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JOHANNESBURG – The cost of keeping South African Airways in the heavens for taxpayers for 20 years is estimated at about 60 billion rand. The state-owned company, looking for another 21 billion rubles, had to keep the engines running until it became profitable in 2021. It's a hard pill for taxpayers to swallow. The airline has always been touted as a government project, with French novelist George Sand defining vanity as a shifting sands of reason. And it seems that reason has been thrown out. It would also be a tragedy if the country's budget was lowered by an airline. Since Eskom also burns a hole in the country's pocket at a knot rate, one may wonder if a state-owned business belongs to the ANC's circle of jurisdiction. . – Stuart Lowman
By Jannie Rossouw *
21 billion rand: this is how much the South African airline, South African Airways (SAA), needs to continue to operate.
SAA has reached this stage of its financial crisis through persistent mismanagement and cronyism, the government of the South African Authority as a major shareholder refusing to make difficult decisions about the company. But such decisions can no longer be delayed.
In theory, it is the South African government that supports SAA and dismisses it when needed. But in practice, it is the taxpayers of the country who are already struggling to pay the bill. And they continue to do so, with no clear plan in sight to stem the financial haemorrhage of the airline. The Free Market Foundation, an economic and political think-tank, estimates that SAA has already cost taxpayers almost R60 billion over the last 20 years.
I have been arguing for some time that SAA is nothing more than a government project and needs to be sold. In March 2016, when I said that for the first time, it might have been possible. so the airline was still financially viable. This moment has passed, the government retaining the SAA as a vanity project.
President Cyril Ramaphosa said the closure of the ASA would destabilize other entities belonging to the state and to the economy in general.
Read also: SAA Treasury giant needed to attract investors – Gordhan
Recently appointed Finance Minister Tito Mboweni disagrees. In his recent medium-term fiscal policy statement, Mboweni warned that state-owned bankruptcy entities are "not sacred cows" and should derive their financial clout.
South Africa can not afford more delays. The main players on the continent are nibbling at the already weakened base of the airline. These include the Ethiopian and Kenyan national carriers as well as minnows such as the Namibian airline.
Meanwhile, South African taxpayers are caught between the hammer and the anvil. The country can no longer afford SAA – and can not afford to close it. What is the next step, then?
The only option left for SAA
I believe there is only one option: an independent analysis of the costs and benefits of SAA's survival and the potential consequences of its sale or closure. This should be an independent process; ASA and the South African government both have interests at stake in the outcome.
This would be a first, and its successful completion could serve as a benchmark for judging the continued financial viability of other problematic public entities such as Denel and the South African Broadcasting Corporation.
It's urgent. SAA is not only asking for more money to keep itself in the air. Its director, Vuyani Jarana, told a parliamentary committee that the airline would not be profitable by 2020, as it had initially announced. He says now that it will pay off by 2021.
Read also: This parrot SAA is dead-shoot daisies – the analyst exposes the current stuffing
One of the reasons for its failure is that the management of SAA has completely distorted its oil price forecast. He predicted an average price of oil of $ 45 per barrel. The actual average turned out to be $ 75 a barrel.
It does not take a lot of management skills to understand that a single price of oil can not be used in profitability forecasts for a company sensitive to fluctuations in the price of oil, as in the case of an airline.
It also appeared that SAA senior executives earned huge monthly wages (Jarana, for example, earned R 6.7 million a year). This fact, coupled with obviously chronic financial mismanagement – how else to explain that the airline spent its last government bailout of 5 billion rand in just one month? – is infuriating for taxpayers.
During its presentation to Parliament, the SAA officials did not propose any other plans. It's a government bailout – or bankruptcy. But it's not sustainable. Independent evaluation is essential if the ASA is to be saved of its own accord; and taxpayers of the country shivering must be saved from the excessive demands of the airline.
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