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November 2017

October 16, 2017

 

 

I  have on my desk the latest copy of the SAA turnaround plan – ‘Corporate Plan April 2017 to March 2022.’

Like the countless other turnaround plans before it, this plan refers to a ‘developmental agenda’. However, what this agenda entails is not defined, other than to state in sweeping terms that SAA’s role is to support South Africa’s National Developmental Agenda through “transformation, job creation and connecting RSA to trade and tourism partners.”

The interesting thing is that South Africa’s National Development Plan makes no reference to SAA, or indeed to any airline, other than to say that “increased airline competition would help lower costs of travel.”

It’s therefore reasonable to conclude that SAA has unilaterally decided that it should fulfil a development agenda. Perhaps the reason is that having a development agenda is a great excuse for incurring billions of Rands in losses.

What does this self-appointed development agenda mean? A good example is SAA’s now infamous chairperson, Dudu Myeni, demanding that 30% of the airline’s procurement must be from Black-owned suppliers. In response, both the National Treasury and the Department of Trade and Industry shot her down, pointing out that this 30% requirement does not comply with either the B-BBEE Act, or the Codes of Good Practice, or the procurement legal framework. This was in response to an attempt by Myeni (as a non-executive Director) to remove a ground handling contract from Bidvest, which was already 63.24% empowered, and appoint an unknown and unproven, (possible crony) to the contract.

Worldwide, it has been shown exhaustively that governments have no ability to run an airline, which are highly capital intensive and yet very low margin businesses. There is no space for non-profit driven interference. Yet the South African government, as indeed most African governments, doggedly persist in owning airlines that are in effect stealing money from the poor – those who need subsidies far more than airline passengers.

It need be noted that where a compelling case may be made for an airline to fly to a non-profitable destination in order to ensure that destination’s economic survival, or for purported long term strategic reasons, then that route should be ring fenced from the profitable routes and subsidised.

An example of such a route for SAA was Beijing, which, over the three years it was operated, cost the airline around R1 million per flight. Since SAA stopped flying it, Air China has stepped into the gap with little, if any, loss of connectivity, and indeed seven other airlines offer a one stop service to Beijing.

Given SAA’s membership of BRICS, this may have been defensible. But other interference is unpardonable. SAA is under intense pressure from Ms Myeni and other KZN-based politicians to reinstate SAA flights between Durban and Cape Town. For SAA, this route is profitable only when operated by a low cost carrier – Mango – yet Ms Myeni demanded SAA fly the route as the politicians wanted business class seats.

Is this the development agenda that justifies the theft of R20 billion over the past 10 years from the poor?

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