister acknowledged that “many countries” did not need a national carrier. “In my view South Africa as a long-haul destination needs a national carrier,” he said, noting that there was a glaring gap in the market – the south-south linkages where South Africa was the hub between China and the east and the countries of the south like Brazil.

South Africa had liberalised its air lift strategy and there were now 50 airlines operating on the international routes to and from the country, up from 27. “I believe we need a well-capitalised, well-managed national airline… with better competition and more choice. That is what we want.”

One of the reasons direct flights from London to Cape Town had been dropped by SAA was that the cabinet had instructed the SAA to run economic routes – and this one had proven not to be. He pointed out that competing airlines, Virgin Atlantic and British Airways still ran this service and had “taken up the slack”.

Van Schalkwyk said: “I was disappointed when SAA made that announcement, as tourism minister [but] I also understand that we gave as cabinet a mandate [to SAA]… to start cutting their losses and manage themselves better.”

If one expected the airline to manage itself in a “more business-like manner”, one had to expect the airline to take “that sort of decision”. The more competitive international model should be replicated domestically, he said. “We need more competition on domestic routes,” he said, giving consumers and business people in particular more choices.

“That is the balancing act between protecting vested interests and ensuring more competition.” Flying is, after all, like politics, the sky is the only limit.

Shoprite

The Shoprite shareholders are generally an enthusiastic bunch of investors, or so it would seem from their voting pattern. At the recent annual general meeting most of the resolutions were passed with over 95 percent support, the vote on the annual financial statements received 100 percent backing from shareholders.

But, proving that these are discerning shareholders, there were some notable exceptions. The re-election of JJ Fouche, JA Louw and JF Malherbe received support of 87 percent, 86 percent and 86 percent respectively. And then there was the non-binding advisory vote on the company’s remuneration policy, that received a mere 73 percent.

It’s impossible to know precisely what part of the lengthy remuneration report 27 percent of the shareholders objected to or indeed whether the vote was merely part of the general trend of voting against generous remuneration policies.

One of the few changes to the policy in financial 2013 is the replacement of share appreciation rights with actual shares in the long-term component. Given the steady appreciation in the Shoprite share price over the past five years, the SAR must have required a lot of the company’s cash, of which there is plenty.

In the past 12 months alone, the share has surged 56 percent and is currently on a price-to-earnings rating of 29 times. This of course seems entirely justified given the company’s ongoing ability to generate strong profit growth and is no doubt why the shareholders are so enthusiastic.

By contrast, poor old Pick n Pay’s share price has edged up just 6 percent in the past 12 months and is not much above the level at which it was trading five years ago.

Sadly, this seems justified in terms of the company’s inability to generate sustained profit growth. And yet, Pick n Pay’s price-to-earnings is also 29 times.

But market capitalisation is just a fifth of Shoprite’s.

Mining?

Perhaps something was lost in translation, but a bold invitation to hear about potential investment opportunities by the China-based Tiens Group in South Africa’s mining industry turned out to be platform to promote health products.

A red carpet was rolled out to the journalists and distributors who attended the event at the Tiens Group head office in Randburg, Johannesburg.

Mining is in the news for all the wrong reasons and for the Tiens Group to claim in its invite that it would help create jobs and invest in the industry was exciting news.

Once guests had received eats and were seated, they were expecting to see mining-related products, only to see sales people promote lifestyle products from the Tiens Group, namely diet supplements and a battery-powered head massager which is used to promote blood circulation and claims to prevent hair loss.

After the demonstration, the master of ceremonies, a young Chinese man dressed in a silver grey suit, ushered us to our seats and urged us to clap for the grand appearance of Li Jinyuan, the founder and chairman of the Tiens Group.

Instead of naming projects, as was pointed out in the invitation, Jinyuan said Tiens Group had a team researching potential exploration projects.

He also promoted the company’s health products and announced plans to construct buildings in South Africa.

After the event, angry journalists confronted Nevesha Naidoo, the public relations officer who organised the event.

She later sent an apology for wasting the media’s time.

She blamed the Tiens Group for not following on the brief that it gave her and said she had decided to cut ties with the firm, saying that her reputation was more important than the business of organising surprise parties for journalists.

Edited by Peter DeIonno. With contributions from Donwald Pressly, Ann Crotty and Dineo Faku.


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