South African Airways Should Shut Down Says Tito Mboweni
The South African newly appointed Finance minister Mr Tito Mboweni says the South African Airways (SAA) should be shut down. Mr Mboweni made his statements while addressing an investor conference aired by SABC.
He pointed out that the company has not had profits in years. It is therefore draining the South African government’s finances. SAA’s consistently losing money and have had to go back to the government, again and again, to keep the lights on.
It is therefore alarming when the finance minister thinks that SAA is doomed.
Why I say close it down is because it’s unlikely that you are going to find any private sector equity partner who will come join this asset.
President Cyril Ramaphosa had set a goal of saving what was once Africa’s biggest airline.Tito Mboweni’s declaration casts doubt on the President’s goals.
President Ramaphosa endorsed a turnaround strategy for SAA under new management when he became President earlier this year (2018). SAA’s decline accelerated under the chairmanship of Dudu Myeni, a friend of former President Jacob Zuma.
Who was accused by opposition parties of running SAA as a personal fiefdom to dispense political favours. Ms Myeni, who left SAA last year (2017), could not be reached for comment but she has previously denied wrongdoing.
Under the turnround plan SAA is asking the state to provide more than R21bn in equity and debt refinancing, and to tolerate another three years of losses while it cuts costs and staff. Its longer-term goal is to convince a big foreign investor, such as another airline, to recapitalise SAA.
Mr Mboweni had already said SAA was not a “not a holy cow” when he unveiled a fresh R5bn bailout to avert a loan default last week. South Africa’s public finances have been left stretched by Mr Zuma’s rule and there is little left for big bailouts of state firms.
Mr Mboweni an outspoken former central bank governor, on Thursday 1 November 2018 while at an event with investors in New York said the closure of SAA would be a powerful admission by Mr Ramaphosa’s government. He went on to say that it cannot save one of South Africa’s highly indebted state-owned companies, which are critical to the economy.
The company last showed a profit in 2011 with the airline costing taxpayers R30 billion since 2012 to keep their planes in the air. Stories of mismanagement and wasteful spending seem to be a regular feature of our news cycle. Despite all of the losses, the management seemed happy to be earning bigger and bigger salaries.
Mr Mboweni will not have the final say on the future of SAA. This is so because its governance was recently transferred to Public Enterprise ministry. Pravin Gordhan is the one heading the ministry who has begun the unenviable task of turning the airline around.
The finance minister’s comments suggest that the government does not have funds to spend on SAA anymore. Defaulting on any one loan to SAA would trigger legal terms for immediate repayment on the rest of its debt.