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SAA negatively impacts on the growth of tourism to South Africa

south african airways bailout, SAA, SAA financial troubles

By Unathi Sonwabile Henama

The national carrier is facing immediate funding challenges, as suppliers are reducing their credit risk to SAA by reducing payment terms from 21 days to 7 days. This means that the airline needs an additional R7,5 billion rands to fund day-to-day operations from next month, and this is after the Minister of Finance gave SAA another R5 billion bailout during the Medium Term Expenditure Framework Budget. It is further expected to make another loss, displaying consistency in being a perennial loss maker.

The state has always argued that SAA is a strategic asset, and the opposite is true, it has not shown any indications of being an asset. As other state-owned enterprises such as Telkom and Airports Company (ACSA) pay dividends, SAA is a black hole for public funds. The continued bailout of SAA is a form of wasteful and fruitless expenditure.

If we look at Comair, it has been delivering profits for more than 70 years, trading under the same tough conditions as SAA, without the guarantee of government bailouts. If the state really wanted to own an airline as a strategic asset, it would buy more than 50% of the shares in Comair which is JSE listed and become the majority shareholder. The state must sell a majority stake in the airline and allow an equity partner to bring in skills, expertise and business acumen, that would save the airline from destruction.

The notion that the partial privatisation of the national airline will lead to job losses, is not based on fact but fiction. The continued bailouts of the airline are wasting valuable pensions of state employees and redirecting valuable money from the depressed fiscus. If part of the airline is not sold, the whole airline will cease to operate, losing all the jobs.

The state is conflicted, as a shareholder and regulator of aviation (Department of Transportation). The ownership of SAA has disadvantaged South Africa with regard to more aviation competition which would have reduced prices, more secondary airports and more frequencies.

The state has protected the market share of SAA at the expense of the public and business, and this had an impact on the tourism industry. South Africa that is at the southern tip of Africa, experiences a geographic disadvantage when trying to lure tourists to destination South Africa. This means that it is expensive and you travel longer to arrive in South Africa, and that is because open skies are not declared to protect the market share of SAA.

Therefore, SA fails to attract more than 10 million tourists, because aviation is red tape in addition to the visa regulations. Countries that have declared open skies have benefited with increased frequencies and lower prices benefiting citizens and commerce. SAA will continue to depress the already depressed fiscus, because there is no will to fix SAA.

The continued bailouts to SAA is a form of corporate capture.

Read: Five activities that prove the Eastern Cape is the adventure province

 

Unathi Sonwabile Henama teaches tourism at the Tshwane University of Technology and writes in his personal capacity

Kaya Voices reflects the opinions of the writers featured not Kaya 959.

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