South Africa’s national airline South African Airways (SAA) is in deep financial trouble, with speculation that it will soon be grounded. While other international airlines take advantage of low oil prices to boost margins, SAA has floundered amid allegations of financial mismanagement.
The International Air Transport Association (Iata) expects airline profits to increase on average by 12% this year. US airlines reported a massive 240% jump in profits in 2015, largely as a result of lower fuel costs. Airlines elsewhere reporting healthy finances include: Dubai’s Emirate Airline, with a 56% jump in profits as its fuel bill declined by more than 30% on crude prices; and Singapore Airlines, registering a 66% leap in operating profit. Even Malaysia Airlines, hit by two reputation-damaging airline disasters in 2014 including a disappearing Boeing 777, has reported a return to profit after many years.
SAA, on the other hand, has run out of money. It has reportedly missed payments to creditors, including for an R250m loan from Standard Bank. Hong Kong’s Registrar of Companies has threatened to withdraw SAA’s right to serve its daily Johannesburg-Hong Kong route unless it submits satisfactory financial statements in September.
After failing to receive an R5bn loan guarantee from the National Treasury, SAA recently advertised an invitation to funders to lend it R16bn ($1.1bn) for working capital requirements and debt consolidation. What’s more, SAA will give preference to bidding entities that are majority black-owned – and preferably at least 30% owned by black women – military veterans and disabled people in rural areas.
Who Will Lend SAA Money?
“I’m trying to picture who’s going win this tender,” said BizNews visitor Pat Bam, after scrutinising the details in the advertisement.
“Could it really be that she’s out there in the sticks reading the Sunday Times, a disabled rural black woman with sufficient clout in the world of high finance to persuade some mega-bank to run with this spectacularly awful ‘investment’ in SAA1?”
Sven Gore said, under the BizNews article on SAA’s astonishing fund-raising proposal: “What is truly unbelievable is the fact that they lay down racial percentages to qualify the lender to lend them R15 Billion. Surely they are in no position to make any demands on the supplier of the funds when they are the ones in desperate need of bailout funds? I would have thought the lender/s would be the ones to layout all the demands to be met to actually receive the funding.” For Sven Gore, this SAA funding appeal seems to be a case of “BEE gone mad”.
MartyB was incredulous, too. “I wonder how many ‘military veterans’ and persons located in ‘rural areas’ have a spare 16bn lying around in their savings accounts – I foresee some kind of scam looming up ahead involving the preschool teacher and some dodgy government organisation!”
Chintza, also evidently battling to envisage the type of person who might be attracted to lending SAA money, added: “No banker worth his salt advances money for debt consolidation. The result is that the debtor runs up more debt as his repayments are reduced and he thinks that he has more disposable income with which to incur more debt.
RodB said he wouldn’t be in the line offering SAA money to keep afloat: “I will not voluntarily support or contribute one cent to what used to be a proud carrier and is now little more than carrion (with all due respect to its pilots, who as a body rank with the world’s best).”
How Did SAA Get Into This State?
Much of the blame for SAA’s woes has been placed at the feet of its management team, starting with its chair Dudu Myeni – who has a good relationship with President Jacob Zuma. The president has strenuously denied reports that they have a love child.
Criticism of Myeni is unanimous across BizNews forums, with Lex Devlin summing up on the BizNews Facebook page a widely held perception of Myeni’s business acumen:
“This woman could not run a bath never mind a huge airline. Has she been to school? My goodness how embarrassing for SA.”1
Kevin Glegg agreed, saying that the management of SAA is “no different to the SABC, i.e. run by unqualified Zuma trough feeders”.
Otlile Makena got straight to the point when he weighed in on the debate on Facebook, saying of the overall handling of SAA:
“Without guarantees from Treasury, they will never get it (loans). What they need to get through (to) those empty skulls is that you can’t put clueless, unqualified, greedy cadres into positions they aren’t suited for. Look now! They (SAA) are surviving through bailouts.”
Meanwhile, BizNews community member Alan Watkins appears to have telepathic abilities or a crystal ball, accurately predicting moves – now underway – by President Jacob Zuma to oust finance minister Pravin Gordhan, who has publicly criticised the performance of the SAA board – and has, therefore, got up Myeni’s nose.
Posting under the BizNews piece on the details of SAA’s missing millions, shortly before South Africa’s local elections in August, Alan Watkins said: “It’s clear to me what Zuma is going to do about this. Right after the elections, he will move against the finance ministry, sacking both Gordhan and Jonas, probably camouflaged by a general cabinet reshuffle, give Myeni absolute power and however many more billions she needs to keep playing with her toys in the SAA sandpit.”
Deputy finance minister Mcebisi Jonas, you might recall, says he was approached by the rich Indian Gupta on behalf of President Zuma – allegedly offering Jonas promotion to finance minister.
Should SAA Get Another Cash Injection From Taxpayers?
Karl Dannenberg said, presumably with tongue in cheek, that taxpayers should foot SAA’s bills: “Fund-raising to fund anti-competitive behaviour, corruption and zero accountability? Isn’t that what taxes are for?”
But many BizNews community members seem to think that there is no point trying to rescue SAA at this stage. SaidChris Darke: “We don’t need a national carrier! Shut the rotten place down and let private, commercial airlines and competitive businesses get to work.”
Responding to an opinion piece on SAA by BizNews contributor Shawn Hagedorn, Marcus Waterson Kneen recommended closing down SAA. He asked: “Why do we need a state airline? To brag?”
LG agreed with Marcus Waterson Kneen, saying: “Why keep flogging this dead horse! SAA needs to accept that it needs business rescue finish and klaar, thanks to recent events and the Zupta shenanigans, there is very little organisational reputation left that would encourage investors.”
SouthAfricaFirst recommended turning to the stock market for a solution: “The only thing that could work would be for SAA to list and sell some equity to the PIC and other investors to raise cash to keep the airline afloat. Cut off the corrupt tenderpreneur patronage network sucking the life blood out of SAA and other SOEs.”
John Dove commented that billions have been “flushed down the toilet” through SAA. He added: “When will this madness end? In her manic attempts to shoehorn BEE (in other words to hack off a chunk of free loot for a handful of chosen cadre “tenderpreneurs” in favour with Zupta) this unqualified, incompetent toady has single handedly destroyed SAA.”
By: Jackie Cameron