CAPE TOWN – Speaking at an investor conference in New York last week, Finance Minister Tito Mboweni called for the closure of South African Airways (SAA), saying: “It was difficult to see a turnaround for the airline. It’s loss-making, we are unlikely to sort out the situation, so my view would be close it down.”
His bold statement shocked many. Why? Cosatu, South Africa's largest federation of trade unions, is complaining about the state of mind of the new minister of finance regarding SAA.
The airline is a perfect storm, it has no solution. Even partnerships with global airlines such as Swiss Air, Etihad, Emirates, among others, didn’t gain traction. Why is SAA a perfect storm? If the unions take an unyielding position that nothing should happen to SAA except pouring more money into it, then Mboweni is aware that such a position is going to take us straight into financial ruin and tip us beyond the 60percent debt to GDP threshold. That makes South Africa a basket case and the IMF will simply take us over.
A perfect storm is when all the wrong elements converge at the same place at the same time for a perfect collusion. Who could have imagined that the problems of the Tripartite Alliance will manifest themselves in the sustainability of SAA in the same way as Cosatu’s comments against Mboweni’s comments are playing themselves out in the public domain. Add to that the failure to resolve the carbon tax regulation in favour of SAA, the absorption of forex losses by the Treasury, the unionisation of the airline and the failure of implementing all the rescue plans that have been tabled.
Sadly, when SAA pays carbon tax as demanded by European regulators, South Africa is unable to recover such tax revenue from European airlines on behalf of SAA. Every five minutes a plane lands at OR Tambo International; an overwhelming majority of the airlines are European.
The critical defining urgencies for the incumbent minister are severest in form and epoch-defining in character. Sitting at 52percent of debt-to-GDP ratio, the country is teetering perilously close to a 60percent debt-to-GDP ratio. A reaction to the remarks about SAA, outside of an appreciation of the state of the well-being of all other state-owned entities, is a perversion of a well-laid-out plan, articulated in Parliament in Mboweni’s maiden mid-term Budget policy address.
With his instinct as the governor of the Reserve Bank, the incumbent minister is acutely aware that it calls for the saving of South Africa overall - even if it means the reconfiguration of the structures of the sums of its parts.
The backdrop against which this dysfunctionality of the airline occurs starts before 1994, during the term of Mike Myburgh, who led the airline until the first rescue package in 1997. If Myburgh can tell us what led to the first bankruptcy of SAA, will it be any different from the challenges that lead to Mboweni’s remarks? In reality Mboweni has given us the straight option of either saving South Africa, or saving SAA. It is obvious that he has chosen to save the former.
South Africa is waiting with baited breath for a solution from the union federation to solve the woes that bedevil SAA.