Opinion / 17 December 2019, 12:30pm / Siyabonga Hadebe
PRETORIA – Somebody asked me to clarify why South African Airways (SAA) exists and why should we be concerned should it fail.
There are fundamental reasons why SAA exists, from both political and security perspectives. The only problem is that those in the know choose bamboozle us with commercial or cash aspects. This, therefore, conceals facts why many governments around generally consider owning airlines as important and strategic.
Any government wants to be able to broadcast its power throughout its territory. One of the ways of doing this is to develop infrastructure and extend public services to reach all citizens irrespective where they are located in the country. Of course, apartheid spatial development created anomalies by giving white urban areas better service compared to black areas, most remote and rural areas.
SAA is one of the interventions available to government to connect different parts of the country, making far flung places within its territory accessible and linking the country to the region and the world. Some of these things cannot be left to chance. This goes for the building of roads – Sanral serves a similar purpose as SAA. That is one of the reasons SA has a Department of Transport, it is not coincidental but deliberate. Its political mandate is not to fix potholes but to reinforce the country’s security apparatus as well as to create a functional society. SAA, therefore, exists on that continuum.
Obviously, where SAA flies, there is basic infrastructure that must be in place, airport and roads. This infrastructure is then shared with others: defence and security forces, communities, companies, and other entities responsible for delivering public services.
One or two examples that may help to clarify this point is easily explicable using the Nigerian struggles with Boko Haram and Congolese government and rebels in the eastern parts of that country. In both instances, governments possibly neglected to supply public goods and services to the troubled areas when there was time.
Now the two governments cannot access the dense forests and swamps because there are no roads and airports. Insurgents roam freely because both Abuja and Kinshasa cannot get to them quickly to save their citizens. In addition, the people who reside in the affected areas are prepared to engage in illegal activities because of exclusion, physically and otherwise.
As South Africa, we cannot rely on British Airways and KLM to service the local and regional routes that SAA covers. Due to our unfortunate past, it means that there are fewer people who can afford flying but SAA still maintains the service, which explains the massive losses the airline makes. The interconnectivity of Southern Africa is largely maintained by SAA and its subsidiary airlines (Airlink and SA Express). Countries such as Malawi, eSwatini, Lesotho and others have little or no capacity to do what South Africa does through SAA.
SAA’s problems link directly with the state of economic development and inequality in the country. Once we have sorted these matters the demand for SAA services will also increase. One problem that has always been overlooked is the country’s quick adoption of unfavourable trading conditions imposed by the World Trade Organization (WTO). In this regard, South Africa accepted WTO rules as a developed nation when it joined in 1995. This meant that our skies were unnecessarily opened to external competition at the expense of SAA. The majority of countries don’t have foreign airlines, as we do with BA-Comair, covering domestic routes.
Another problem arises from WTO requirements for free-market practices. If one were to inspect the categorization of SOEs, as outlined in the Public Finance Management Act (PFMA), it is apparent that the decision to make certain state companies to financially support themselves was to circumvent WTO rules on subsidies. In terms of this rather absurd requirement, government cannot provide financial support to any sector because that would be interpreted as a way of stifling competition and protectionist in nature.
But what is more concerning is that the likes of Europe and US apply protectionist measures to certain sectors of their economies, including agriculture and strategic industries like aviation and defense. South Africa chose to abolish all subsidies for different sectors, i.e. mining, industry, agriculture, etc., when the post-apartheid government assumed power to appease the Washington. To this day, the US fights China for refusing to handover its economy to the ‘invisible hand’.
It is not necessary to delve into the gross mistakes of stripping the national airline its aircrafts and value during the tenure of American Coleman Andrews as its chief executive officer in the late 1990s.
With all this said and done, one would be tempted to ask if these endless bailouts by National Treasury to Eskom and SAA aren’t really similar to subsidies. South Africa could have saved itself from the costly bailouts by giving preference to SAA. One of the strategies could be to compel all state employees to use SAA for domestic and international trips. Even if it was not 100%, but a huge expenditure for travel by public servants could have been given to SAA instead of subjecting the airline to competition with the likes of Emirates, Qatar and Etihad which are heavily supported by their governments.
SAA should therefore be looked at in the same way the army, social services and other public services. SAA is not KFC or FNB, but it has a public mandate which certain people decided to mess with. Whether the country can afford to keep SAA or not, it is irrelevant because its mandate is clear. Many serious countries have national carriers, whether state-owned or private, so the decision to discard SAA should be mindful of long term impacts of such a decision. Selling SAA cannot be haphazard or done without thorough planning because there is a huge price to pay.
Siya yi banga le economy!
Siyabonga Hadebe is an independent commentator on socio-economic, politics and global matters based in Pretoria.